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| 55 | 66 | | An Act |
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| 59 | 70 | | amending sections 43-1021, 43-1022, 43-1121 and 43-1122, Arizona Revised Statutes; relating to taxation of income. |
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| 65 | 76 | | (TEXT OF BILL BEGINS ON NEXT PAGE) |
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| 69 | 80 | | Be it enacted by the Legislature of the State of Arizona: Section 1. Section 43-1021, Arizona Revised Statutes, is amended to read: START_STATUTE43-1021. Addition to Arizona gross income In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income: 1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 increases the beneficiary's Arizona gross income. 2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99-514, section 1122(h)(3). 3. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside of this state, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income. 4. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code. 5. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title. 6. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1084. 7. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1081.01 or that is pollution control equipment for which a credit was taken before taxable year 2022 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property. 8. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1074.02 or 43-1081.01 or that is pollution control equipment for which a credit was taken before taxable year 2022 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1074.02 or 43-1081.01 or for pollution control equipment, the section in which the credit was taken, as applicable. 9. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right. 10. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F. 11. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added. 12. The amount of a nonqualified withdrawal, as defined in section 15-1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43-1022 in prior taxable years and the amount added under this section in any prior taxable years. 13. If a subtraction is or has been taken by the taxpayer under section 43-1024, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing taxable income for the current taxable year. 14. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. (b) "Specie" means coins having precious metal content. 15. For taxable years beginning from and after December 31, 2021, the amount deducted by the partnership or S corporation pursuant to the internal revenue code for the amount paid to this state under section 43-1014 and for taxes that the department determines are substantially similar to the tax imposed under section 43-1014. This amount shall be reflected in the partner's or shareholder's Arizona gross income and the partnership's or S corporation's Arizona taxable income. 16. The amount of any motion picture production costs that was deducted pursuant to the internal revenue code for which a tax credit is claimed under section 43-1082. 17. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. 18. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE Sec. 2. Section 43-1022, Arizona Revised Statutes, is amended to read: START_STATUTE43-1022. Subtractions from Arizona gross income In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income: 1. The amount of exemptions allowed by section 43-1023. 2. Benefits, annuities and pensions in an amount totaling not more than $2,500 received from one or more of the following: (a) The United States government service retirement and disability fund, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law, except retired or retainer pay of the uniformed services of the United States that qualifies for a subtraction under paragraph 26 of this section. (b) The Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15-1628, an optional retirement program established by a community college district board under section 15-1451 or a retirement plan established for employees of a county, city or town in this state. 3. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 decreases the beneficiary's Arizona gross income. 4. Interest income received on obligations of the United States, minus any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, that were incurred or continued to purchase or carry such obligations. 5. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title. 6. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code. 7. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations. 8. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code. 9. The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold. 10. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits. 11. To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code. 12. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed $3,000. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $3,000. The subtraction under this paragraph may be taken for the costs that are described in this paragraph and that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted. 13. The amount authorized by section 43-1027 for the taxable year relating to qualified wood stoves, wood fireplaces or gas fired fireplaces. 14. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code. 15. Any amount of qualified educational expenses that is distributed from a qualified state tuition program determined pursuant to section 529 of the internal revenue code and that is included in income in computing federal adjusted gross income. 16. Any item of income resulting from an installment sale that has been properly subjected to income tax in another state in a previous taxable year and that is included in Arizona gross income in the current taxable year. 17. For property placed in service: (a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service. (b) In taxable years beginning from and after December 31, 2012 through December 31, 2013, an amount determined in the year the asset was placed in service based on the calculation in subdivision (a) of this paragraph. In the first taxable year beginning from and after December 31, 2013, the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service. Subdivision (c) of this paragraph applies for the remainder of the asset's life. If the taxpayer does not make the election under this subdivision, subdivision (a) of this paragraph applies for the remainder of the asset's life. (c) In taxable years beginning from and after December 31, 2013 through December 31, 2015, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been ten percent of the amount allowed pursuant to section 168(k) of the internal revenue code. (d) In taxable years beginning from and after December 31, 2015 through December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been fifty-five percent of the amount allowed pursuant to section 168(k) of the internal revenue code. (e) In taxable years beginning from and after December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been the full amount allowed pursuant to section 168(k) of the internal revenue code. 18. