internal revenue code
conformity
SB 1071 conforms Arizona statutes to the current United States Internal Revenue Code (IRC) for tax purposes and with other internal revenue code provisions for taxpayers serving in combat zones or affected by a presidentially declared disaster, and provisions relating to the Economic Growth and Tax Relief Reconciliation Act of 2001.
SB 1071 was amended in the Ways and Means Committee to conform the state income tax code to the Job Creation and Worker Assistance Act of 2002.
Since 1978, the provisions of the federal IRC have been adopted by the Legislature to conform the computation of Arizona income tax and other statutory references throughout the Arizona Revised Statutes with the IRC as amended. Each year, the Legislature adopts an updated statutory definition of the IRC to include any provisions that may have become effective in the previous year. This is because Arizona, like many states, stipulates that taxpayers use federal adjusted gross income as defined in the IRC as a starting point for state tax.
In addition to the statutory definition update of “IRC,” the federal government passed two acts with provisions that have an impact on Arizona tax liability. On June 7, 2001, President Bush signed into law the Economic Growth and Tax Relief Reconciliation Act of 2001, which included significant changes to the estate and generation-skipping transfer tax. Arizona’s estate tax revenue is based on the State’s share of the maximum credit allowed by the federal estate tax laws. The federal provisions in this Act will phase-out and eventually repeal the federal state death tax credit beginning in tax year 2002.
The second Act is the Fallen Hero Survivor Benefit Fairness Act of 2001, signed into law on June 5, 2001. This act amends the Taxpayer Relief Act of 1997 to extend to survivors of public safety officers killed in the line of duty before December 31, 1996, the same tax benefits available to the survivors of officers killed after such date.
SB 1071 is the annual Internal Revenue Code conformity bill.
According to the Department of Revenue report, “Impact on State Revenues of Conformity,” the fiscal impact of SB 1071 is as shown on the following table. However, it should be noted that Joint Legislative Budget Committee staff has already accounted for the phased down estate tax portion in its current revenue forecasts and has revised the estimated impact.
|
In millions |
FY2001-2002 |
FY2002-2003 |
FY2003-2004 |
FY2004-2005 |
|
Retroactive Provisions |
($0.00M) |
($0.06M) |
($0.12M) |
($0.14M) |
|
Provisions Effective January 1, 2002 |
($6.23M) |
($33.16M) |
($55.28M) |
($78.87M) |
|
Combined Impact |
($6.23M) |
($33.22M) |
($55.40M) |
($79.01M) |
|
JLBC Revised Impact |
($0.00M) |
($14.00M) |
($17.14M) |
($21.32M) |