Arizona Governor Vetoes Tax Conformity Bill

Arizona Gov. Doug Ducey has vetoed a bill that would have:

– updated Arizona’s conformity to the Internal Revenue Code (IRC) for income tax purposes; and

– cut individual income tax rates to offset the increase in taxes caused by conformity.

IRC Conformity

The bill would have retroactively updated Arizona’s IRC conformity date to January 1, 2018, for tax year 2018. This would have conformed Arizona law to federal changes made by:

– the Tax Cuts and Jobs Act of 2017;

– retroactive provisions of the Bipartisan Budget Act of 2018; and

– retroactive provisions of the Consolidated Appropriations Act of 2018.

Updating Arizona’s IRC conformity date would have had the effect of raising taxes on most Arizonans.

Individual Income Tax Rates

To offset the increase in taxes, the bill would have cut individual income tax rates across the board by 0.11% for tax year 2018. The tax rates would have reset to statutory levels after tax year 2018.

Governor’s Veto Message

In his veto letter, the governor said that the bill was “the wrong policy.” The governor said that any bill like this with a fiscal impact should be a part of budget discussions agreed to by the Legislature and Executive.

S.B. 1143, as vetoed by Arizona Gov. Doug Ducey on February 1, 2019; Senate Fact Sheet, Arizona Senate, January 28, 2019; Governor’s Letter, Arizona Gov. Doug Ducey on February 1, 2019

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CCHTaxGroup

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