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43-1021, paragraph 11 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current or prior taxable years. 19. The amount contributed during the taxable year to college savings plans established pursuant to section 529 of the internal revenue code on behalf of the designated beneficiary to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted may not exceed: (a) $2,000 per beneficiary for a single individual or a head of household. (b) $4,000 per beneficiary for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary. 20. The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income. This subtraction only applies to taxpayers who made an election under section 172(b)(1)(H) of the internal revenue code as amended by section 1211 of the American recovery and reinvestment act of 2009 (P.L. 111-5) or as amended by section 13 of the worker, homeownership, and business assistance act of 2009 (P.L. 111-92). 21. For taxable years beginning from and after December 31, 2013, the amount of any net capital gain included in federal adjusted gross income for the taxable year derived from investment in a qualified small business as determined by the Arizona commerce authority pursuant to section 41-1518. 22. An amount of any net long-term capital gain included in federal adjusted gross income for the taxable year that is derived from an investment in an asset acquired after December 31, 2011, as follows: (a) For taxable years beginning from and after December 31, 2012 through December 31, 2013, ten percent of the net long-term capital gain included in federal adjusted gross income. (b) For taxable years beginning from and after December 31, 2013 through December 31, 2014, twenty percent of the net long-term capital gain included in federal adjusted gross income. (c) For taxable years beginning from and after December 31, 2014, twenty-five percent of the net long-term capital gain included in federal adjusted gross income. For the purposes of this paragraph, a transferee that receives an asset by gift or at the death of a transferor is considered to have acquired the asset when the asset was acquired by the transferor. If the date an asset is acquired cannot be verified, a subtraction under this paragraph is not allowed. 23. If an individual is not claiming itemized deductions pursuant to section 43-1042, the amount of premium costs for long-term care insurance, as defined in section 20-1691. 24. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 as provided by section 43-1024. 25. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. (b) "Specie" means coins having precious metal content. 26. Benefits, annuities and pensions received as retired or retainer pay of the uniformed services of the United States in amounts as follows: (a) For taxable years through December 31, 2018, an amount totaling not more than $2,500. (b) For taxable years beginning from and after December 31, 2018 through December 31, 2020, an amount totaling not more than $3,500. (c) For taxable years beginning from and after December 31, 2020, the full amount received. 27. For taxable years beginning from and after December 31, 2020, the amount contributed during the taxable year to an achieving a better life experience account established pursuant to section 529A of the internal revenue code on behalf of the designated beneficiary to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted may not exceed: (a) $2,000 per beneficiary for a single individual or a head of household. (b) $4,000 per beneficiary for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary. 28. For taxable years beginning from and after December 31, 2020, Arizona small business gross income but only if an individual taxpayer has elected to separately report and pay tax on the taxpayer's Arizona small business adjusted gross income on the Arizona small business income tax return. 29. To the extent not already excluded from Arizona gross income under the internal revenue code, the value of virtual currency and non-fungible tokens the taxpayer received pursuant to an airdrop at the time of the airdrop. This paragraph may not be interpreted as providing a subtraction for any appreciation in value that occurs from holding the virtual currency after the initial receipt of the airdrop. For the purposes of this paragraph: (a) "Airdrop" means the receipt of virtual currency through a means of distribution of virtual currency to the distributed ledger addresses of multiple taxpayers. (b) "Non-fungible token" has the same meaning prescribed in section 43-1028. (c) "Virtual currency" has the same meaning prescribed in section 43-1028. 30. The amount allowed as a subtraction by section 43-1028 for gas fees not already included in the taxpayer's virtual currency or non-fungible token basis. 31. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. 32. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE Sec. 3. Section 43-1121, Arizona Revised Statutes, is amended to read: START_STATUTE43-1121. Additions to Arizona gross income; corporations In computing Arizona taxable income for a corporation, the following amounts shall be added to Arizona gross income: 1. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside this state, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income. 2. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code. 3. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title. 4. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added. 5. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 245, 245A and 250(a)(1)(B) of the internal revenue code. 6. Taxes that are based on income paid to states, local governments or foreign governments and that were deducted in computing federal taxable income. 7. Expenses and interest relating to tax-exempt income on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the tax imposed by this title. Financial institutions, as defined in section 6-101, shall be governed by section 43-961, paragraph 2. 