SB 1371
Initials VP Page 1 Caucus & COW
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature
First Regular Session
Senate: FIN DPA 4-3-0-0 | 3rd Read 17-8-5-0
House: WM DP 5-4-0-0
SB 1371: income tax; subtraction; retirement distribution
Sponsor: Senator Mesnard, LD 13
Caucus & COW
Overview
Creates an individual income tax subtraction from Arizona gross income for the amount of
any distributions from a qualified retirement plan and an Individual Retirement Account for
taxpayers 67 or older and limits the subtraction to the amount of the standard deduction.
History
Individual income tax is levied on Arizona residents’ taxable income and, beginning in Tax
Year 2023, the state imposes a 2.5% tax rate. The tax is levied, paid and collected each year
based on taxable income. The tax base starts with Arizona gross income, which is equivalent
to the federal adjusted gross income and is then modified by a list of additions and
subtractions to income. This is further reduced by exemptions and standard or itemized
deductions to arrive at Arizona taxable income. (A.R.S. §§ 43-1011; 43-1021; 43-1022; 43-
1023; 43-1041; and 43-1042)
Federal law defines several types of pension and retirement accounts in the U.S. Internal
Revenue Code (IRC), including: 1) a trust created or organized in the United States and forms
part of pension constitutes a qualified trust; 2) a tax-sheltered annuity offered by public
schools and certain tax-exempt organizations; 3) a deferred compensation plan; 4) an
individual retirement account (IRA); 5) a Roth IRA: 6) a simplified employee pension; and 7)
a simple retirement account. (I.R.C. §§ 401; 403; 457; 408; 408(a); 408(k) and 408(p))
Provisions
1. Creates an individual income tax subtraction, to the extent not already excluded from
Arizona gross income, for the amount of any distributions from a retirement account for
taxpayers 67 or older. (Sec. 1)
2. Limits the subtraction to the amount of the standard deduction. (Sec. 1)
3. Defines retirement account. (Sec. 1)
4. Applies the subtraction to taxable years beginning January 1, 2025. (Sec. 2)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☒ Fiscal Note