- i -

House Engrossed

taxation; omnibus; 2026-2027

State of Arizona House of Representatives Fifty-seventh Legislature Second Regular Session 2026

HOUSE BILL 4168

AN ACT

AMENDING SECTIONS 20-224 AND 20-224.01, ARIZONA REVISED STATUTES; REPEALING SECTION 20-224.03, ARIZONA REVISED STATUTES; AMENDING SECTIONS 20-837, 20-1010, 20-1060 AND 20-1097.07, ARIZONA REVISED STATUTES; REPEALING SECTIONS 41-1507 AND 41-1525, ARIZONA REVISED STATUTES; AMENDING SECTIONS 42-1001, 42-5032.02, 42-11111, 43-105, 43-222, 43-1021, 43-1022, 43-1041, 43-1042 AND 43-1073.01, ARIZONA REVISED STATUTES; REPEALING SECTION 43-1074, ARIZONA REVISED STATUTES; AMENDING SECTIONS 43-1074.01, 43-1083.03, 43-1121 AND 43-1122, ARIZONA REVISED STATUTES; REPEALING SECTION 43-1161, ARIZONA REVISED STATUTES; AMENDING SECTIONS 43-1164.04 AND 43-1168, ARIZONA REVISED STATUTES; REPEALING SECTION 43-1170, ARIZONA REVISED STATUTES; AMENDING SECTIONS 43-1183 AND 48-4203, ARIZONA REVISED STATUTES; RELATING TO TAXATION.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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- 1 - Be it enacted by the Legislature of the State of Arizona: 1 Section 1. Section 20-224, Arizona Revised Statutes, is amended to 2 read: 3 20-224. Premium tax; reports 4 A. On or before March 1 of each year, each authorized domestic 5 insurer, each other insurer and each formerly authorized insurer referred 6 to in section 20-206, subsection B shall file with the director a report 7 in a form prescribed by the director showing total direct premium income 8 including policy membership and other fees and all other considerations 9 for insurance from all classes of business whether designated as a premium 10 or otherwise received by it during the preceding calendar year on account 11 of policies and contracts covering property, subjects or risks located, 12 resident or to be performed in this state, after deducting from such total 13 direct premium income applicable cancellations, returned premiums, the 14 amount of reduction in or refund of premiums allowed to industrial life 15 policyholders for payment of premiums direct to an office of the insurer 16 and all policy dividends, refunds, savings coupons and other similar 17 returns paid or credited to policyholders within this state and not 18 reapplied as premiums for new, additional or extended insurance. No 19 deduction shall be made of the cash surrender values of policies or 20 contracts. Considerations received on annuity contracts, as well as the 21 unabsorbed portion of any premium deposit, shall not be included in total 22 direct premium income, and neither shall be subject to tax. The report 23 shall separately indicate the total direct fire insurance premium income 24 received from property located in the incorporated cities and towns 25 certified by the office of the state fire marshal pursuant to section 26 9-951, subsection B, as procuring the services of a private fire company. 27 B. Coincident with the filing of the tax report, each insurer shall 28 pay to the director for deposit, pursuant to sections 35-146 and 35-147, a 29 tax on such net premiums at the following rates: 30 1. For fire insurance: 31 (a) On property located in a city or town certified by the office 32 of the state fire marshal pursuant to section 9-951, subsection B, as 33 procuring the services of a private fire company, .66 percent. 34 (b) On all other property, 2.2 percent. 35 2. For disability insurance, 2.0 percent. 36 3. For health care service plans, the rates prescribed under 37 sections 20-837, 20-1010 and 20-1060. 38 4. For other insurance: 39 (a) For premiums received in calendar year 2016, 1.95 percent. 40 (b) For premiums received in calendar year 2017, 1.90 percent. 41 (c) For premiums received in calendar year 2018, 1.85 percent. 42 (d) For premiums received in calendar year 2019, 1.80 percent. 43