8. Commissions, rentals and other amounts paid or accrued to a domestic international sales corporation controlled by the payor corporation if the domestic international sales corporation is not required to report its taxable income to this state because its income is not derived from or attributable to sources within this state. If the domestic international sales corporation is subject to article 4 of this chapter, the department shall prescribe by rule the method of determining the portion of the commissions, rentals and other amounts that are paid or accrued to the controlled domestic international sales corporation and that shall be deducted by the payor. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the domestic international sales corporation by the payor corporation. 9. The amount of net operating loss taken pursuant to section 172 of the internal revenue code. 10. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed $75,000 and to the extent that the election is made to defer those expenses not in excess of $75,000. 11. Amortization of costs incurred to install pollution control devices and deducted pursuant to the internal revenue code or the amount of deduction for depreciation taken pursuant to the internal revenue code on pollution control devices for which an election is made pursuant to section 43-1129. 12. The amount of depreciation or amortization of costs of child care facilities deducted pursuant to section 167 or 188 of the internal revenue code for which an election is made to amortize pursuant to section 43-1130. 13. The loss of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947. 14. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1170 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property. 15. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1170 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1170. 16. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right. 17. The amount by which a capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the capital loss carryover allowable pursuant to section 43-1130.01, subsection F. 18. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1175 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients. 19. Any amount of expenses that were deducted pursuant to the internal revenue code and for which a credit is claimed under section 43-1178. 20. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to a school tuition organization for which a credit is claimed under section 43-1183 or 43-1184. 21. If a subtraction is or has been taken by the taxpayer under section 43-1124, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing Arizona taxable income for the current taxable year. 22. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. (b) "Specie" means coins having precious metal content. 23. The amount of any deduction that is claimed in computing Arizona gross income and that represents a donation of a school site for which a credit is claimed under section 43-1181. 24. The amount of any motion picture production costs that was deducted pursuant to the internal revenue code for which a tax credit is claimed under section 43-1165. 25. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. 26. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE Sec. 4. Section 43-1122, Arizona Revised Statutes, is amended to read: START_STATUTE43-1122. Subtractions from Arizona gross income; corporations In computing Arizona taxable income for a corporation, the following amounts shall be subtracted from Arizona gross income: 1. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title. 2. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code. 3. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations. 4. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code. 5. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43-1121, paragraph 4 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current taxable year or prior taxable years. 6. With respect to a financial institution as defined in section 6-101, expenses and interest relating to tax-exempt income disallowed pursuant to section 265 of the internal revenue code. 7. Dividends received from another corporation owned or controlled directly or indirectly by a recipient corporation. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the payor corporation by the recipient corporation. Dividends shall have the meaning provided in section 316 of the internal revenue code. This subtraction shall apply without regard to section 43-961, paragraph 2 and article 4 of this chapter. 8. Interest income received on obligations of the United States. 9. The amount of dividend income from foreign corporations. For the purposes of this paragraph, gross up income as described in section 78 of the internal revenue code, global intangible low-taxed income as defined in section 951A of the internal revenue code and subpart F income as defined in section 952 of the internal revenue code shall be considered foreign dividends. 10. The amount of net operating loss allowed by section 43-1123. 11. The amount of any state income tax refunds received that were included as income in computing federal taxable income. 12. The amount of expense recapture included in income pursuant to section 617 of the internal revenue code for mine exploration expenses. 13. The amount of deferred exploration expenses allowed by section 43-1127. 14. The amount of exploration expenses related to the exploration of oil, gas or geothermal resources, computed in the same manner and on the same basis as a deduction for mine exploration pursuant to section 617 of the internal revenue code. This computation is subject to the adjustments contained in section 43-1121, paragraph 10 and paragraphs 12 and 13 of this section relating to exploration expenses. 15. The amortization of pollution control devices allowed by section 43-1129. 16. The amount of amortization of the cost of child care facilities pursuant to section 43-1130. 17. The amount of income from a domestic international sales corporation required to be included in the income of its shareholders pursuant to section 995 of the internal revenue code. 18. The income of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947. 19. The amount by which a capital loss carryover allowable pursuant to section 43-1130.01, subsection F exceeds the capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code. 20. An amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k)(7) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service. 21. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 as provided by section 43-1124. 22. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. (b) "Specie" means coins having precious metal content. 