income tax forms;
flexibility
HB 2016 will allow DOR more flexibility in the design of income tax forms. The proposed strike-everything amendment to HB 2016 establishes the Equity Act of 2001. The Equity Act of 2001 modifies the definition of “dependent” for income tax purposes and also repeals the crimes of cohabitation, sodomy, and lewd and lascivious acts.
Arizona uses the same definition of “dependent” as the Internal Revenue Code (IRC) for income tax purposes. This definition includes a paragraph that prohibits taxpayers from claiming a dependent, even if support requirements are met, if the relationship between the taxpayer and the dependent is in violation of local law.
For example, a person who makes $60,000 per year and supports someone who is not making any income, is treated differently for tax purposes than a single person with a “legal” dependent. Two single people living together would not be able to take advantage of higher personal exemptions and standard deductions that are allowed for head of household. In addition, a head of household would be allowed a dependent deduction at the state level.
Arizona Tax Liability:
Adjusted Gross Income $60,000 $60,000
Minus:
Dependent Exemption 2,100
Personal Exemption 2,100 4,200
Standard Deduction 3,600 7,200
Taxable Income $54,300 $46,500
Tax Rate 4.72% -
$658 3.2% - $66
Tax Due $ 1,904 $
1,422
Difference: $482
Because Arizona has laws prohibiting cohabitation, a couple is penalized on their federal tax liability as well as the state. In fact, the federal penalty is much greater than the penalty at the state level.
Federal Tax Liability:
Adjusted Gross Income $60,000 $60,000
Minus:
Personal Exemptions 2,800 5,600
Standard Deduction 4,400 6,450
Taxable Income $52,800 $47,950
Tax Due $11,379 $ 8,864
Difference: $2,515
TOTAL STATE AND FEDERAL PENALTY:
$2,997
The proposed strike-everything amendment also repeals the state’s archaic laws. The statutes being repealed have the following language prohibiting certain acts:
13-1409. Open and notorious
cohabitation or adultery; classification
A person who lives in a state
of open and notorious cohabitation or adultery is guilty of a class 3
misdemeanor.
Explanation: This prohibits two adults from living
together. This does not repeal the
prohibition against adultery pursuant to section 13-1408.
13-1411. Crime against nature;
classification
A person who knowingly and
without force commits the infamous crime against nature with an adult is guilty
of a class 3 misdemeanor.
Explanation: This prohibits sodomy and oral sex,
including these acts between married couples.
13-1412. Lewd and lascivious acts;
classification
A person who knowingly and
without force commits, in any unnatural manner, any lewd or lascivious act upon
or with the body or any part or member thereof of a male or female adult, with
the intent of arousing, appealing to or gratifying the lust, passion or sexual
desires of either of such persons, is guilty of a class 3 misdemeanor.
Explanation: Arizona courts have generally interpreted
lewd and lascivious acts to include sexual acts that are not in the furtherance
of child-bearing.
Arizona is one of only twelve
states that have a law against cohabitation.
During the last JLBC meeting held on February 16, 2001, DOA cited ARS
13-1409 as a reason to deny benefits to state employees. DOA refused to honor an employee group’s
request to include in the RFP for state health plans that an employee could pay
for benefits at their own expense for domestic partners.
“The term 'dependent' means any of the following individuals over half of whose support, for the calendar year in which the taxable year of the taxpayer begins, was received from the taxpayer (or is treated under subsection (c) or (e) as received from the taxpayer):
(1) A son or daughter of the taxpayer, or a descendant of either,
(2) A stepson or stepdaughter of the taxpayer,
(3) A brother, sister, stepbrother, or stepsister of the taxpayer,
(4) The father or mother of the taxpayer, or an ancestor of either,
(5) A stepfather or stepmother of the taxpayer,
(6) A son or daughter of a brother or sister of the taxpayer,
(7) A brother or sister of the father or mother of the taxpayer,
(8) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law of the taxpayer, or
(9) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household.
(b) Rules relating to general definition
For purposes of this section -
(1) The terms 'brother' and 'sister' include a brother or sister by the halfblood.
(2) In determining whether any of the relationships specified in subsection (a) or paragraph (1) of this subsection exists, a legally adopted child of an individual (and a child who is a member of an individual's household, if placed with such individual by an authorized placement agency for legal adoption by such individual), or a foster child of an individual (if such child satisfies the requirements of subsection (a)(9) with respect to such individual), shall be treated as a child of such individual by blood.
(3) The term 'dependent' does not include any individual who is not a citizen or national of the United States unless such individual is a resident of the United States or of a country contiguous to the United States. The preceding sentence shall not exclude from the definition of 'dependent' any child of the taxpayer legally adopted by him, if, for the taxable year of the taxpayer, the child has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household, and if the taxpayer is a citizen or national of the United States.
(4) A payment to a wife which is includible in the gross income of the wife under section 71 or 682 shall not be treated as a payment by her husband for the support of any dependent.
(5) An individual is not a member of the taxpayer's household if at any time during the taxable year of the taxpayer the relationship between such individual and the taxpayer is in violation of local law.”
. . . The IRC goes on to further define support tests for students, children of divorced parents, multiple support agreements, etc.
HB 2016
passed the Ways and Means committee as amended with the provisions listed
above.
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45th Legislature
First Regular
Session 3 March 6, 2001
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