ARIZONA STATE SENATE
Phoenix, Arizona
Contains a Proposition 108 clause. Eliminates the corporate income tax subtraction for dividends received from Arizona corporations.
In 1973, the Legislature enacted a corporate and individual subtraction for dividends received from corporations that do the principle portion of their business in Arizona. This law continued to exist in the individual income tax statutes until 1990 when it was repealed as part of the massive rewrite of those laws. However, it continues to exist to this day as a subtraction in the corporate income tax statute.
The estate of Helen Ladewig (Ladewig) filed a refund claim on the grounds that the individual income subtraction violated the interstate commerce clause of the U.S. constitution by favoring in-state corporations over out-of-state corporations and sought a refund for tax years 1986 through 1989. The tax court agreed with Ladewig and found the individual income subtraction unconstitutional.
H.B. 2088 eliminates the corresponding corporate income tax subtraction for dividends received from Arizona corporations.
According to the Department of Revenue (DOR), this bill should generate an estimated $22 million revenue gain to the state. However, this estimate is based on returns filed in tax year 2000 when the stock market was performing well (compared to historical market performance) and thus generated high dividend payouts. DOR estimates that actual revenue gain resulting from this measure is probably lower because of current stock market conditions.
1. Eliminates the corporate income tax subtraction for dividends received from Arizona corporations.
2. Allows DOR to disclose the corporations that would have qualified for the tax subtraction being eliminated.
3. Clarifies that the Attorney General may receive confidential information from DOR for the purposes of enforcing the Tobacco Master Settlement Agreement.
4. Makes conforming changes.
5. Contains a retroactivity clause of January 1, 2002, except for the delayed repeal of the disclosure of information by DOR which becomes effective August 1, 2004.
6. Becomes effective on signature of the Governor.
Amendment
Adopted by Committee
· Clarifies that the Attorney General may receive confidential information from DOR for the purposes of enforcing the Tobacco Master Settlement Agreement.
House Action Senate Action
WM 1/22/02 DPA 7-0-0-3 FIN 8/25/02 DPA 7-0-1-0
3rd Read 2/12/02 53-6-1-0
Prepared by Senate Staff
March 25, 2002