23. With respect to a public service corporation operating a water system or sewage disposal facility, the amount of monies or property received as a contribution in aid of construction. For the purposes of this paragraph: (a) "Contribution in aid of construction" means any amount of monies or other property contributed to a public service corporation that provides water or sewage disposal services to the extent that the purpose of the contribution is to provide for expanding, improving or replacing the public service corporation's water system or sewage disposal facilities, including any amount of monies or other property contributed to a public service corporation for a water system or sewage disposal facility subject to a contingent obligation to repay the amount, in whole or in part, to the contributor. (b) "Public service corporation" means a public service corporation as defined in article XV, section 2, Constitution of Arizona, that is regulated by the corporation commission. 24. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. 25. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE |
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| 70 | 81 | | |
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| 71 | 82 | | Be it enacted by the Legislature of the State of Arizona: |
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| 72 | 83 | | |
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| 73 | 84 | | Section 1. Section 43-1021, Arizona Revised Statutes, is amended to read: |
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| 74 | 85 | | |
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| 75 | 86 | | START_STATUTE43-1021. Addition to Arizona gross income |
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| 76 | 87 | | |
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| 77 | 88 | | In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income: |
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| 78 | 89 | | |
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| 79 | 90 | | 1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 increases the beneficiary's Arizona gross income. |
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| 80 | 91 | | |
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| 81 | 92 | | 2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99-514, section 1122(h)(3). |
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| 82 | 93 | | |
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| 83 | 94 | | 3. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside of this state, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income. |
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| 84 | 95 | | |
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| 85 | 96 | | 4. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code. |
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| 86 | 97 | | |
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| 87 | 98 | | 5. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title. |
|---|
| 88 | 99 | | |
|---|
| 89 | 100 | | 6. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1084. |
|---|
| 90 | 101 | | |
|---|
| 91 | 102 | | 7. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1081.01 or that is pollution control equipment for which a credit was taken before taxable year 2022 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property. |
|---|
| 92 | 103 | | |
|---|
| 93 | 104 | | 8. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1074.02 or 43-1081.01 or that is pollution control equipment for which a credit was taken before taxable year 2022 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1074.02 or 43-1081.01 or for pollution control equipment, the section in which the credit was taken, as applicable. |
|---|
| 94 | 105 | | |
|---|
| 95 | 106 | | 9. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right. |
|---|
| 96 | 107 | | |
|---|
| 97 | 108 | | 10. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F. |
|---|
| 98 | 109 | | |
|---|
| 99 | 110 | | 11. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added. |
|---|
| 100 | 111 | | |
|---|
| 101 | 112 | | 12. The amount of a nonqualified withdrawal, as defined in section 15-1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43-1022 in prior taxable years and the amount added under this section in any prior taxable years. |
|---|
| 102 | 113 | | |
|---|
| 103 | 114 | | 13. If a subtraction is or has been taken by the taxpayer under section 43-1024, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing taxable income for the current taxable year. |
|---|
| 104 | 115 | | |
|---|
| 105 | 116 | | 14. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: |
|---|
| 106 | 117 | | |
|---|
| 107 | 118 | | (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. |
|---|
| 108 | 119 | | |
|---|
| 109 | 120 | | (b) "Specie" means coins having precious metal content. |
|---|
| 110 | 121 | | |
|---|
| 111 | 122 | | 15. For taxable years beginning from and after December 31, 2021, the amount deducted by the partnership or S corporation pursuant to the internal revenue code for the amount paid to this state under section 43-1014 and for taxes that the department determines are substantially similar to the tax imposed under section 43-1014. This amount shall be reflected in the partner's or shareholder's Arizona gross income and the partnership's or S corporation's Arizona taxable income. |
|---|
| 112 | 123 | | |
|---|
| 113 | 124 | | 16. The amount of any motion picture production costs that was deducted pursuant to the internal revenue code for which a tax credit is claimed under section 43-1082. |
|---|
| 114 | 125 | | |
|---|
| 115 | 126 | | 17. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. |
|---|
| 116 | 127 | | |
|---|
| 117 | 128 | | 18. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE |
|---|
| 118 | 129 | | |
|---|
| 119 | 130 | | Sec. 2. Section 43-1022, Arizona Revised Statutes, is amended to read: |
|---|
| 120 | 131 | | |
|---|
| 121 | 132 | | START_STATUTE43-1022. Subtractions from Arizona gross income |
|---|
| 122 | 133 | | |
|---|
| 123 | 134 | | In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income: |
|---|
| 124 | 135 | | |
|---|
| 125 | 136 | | 1. The amount of exemptions allowed by section 43-1023. |
|---|
| 126 | 137 | | |
|---|
| 127 | 138 | | 2. Benefits, annuities and pensions in an amount totaling not more than $2,500 received from one or more of the following: |
|---|
| 128 | 139 | | |
|---|
