Assigned to FIN & APPROP FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
FACT SHEET FOR S.B. 1155
income tax; subtraction; uniformed service
Purpose
Effective January 1, 2026, expands the individual income tax subtraction for active service
compensation to include compensation received for active service in the U.S. Uniformed Services,
rather than the U.S. Armed Forces.
Background
The U.S. Armed Forces include the Army, Navy, Air Force, Marine Corps, Space Force
and Coast Guard. The U.S. Uniformed Services include the U.S. Armed Forces, the Public Health
Service and the National Oceanic and Atmospheric Administration (37 U.S.C § 101).
Individual income tax is levied on Arizona residents’ taxable income. The tax base begins
with Arizona gross income, which is equivalent to the taxpayer's federal adjusted gross income.
Statute authorizes various amounts to be added or subtracted when computing an individual's
Arizona adjusted gross income which is further reduced by standard or itemized deductions to
arrive at Arizona taxable income. To the extent not already excluded from Arizona gross income
under the U.S. Internal Revenue Code, compensation received for active service as a member of
the U.S. Reserves, National Guard or Armed Forces is subtracted from Arizona gross income when
computing Arizona adjusted gross income (A.R.S. §§ 43-1001; 43-1021; and 43-1022; IRS).
If allowing members of the U.S. Uniformed Services, rather than only the U.S. Armed
Forces, to subtract active service compensation from the person's Arizona adjusted gross income
results in a change to individual income tax collections, there may be an impact to the state General
Fund.
Provisions
1. Expands the individual income tax subtraction for active service compensation to include
compensation received for active service in the U.S. Uniformed Services, rather than only the
U.S. Armed Forces.
2. Becomes effective on January 1, 2026.
Prepared by Senate Research
January 29, 2025
MG/KP/ci