Assigned to FIN & APPROP FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
REVISED
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).
The Joint Legislative Budget Committee fiscal note on S.B. 1155 estimates a state General
Fund cost of $976,800 beginning in FY 2027. Due to data constraints, the estimate should be
interpreted with caution (JLBC fiscal note).
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.
Revisions
• Updates the fiscal impact statement.
Prepared by Senate Research
February 3, 2025
MG/KP/ci