Assigned to FIN                                                                                                   FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

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 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. Increases, from 5 years to 20 years, the time period a corporation can carry over a net operating loss.

3. Makes technical changes.

4. Becomes effective on the general effective date.

Amendments Adopted by Committee

1. Increases the time period a corporation can carry over a net operating loss.

2. Makes technical changes.

Senate Action

FIN                 1/19/06     DPA     9-0-0-0

Prepared by Senate Research

January 20, 2006

SL/GC/jas