| 129 | 140 | | (a) The United States government service retirement and disability fund, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law, except retired or retainer pay of the uniformed services of the United States that qualifies for a subtraction under paragraph 26 of this section. |
|---|
| 130 | 141 | | |
|---|
| 131 | 142 | | (b) The Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15-1628, an optional retirement program established by a community college district board under section 15-1451 or a retirement plan established for employees of a county, city or town in this state. |
|---|
| 132 | 143 | | |
|---|
| 133 | 144 | | 3. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 decreases the beneficiary's Arizona gross income. |
|---|
| 134 | 145 | | |
|---|
| 135 | 146 | | 4. Interest income received on obligations of the United States, minus any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, that were incurred or continued to purchase or carry such obligations. |
|---|
| 136 | 147 | | |
|---|
| 137 | 148 | | 5. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title. |
|---|
| 138 | 149 | | |
|---|
| 139 | 150 | | 6. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code. |
|---|
| 140 | 151 | | |
|---|
| 141 | 152 | | 7. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations. |
|---|
| 142 | 153 | | |
|---|
| 143 | 154 | | 8. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code. |
|---|
| 144 | 155 | | |
|---|
| 145 | 156 | | 9. The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold. |
|---|
| 146 | 157 | | |
|---|
| 147 | 158 | | 10. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits. |
|---|
| 148 | 159 | | |
|---|
| 149 | 160 | | 11. To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code. |
|---|
| 150 | 161 | | |
|---|
| 151 | 162 | | 12. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed $3,000. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $3,000. The subtraction under this paragraph may be taken for the costs that are described in this paragraph and that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted. |
|---|
| 152 | 163 | | |
|---|
| 153 | 164 | | 13. The amount authorized by section 43-1027 for the taxable year relating to qualified wood stoves, wood fireplaces or gas fired fireplaces. |
|---|
| 154 | 165 | | |
|---|
| 155 | 166 | | 14. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code. |
|---|
| 156 | 167 | | |
|---|
| 157 | 168 | | 15. Any amount of qualified educational expenses that is distributed from a qualified state tuition program determined pursuant to section 529 of the internal revenue code and that is included in income in computing federal adjusted gross income. |
|---|
| 158 | 169 | | |
|---|
| 159 | 170 | | 16. Any item of income resulting from an installment sale that has been properly subjected to income tax in another state in a previous taxable year and that is included in Arizona gross income in the current taxable year. |
|---|
| 160 | 171 | | |
|---|
| 161 | 172 | | 17. For property placed in service: |
|---|
| 162 | 173 | | |
|---|
| 163 | 174 | | (a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service. |
|---|
| 164 | 175 | | |
|---|
| 165 | 176 | | (b) In taxable years beginning from and after December 31, 2012 through December 31, 2013, an amount determined in the year the asset was placed in service based on the calculation in subdivision (a) of this paragraph. In the first taxable year beginning from and after December 31, 2013, the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service. Subdivision (c) of this paragraph applies for the remainder of the asset's life. If the taxpayer does not make the election under this subdivision, subdivision (a) of this paragraph applies for the remainder of the asset's life. |
|---|
| 166 | 177 | | |
|---|
| 167 | 178 | | (c) In taxable years beginning from and after December 31, 2013 through December 31, 2015, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been ten percent of the amount allowed pursuant to section 168(k) of the internal revenue code. |
|---|
| 168 | 179 | | |
|---|
| 169 | 180 | | (d) In taxable years beginning from and after December 31, 2015 through December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been fifty-five percent of the amount allowed pursuant to section 168(k) of the internal revenue code. |
|---|
| 170 | 181 | | |
|---|
| 171 | 182 | | (e) In taxable years beginning from and after December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been the full amount allowed pursuant to section 168(k) of the internal revenue code. |
|---|
| 172 | 183 | | |
|---|
| 173 | 184 | | 18. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43-1021, paragraph 11 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current or prior taxable years. |
|---|
| 174 | 185 | | |
|---|
| 175 | 186 | | 19. The amount contributed during the taxable year to college savings plans established pursuant to section 529 of the internal revenue code on behalf of the designated beneficiary to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted may not exceed: |
|---|
| 176 | 187 | | |
|---|
| 177 | 188 | | (a) $2,000 per beneficiary for a single individual or a head of household. |
|---|
| 178 | 189 | | |
|---|
| 179 | 190 | | (b) $4,000 per beneficiary for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary. |
|---|
| 180 | 191 | | |
|---|
| 181 | 192 | | 20. The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income. This subtraction only applies to taxpayers who made an election under section 172(b)(1)(H) of the internal revenue code as amended by section 1211 of the American recovery and reinvestment act of 2009 (P.L. 111-5) or as amended by section 13 of the worker, homeownership, and business assistance act of 2009 (P.L. 111-92). |
|---|
| 182 | 193 | | |
|---|
| 183 | 194 | | 21. For taxable years beginning from and after December 31, 2013, the amount of any net capital gain included in federal adjusted gross income for the taxable year derived from investment in a qualified small business as determined by the Arizona commerce authority pursuant to section 41-1518. |
|---|
| 184 | 195 | | |
|---|
| 185 | 196 | | 22. An amount of any net long-term capital gain included in federal adjusted gross income for the taxable year that is derived from an investment in an asset acquired after December 31, 2011, as follows: |
|---|
| 186 | 197 | | |
|---|
| 187 | 198 | | (a) For taxable years beginning from and after December 31, 2012 through December 31, 2013, ten percent of the net long-term capital gain included in federal adjusted gross income. |
|---|
| 188 | 199 | | |
|---|
| 189 | 200 | | (b) For taxable years beginning from and after December 31, 2013 through December 31, 2014, twenty percent of the net long-term capital gain included in federal adjusted gross income. |