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- 2 - (e) For premiums received in calendar year 2020, 1.75 percent. 1 (f) For premiums received in calendar year 2021 and for each 2 subsequent calendar year, 1.70 percent. 3 C. Any payments of tax pursuant to subsection F of this section 4 shall be deducted from the tax payable pursuant to subsection B of this 5 section. Each insurer shall reflect the cost savings attributable to the 6 lower tax in fire insurance premiums charged on property located in an 7 incorporated city or town certified by the office of the state fire 8 marshal pursuant to section 9-951, subsection B, as procuring the services 9 of a private fire company. No insurer shall be liable to the state or to 10 any other person, or shall be subject to regulatory action, relating to 11 the calculation or submittal of fire insurance premium taxes based in good 12 faith on the office of the state fire marshal's certification. 13 D. Eighty-five percent of the tax paid under this section by an 14 insurer on account of premiums received for fire insurance shall be 15 separately specified in the report and shall be apportioned in the manner 16 provided by sections 9-951, 9-952 and 9-972, except that all of the tax so 17 allocated to a fund of a municipality or fire district that has no 18 volunteer firefighters or pension obligations to volunteer firefighters 19 shall be appropriated to the account of the municipality or fire district 20 in the public safety personnel retirement system and all of the tax so 21 allocated to a fund of a municipality or fire district that has both 22 full-time paid firefighters and volunteer firefighters or pension 23 obligations to full-time paid firefighters or volunteer firefighters shall 24 be appropriated to the account of the municipality or fire district in the 25 public safety personnel retirement system where it shall be reallocated by 26 actuarial procedures proportionately to the municipality or fire district 27 for the account of the full-time paid firefighters and to the municipality 28 or fire district for the account of the volunteer firefighters. A 29 municipality or fire district shall provide to the public safety personnel 30 retirement system all information that the system deems necessary to 31 perform the reallocation prescribed by this section. A full accounting of 32 the reallocation shall be forwarded to the municipality or fire district 33 and its local boards. 34 E. This section does not apply to title insurance. Title insurers 35 shall be taxed as provided in section 20-1566. 36 F. Any insurer that paid or is required to pay a tax of $50,000 or 37 more on net premiums received during the preceding calendar year, pursuant 38 to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 39 20-1060 and 20-1097.07, shall file on or before the fifteenth day of each 40 month from March through August a report for that month, on a form 41 prescribed by the director, accompanied by a payment in an amount equal to 42 fifteen percent of the amount paid or required to be paid during the 43 preceding calendar year pursuant to subsection B of this section and 44 sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07. The payments 45

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- 3 - are due and payable on or before the fifteenth day of each month and shall 1 be made to the director for deposit, pursuant to sections 35-146 and 2 35-147. 3 G. Except for the tax paid on fire insurance premiums pursuant to 4 subsections B and D of this section, an insurer may claim a premium tax 5 credit if the insurer qualifies for a credit pursuant to section 6 20-224.03, 20-224.04, 20-224.06 or 20-224.07. 7 H. On receipt of a properly documented claim, a refund shall be 8 provided to an insurer from available funds for the excess amount of any 9 fire insurance premium improperly paid by the insurer. The insurer shall 10 reflect the refund in the fire insurance premiums charged on the property 11 that was charged the excessive amount. 12 I. On or before September 30 of each year, the director of the 13 department of insurance and financial institutions shall report to the 14 directors of the joint legislative budget committee and the governor's 15 office of strategic planning and budgeting on the amount of insurance 16 premium tax credits established by sections 20-224.03, 20-224.04, 17 20-224.05, 20-224.06 and 20-224.07 that were used during the previous 18 fiscal year. 19 J. For the purposes of: 20 1. Subsection B of this section, fire insurance is one hundred 21 percent of fire lines, forty percent of commercial multiple peril 22 nonliability lines, thirty-five percent of homeowners' multiple peril 23 lines, twenty-five percent of farm owners' multiple peril lines and twenty 24 percent of allied lines. 25 2. Section 20-416, fire insurance is eighty-five percent of fire 26 and allied lines. 27 K. From and after December 31, 2017, the director may require that 28 reports and payments under this section be submitted electronically. If 29 the director requires electronic submission, the director shall include on 30 the department's official website a list of one or more acceptable 31 third-party services through which an insurer must submit reports and 32 payments. 33 Sec. 2. Section 20-224.01, Arizona Revised Statutes, is amended to 34 read: 35 20-224.01. Additional premium tax; civil penalty 36 A. Coincident with the filing of the tax report as required in 37 section 20-224, each insurer shall pay to the director, for deposit, 38 pursuant to sections 35-146 and 35-147, a tax of .4312 percent of such net 39 premiums received from all insurance carried for or on vehicles as defined 40 in section 28-101, in addition to other applicable taxes. 41 B. The tax of .4312 percent of such net premiums received by the 42 director and paid by an insurer on account of premiums received for 43 insurance on certain vehicles as defined in section 28-101 shall be 44 separately specified in the insurer's report required in section 20-224 45

