ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR S.B. 1156
internal revenue code conformity
Purpose
Conforms the definition of the United States Internal Revenue Code (IRC) for tax year 2006 to the IRC definition in effect on January 1, 2006.
Background
Since 1978, the provisions of the federal IRC have been adopted by the Arizona State Legislature to conform the computation of Arizona income tax and other statutory references throughout the Arizona Revised Statutes with the IRC as amended by federal legislation enacted in the previous year. This is necessary because Arizona statute requires taxpayers to use federal adjusted gross income (as defined in the IRC) as the starting point for state income tax assessment.
S.B. 1156 updates the definition of the IRC for tax year 2006 to the federal IRC in effect on January 1, 2006, excluding the three provisions where Arizona did not previously conform to the federal changes. For the 30 percent special bonus depreciation provided in the Job Creation and Worker Assistance Act of 2002, and both the 50 percent bonus depreciation and Section 179 expensing in the Jobs and Growth Tax Relief Reconciliation Act of 2003, Arizona taxpayers must make an adjustment to add back the amount taken at the federal level to calculate Arizona income tax.
According to the Arizona Department of Revenue the fiscal impact to the state General Fund is a negative ($2.58 million) in FY 2005-2006 and ($2.74 million) in FY 2006-2007 and ($0.65million) in FY 2007-2008 and ($1.04 million) in FY 2008-2009
Provisions
1. Updates the definition of the IRC for tax year 2006 to the IRC definition in effect on January 1, 2006.
2. Makes technical changes.
3. Becomes effective on the general effective date.
Prepared by Senate Research
January 17, 2006
SL/GC/ac