|---|
| 190 | 201 | | |
|---|
| 191 | 202 | | (c) For taxable years beginning from and after December 31, 2014, twenty-five percent of the net long-term capital gain included in federal adjusted gross income. For the purposes of this paragraph, a transferee that receives an asset by gift or at the death of a transferor is considered to have acquired the asset when the asset was acquired by the transferor. If the date an asset is acquired cannot be verified, a subtraction under this paragraph is not allowed. |
|---|
| 192 | 203 | | |
|---|
| 193 | 204 | | 23. If an individual is not claiming itemized deductions pursuant to section 43-1042, the amount of premium costs for long-term care insurance, as defined in section 20-1691. |
|---|
| 194 | 205 | | |
|---|
| 195 | 206 | | 24. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 as provided by section 43-1024. |
|---|
| 196 | 207 | | |
|---|
| 197 | 208 | | 25. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: |
|---|
| 198 | 209 | | |
|---|
| 199 | 210 | | (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. |
|---|
| 200 | 211 | | |
|---|
| 201 | 212 | | (b) "Specie" means coins having precious metal content. |
|---|
| 202 | 213 | | |
|---|
| 203 | 214 | | 26. Benefits, annuities and pensions received as retired or retainer pay of the uniformed services of the United States in amounts as follows: |
|---|
| 204 | 215 | | |
|---|
| 205 | 216 | | (a) For taxable years through December 31, 2018, an amount totaling not more than $2,500. |
|---|
| 206 | 217 | | |
|---|
| 207 | 218 | | (b) For taxable years beginning from and after December 31, 2018 through December 31, 2020, an amount totaling not more than $3,500. |
|---|
| 208 | 219 | | |
|---|
| 209 | 220 | | (c) For taxable years beginning from and after December 31, 2020, the full amount received. |
|---|
| 210 | 221 | | |
|---|
| 211 | 222 | | 27. For taxable years beginning from and after December 31, 2020, the amount contributed during the taxable year to an achieving a better life experience account established pursuant to section 529A of the internal revenue code on behalf of the designated beneficiary to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted may not exceed: |
|---|
| 212 | 223 | | |
|---|
| 213 | 224 | | (a) $2,000 per beneficiary for a single individual or a head of household. |
|---|
| 214 | 225 | | |
|---|
| 215 | 226 | | (b) $4,000 per beneficiary for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary. |
|---|
| 216 | 227 | | |
|---|
| 217 | 228 | | 28. For taxable years beginning from and after December 31, 2020, Arizona small business gross income but only if an individual taxpayer has elected to separately report and pay tax on the taxpayer's Arizona small business adjusted gross income on the Arizona small business income tax return. |
|---|
| 218 | 229 | | |
|---|
| 219 | 230 | | 29. To the extent not already excluded from Arizona gross income under the internal revenue code, the value of virtual currency and non-fungible tokens the taxpayer received pursuant to an airdrop at the time of the airdrop. This paragraph may not be interpreted as providing a subtraction for any appreciation in value that occurs from holding the virtual currency after the initial receipt of the airdrop. For the purposes of this paragraph: |
|---|
| 220 | 231 | | |
|---|
| 221 | 232 | | (a) "Airdrop" means the receipt of virtual currency through a means of distribution of virtual currency to the distributed ledger addresses of multiple taxpayers. |
|---|
| 222 | 233 | | |
|---|
| 223 | 234 | | (b) "Non-fungible token" has the same meaning prescribed in section 43-1028. |
|---|
| 224 | 235 | | |
|---|
| 225 | 236 | | (c) "Virtual currency" has the same meaning prescribed in section 43-1028. |
|---|
| 226 | 237 | | |
|---|
| 227 | 238 | | 30. The amount allowed as a subtraction by section 43-1028 for gas fees not already included in the taxpayer's virtual currency or non-fungible token basis. |
|---|
| 228 | 239 | | |
|---|
| 229 | 240 | | 31. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. |
|---|
| 230 | 241 | | |
|---|
| 231 | 242 | | 32. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE |
|---|
| 232 | 243 | | |
|---|
| 233 | 244 | | Sec. 3. Section 43-1121, Arizona Revised Statutes, is amended to read: |
|---|
| 234 | 245 | | |
|---|
| 235 | 246 | | START_STATUTE43-1121. Additions to Arizona gross income; corporations |
|---|
| 236 | 247 | | |
|---|
| 237 | 248 | | In computing Arizona taxable income for a corporation, the following amounts shall be added to Arizona gross income: |
|---|
| 238 | 249 | | |
|---|
| 239 | 250 | | 1. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside this state, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income. |
|---|
| 240 | 251 | | |
|---|
| 241 | 252 | | 2. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code. |
|---|
| 242 | 253 | | |
|---|
| 243 | 254 | | 3. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title. |
|---|
| 244 | 255 | | |
|---|
| 245 | 256 | | 4. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added. |
|---|
| 246 | 257 | | |
|---|
| 247 | 258 | | 5. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 245, 245A and 250(a)(1)(B) of the internal revenue code. |
|---|
| 248 | 259 | | |
|---|
| 249 | 260 | | 6. Taxes that are based on income paid to states, local governments or foreign governments and that were deducted in computing federal taxable income. |
|---|
| 250 | 261 | | |
|---|
| 251 | 262 | | 7. Expenses and interest relating to tax-exempt income on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the tax imposed by this title. Financial institutions, as defined in section 6-101, shall be governed by section 43-961, paragraph 2. |
|---|
| 252 | 263 | | |
|---|
| 253 | 264 | | 8. Commissions, rentals and other amounts paid or accrued to a domestic international sales corporation controlled by the payor corporation if the domestic international sales corporation is not required to report its taxable income to this state because its income is not derived from or attributable to sources within this state. If the domestic international sales corporation is subject to article 4 of this chapter, the department shall prescribe by rule the method of determining the portion of the commissions, rentals and other amounts that are paid or accrued to the controlled domestic international sales corporation and that shall be deducted by the payor. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the domestic international sales corporation by the payor corporation. |
|---|