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- 4 - and is appropriated to the public safety personnel retirement system and 1 shall be transferred by the state treasurer to the board of trustees of 2 the public safety personnel retirement system for deposit in the highway 3 patrol account. If the tax received is greater than the amount necessary 4 to fund the highway patrol account, beginning in the 1991-1992 fiscal year 5 the state treasurer shall deposit the excess in the Arizona highway patrol 6 fund established by section 41-1752 in any amount required by legislative 7 appropriation. 8 C. An insurer shall report and pay the taxes required by this 9 section in the manner prescribed by section 20-224. An insurer who THAT 10 fails to pay the tax on or before the prescribed payment dates is subject 11 to a civil penalty determined pursuant to section 20-225. 12 D. An insurer shall not claim a premium tax credit pursuant to 13 section 20-224.03 for the premium taxes paid pursuant to this section. 14 Sec. 3. Repeal 15 Section 20-224.03, Arizona Revised Statutes, is repealed. 16 Sec. 4. Section 20-837, Arizona Revised Statutes, is amended to 17 read: 18 20-837. Tax exemption; exceptions 19 A. Every corporation doing business pursuant to this article is 20 declared to be a nonprofit and benevolent institution and to be exempt 21 from state, county, district, municipal and school taxes, including the 22 taxes prescribed by this title, and excepting only the fees prescribed by 23 section 20-167 and taxes on real and tangible personal property located 24 within this state. Each corporation is subject to a state tax of 2.0 25 percent on net premiums that are received to effect or maintain the 26 corporation's subscription contracts, except that the tax shall not apply 27 with respect to any coverage concerning which the corporation's 28 relationship is as administrative or fiscal agent for national, state or 29 municipal government or any political subdivision or body thereof, and 30 such tax shall not apply with respect to any premiums received from funds 31 of national, state or municipal government or any political subdivision or 32 body thereof. The tax shall be determined, filed and reported in the 33 manner prescribed in section 20-224. The failure by a corporation to pay 34 the tax on or before the prescribed payment dates results in a civil 35 penalty determined pursuant to section 20-225. 36 B. A corporation may claim a premium tax credit if the corporation 37 qualifies for a credit pursuant to section 20-224.03. 38 Sec. 5. Section 20-1010, Arizona Revised Statutes, is amended to 39 read: 40 20-1010. Taxes 41 A. On the tax payment dates prescribed in section 20-224, each 42 prepaid dental plan organization shall pay to the director for deposit, 43 pursuant to sections 35-146 and 35-147, in a form prescribed by the 44

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- 5 - director a tax for transacting a prepaid dental plan in the amount of 2.0 1 percent of prepaid net charges received from members. 2 B. The failure by an organization to pay the tax imposed by this 3 section results in a civil penalty determined pursuant to section 20-225. 4 C. A prepaid dental plan organization may claim a premium tax 5 credit if the organization qualifies for a credit pursuant to section 6 20-224.03. 7 Sec. 6. Section 20-1060, Arizona Revised Statutes, is amended to 8 read: 9 20-1060. Taxes; exemption 10 A. Except as provided in subsection C of this section, on the tax 11 payment dates prescribed in section 20-224, each health care services 12 organization shall pay to the director for deposit, pursuant to sections 13 35-146 and 35-147, in a form prescribed by the director a tax for 14 transacting a health care plan in the amount of 2.0 percent of net charges 15 received from enrollees. 16 B. The failure by an organization to pay the tax imposed by this 17 section results in a civil penalty determined pursuant to section 20-225. 18 C. Payments received by health care services organizations from the 19 United States secretary of health and human services pursuant to a 20 contract issued pursuant to 42 United States Code section 1395mm(g) are 21 not taxable under this section. 22 D. A health care services organization may claim a premium tax 23 credit if the organization qualifies for a credit pursuant to section 24 20-224.03. 25 Sec. 7. Section 20-1097.07, Arizona Revised Statutes, is amended to 26 read: 27 20-1097.07. Fees and taxes 28 A. Any prepaid legal insurance corporation licensed pursuant to 29 this article shall pay those fees prescribed by section 20-167 and those 30 taxes prescribed by section 20-224. 31 B. A prepaid legal insurance corporation may claim a premium tax 32 credit if the corporation qualifies for a credit pursuant to section 33 20-224.03. 34 Sec. 8. Repeal 35 Sections 41-1507 and 41-1525, Arizona Revised Statutes, are 36 repealed. 37 Sec. 9. Section 42-1001, Arizona Revised Statutes, is amended to 38 read: 39 42-1001. Definitions 40 In this title, unless the context otherwise requires: 41 1. "Board" or "state board" means either the state board of tax 42 appeals or the state board of equalization, as applicable. 43 2. "Court" means the tax court or superior court, whichever is 44 applicable. 45

