Assigned to FICO FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR S.B. 1358
income tax withholding; retirement distributions
Purpose
Clarifies pension, annuity and retirement account payments from which an individual may
request the payor to withhold Arizona income tax.
Background
An individual who receives regularly scheduled payments from a pension or annuity that
are included in the individual's Arizona gross income may elect to have Arizona income tax
withheld from those payments. Eligible, regularly scheduled payments include payments received
from: 1) pensions and annuities; 2) retired or retainer pay for service in the U.S. military or naval
forces; 3) the U.S. civil service retirement system from the Civil Service Retirement and Disability
Fund; and 4) traditional individual retirement accounts. To request a payor to withhold Arizona
income tax from an eligible payment, an individual must complete a form prescribed by the
Arizona Department of Revenue (ADOR) and choose a withholding rate. The individual may
terminate the request by submitting a written statement of termination to the payor. ADOR
prescribes withholding percentages which are currently between 0.5 percent and 3.5 percent
(A.R.S. ยงยง 43-401 and 43-404).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Specifies that distributions from a retirement account are eligible for Arizona income tax
withholding to the extent that the distributed amount is includable in the individual's Arizona
gross income.
2. Requires a distribution from a retirement account to be treated as a payment of wages for
income tax purposes, if a request that the retirement account be subject to withholding is in
effect at the time of payment.
3. Allows a request to initiate, adjust or terminate withholding from a pension, annuity or
retirement account to be executed in writing by paper or electronic means on an ADOR-
prescribed form.
4. Defines pension and retirement account and modifies the definition of annuity.
5. Makes technical and conforming changes.
6. Becomes effective on the general effective date.
Prepared by Senate Research
February 1, 2024
MG/cs