| 254 | 265 | | |
|---|
| 255 | 266 | | 9. The amount of net operating loss taken pursuant to section 172 of the internal revenue code. |
|---|
| 256 | 267 | | |
|---|
| 257 | 268 | | 10. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed $75,000 and to the extent that the election is made to defer those expenses not in excess of $75,000. |
|---|
| 258 | 269 | | |
|---|
| 259 | 270 | | 11. Amortization of costs incurred to install pollution control devices and deducted pursuant to the internal revenue code or the amount of deduction for depreciation taken pursuant to the internal revenue code on pollution control devices for which an election is made pursuant to section 43-1129. |
|---|
| 260 | 271 | | |
|---|
| 261 | 272 | | 12. The amount of depreciation or amortization of costs of child care facilities deducted pursuant to section 167 or 188 of the internal revenue code for which an election is made to amortize pursuant to section 43-1130. |
|---|
| 262 | 273 | | |
|---|
| 263 | 274 | | 13. The loss of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947. |
|---|
| 264 | 275 | | |
|---|
| 265 | 276 | | 14. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1170 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property. |
|---|
| 266 | 277 | | |
|---|
| 267 | 278 | | 15. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1170 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1170. |
|---|
| 268 | 279 | | |
|---|
| 269 | 280 | | 16. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right. |
|---|
| 270 | 281 | | |
|---|
| 271 | 282 | | 17. The amount by which a capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the capital loss carryover allowable pursuant to section 43-1130.01, subsection F. |
|---|
| 272 | 283 | | |
|---|
| 273 | 284 | | 18. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1175 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients. |
|---|
| 274 | 285 | | |
|---|
| 275 | 286 | | 19. Any amount of expenses that were deducted pursuant to the internal revenue code and for which a credit is claimed under section 43-1178. |
|---|
| 276 | 287 | | |
|---|
| 277 | 288 | | 20. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to a school tuition organization for which a credit is claimed under section 43-1183 or 43-1184. |
|---|
| 278 | 289 | | |
|---|
| 279 | 290 | | 21. If a subtraction is or has been taken by the taxpayer under section 43-1124, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing Arizona taxable income for the current taxable year. |
|---|
| 280 | 291 | | |
|---|
| 281 | 292 | | 22. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: |
|---|
| 282 | 293 | | |
|---|
| 283 | 294 | | (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. |
|---|
| 284 | 295 | | |
|---|
| 285 | 296 | | (b) "Specie" means coins having precious metal content. |
|---|
| 286 | 297 | | |
|---|
| 287 | 298 | | 23. The amount of any deduction that is claimed in computing Arizona gross income and that represents a donation of a school site for which a credit is claimed under section 43-1181. |
|---|
| 288 | 299 | | |
|---|
| 289 | 300 | | 24. The amount of any motion picture production costs that was deducted pursuant to the internal revenue code for which a tax credit is claimed under section 43-1165. |
|---|
| 290 | 301 | | |
|---|
| 291 | 302 | | 25. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. |
|---|
| 292 | 303 | | |
|---|
| 293 | 304 | | 26. For taxable years beginning from and after December 31, 2024, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE |
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| 294 | 305 | | |
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| 295 | 306 | | Sec. 4. Section 43-1122, Arizona Revised Statutes, is amended to read: |
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| 296 | 307 | | |
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| 297 | 308 | | START_STATUTE43-1122. Subtractions from Arizona gross income; corporations |
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| 298 | 309 | | |
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| 299 | 310 | | In computing Arizona taxable income for a corporation, the following amounts shall be subtracted from Arizona gross income: |
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| 300 | 311 | | |
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| 301 | 312 | | 1. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title. |
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| 302 | 313 | | |
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| 303 | 314 | | 2. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code. |
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| 304 | 315 | | |
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| 305 | 316 | | 3. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations. |
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| 306 | 317 | | |
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| 307 | 318 | | 4. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code. |
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| 308 | 319 | | |
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| 309 | 320 | | 5. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43-1121, paragraph 4 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current taxable year or prior taxable years. |
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| 310 | 321 | | |
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| 311 | 322 | | 6. With respect to a financial institution as defined in section 6-101, expenses and interest relating to tax-exempt income disallowed pursuant to section 265 of the internal revenue code. |
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| 312 | 323 | | |
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| 313 | 324 | | 7. Dividends received from another corporation owned or controlled directly or indirectly by a recipient corporation. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the payor corporation by the recipient corporation. Dividends shall have the meaning provided in section 316 of the internal revenue code. This subtraction shall apply without regard to section 43-961, paragraph 2 and article 4 of this chapter. |
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| 314 | 325 | | |
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| 315 | 326 | | 8. Interest income received on obligations of the United States. |
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| 316 | 327 | | |
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| 317 | 328 | | 9. The amount of dividend income from foreign corporations. For the purposes of this paragraph, gross up income as described in section 78 of the internal revenue code, global intangible low-taxed income as defined in section 951A of the internal revenue code and subpart F income as defined in section 952 of the internal revenue code shall be considered foreign dividends. |
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| 318 | 329 | | |
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| 319 | 330 | | 10. The amount of net operating loss allowed by section 43-1123. |
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| 320 | 331 | | |
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| 321 | 332 | | 11. The amount of any state income tax refunds received that were included as income in computing federal taxable income. |
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| 322 | 333 | | |
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| 323 | 334 | | 12. The amount of expense recapture included in income pursuant to section 617 of the internal revenue code for mine exploration expenses. |
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| 324 | 335 | | |
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| 325 | 336 | | 13. The amount of deferred exploration expenses allowed by section 43-1127. |
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| 326 | 337 | | |
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| 327 | 338 | | 14. The amount of exploration expenses related to the exploration of oil, gas or geothermal resources, computed in the same manner and on the same basis as a deduction for mine exploration pursuant to section 617 of the internal revenue code. This computation is subject to the adjustments contained in section 43-1121, paragraph 10 and paragraphs 12 and 13 of this section relating to exploration expenses. |
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| 328 | 339 | | |
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| 329 | 340 | | 15. The amortization of pollution control devices allowed by section 43-1129. |
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| 330 | 341 | | |
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| 331 | 342 | | 16. The amount of amortization of the cost of child care facilities pursuant to section 43-1130. |
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| 332 | 343 | | |
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| 333 | 344 | | 17. The amount of income from a domestic international sales corporation required to be included in the income of its shareholders pursuant to section 995 of the internal revenue code. |
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| 334 | 345 | | |
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| 335 | 346 | | 18. The income of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947. |
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| 336 | 347 | | |
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| 337 | 348 | | 19. The amount by which a capital loss carryover allowable pursuant to section 43-1130.01, subsection F exceeds the capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code. |
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| 338 | 349 | | |
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| 339 | 350 | | 20. An amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k)(7) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service. |
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| 340 | 351 | | |
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| 341 | 352 | | 21. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 as provided by section 43-1124. |
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| 342 | 353 | | |
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| 343 | 354 | | 22. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph: |
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| 344 | 355 | | |
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| 345 | 356 | | (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues. |
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| 346 | 357 | | |
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| 347 | 358 | | (b) "Specie" means coins having precious metal content. |
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| 348 | 359 | | |
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| 349 | 360 | | 23. With respect to a public service corporation operating a water system or sewage disposal facility, the amount of monies or property received as a contribution in aid of construction. For the purposes of this paragraph: |
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| 350 | 361 | | |
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| 351 | 362 | | (a) "Contribution in aid of construction" means any amount of monies or other property contributed to a public service corporation that provides water or sewage disposal services to the extent that the purpose of the contribution is to provide for expanding, improving or replacing the public service corporation's water system or sewage disposal facilities, including any amount of monies or other property contributed to a public service corporation for a water system or sewage disposal facility subject to a contingent obligation to repay the amount, in whole or in part, to the contributor. |
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| 352 | 363 | | |
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| 353 | 364 | | (b) "Public service corporation" means a public service corporation as defined in article XV, section 2, Constitution of Arizona, that is regulated by the corporation commission. |
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| 354 | 365 | | |
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| 355 | 366 | | 24. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a foreign currency transaction. For the purposes of this paragraph, "foreign currency" means the coin and paper money of a country other than the United States that is designated as legal tender, that circulates and that is customarily used and accepted as a medium of exchange in the country of issuance. |
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| 356 | 367 | | |
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| 357 | 368 | | 25. For taxable years beginning from and after December 31, 2024, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from a virtual currency transaction. For the purposes of this paragraph, "virtual currency" has the same meaning prescribed in section 43-1028. END_STATUTE |
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