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- 6 - 3. "Department" means the department of revenue. 1 4. "Director" means the director of the department. 2 5. "Electronically send" or "send electronically" means to send by 3 either email or the use of an electronic portal. 4 6. "Electronic portal" means a secure location on a website 5 established by the department that requires the receiver to enter a 6 password to access. 7 7. "Email" means: 8 (a) An electronic transmission of a message to an email address. 9 (b) If the message contains confidential information, the 10 electronic transmission of a message to an email address using encryption 11 software that requires the receiver to enter a password before the message 12 can be retrieved and viewed. 13 8. "Internal revenue code" means the United States internal revenue 14 code of 1986, as amended and in effect as of January 1, 2025 2026, 15 including those provisions that became effective during 2024 2025 with the 16 specific adoption of their retroactive effective dates but excluding all 17 changes to the code enacted after January 1, 2025 2026. 18 Sec. 10. Section 42-5032.02, Arizona Revised Statutes, is amended 19 to read: 20 42-5032.02. Distribution of revenues for city, town or county 21 infrastructure improvements related to 22 manufacturing facilities; definitions 23 A. Subject to subsection B of this section, from and after 24 September 30, 2013 through September 30, 2033, the state treasurer shall 25 pay in monthly increments a city, town or county up to the amount 26 determined under subsection C of this section for public infrastructure 27 improvements for the benefit of a manufacturing facility. 28 B. The state treasurer shall not make any payments under subsection 29 C of this section until both of the following apply: 30 1. Ten percent of the qualifying capital investment that is 31 certified under subsection D of this section and that constitutes 32 construction phase services, as defined in section 42-5075, has been made 33 by the manufacturing facility. 34 2. From and after June 30, 2014. 35 C. The total amount paid to a city, town or county under subsection 36 A of this section shall not exceed the total amount of state transaction 37 privilege tax revenues collected under section 42-5010, subsection A from 38 persons conducting business under section 42-5075 derived from contracts 39 to construct buildings and associated improvements for the benefit of a 40 manufacturing facility or eighty SEVENTY-FIVE percent of the total cost of 41 the public infrastructure improvements, whichever is less. The total 42 amount paid to all cities, towns and counties under this subsection shall 43 not exceed a maximum of $200,000,000 THE FOLLOWING: 44 1. THROUGH JUNE 30, 2027, A MAXIMUM OF $250,000,000 45

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- 7 - 2. THROUGH JUNE 30, 2028, A MAXIMUM OF $300,000,000. 1 3. FROM AND AFTER JUNE 30, 2028, A MAXIMUM OF $350,000,000. 2 D. Within one hundred eighty days after the commencement of the 3 construction of buildings and associated improvements for the benefit of a 4 manufacturing facility that will require a city, town or county to make 5 infrastructure improvements, the manufacturing facility shall file a sworn 6 certification with the Arizona commerce authority and submit a copy of 7 this sworn certification to the applicable city, town or county that the 8 manufacturing facility agrees to either: 9 1. Make at least $500,000,000 $3,000,000,000 in capital investment 10 if the manufacturing facility is located in a county that has a population 11 of eight hundred thousand persons or more. 12 2. Make at least $50,000,000 $100,000,000 in capital investment if 13 the manufacturing facility is located in a county that has a population of 14 less than eight hundred thousand persons. 15 E. The certification under subsection D of this section shall 16 contain a sworn statement or certification, signed by an officer of the 17 manufacturing facility under penalty of perjury, that the information 18 contained is true and correct according to the best belief and knowledge 19 of the person submitting the information after a reasonable investigation 20 of the facts. 21 F. Before submitting the certification to the Arizona commerce 22 authority, the manufacturing facility and the city, town or county must 23 enter into a written agreement that: 24 1. Identifies and states the cost of the public infrastructure 25 improvements that will be constructed. 26 2. Identifies the sources of monies, including monies received 27 pursuant to this section, that will be used to pay for the public 28 infrastructure improvements. 29 G. On receipt of the sworn certification from a manufacturing 30 facility pursuant to subsection D of this section, the city, town or 31 county shall enter into a written agreement with the department. This 32 agreement and any amendments or changes to the agreement shall: 33 1. State the cost of the public infrastructure improvements and 34 separately identify the particular improvements that will be made. 35 2. State that the monies received under this section will be used 36 exclusively to pay for public infrastructure improvements that are 37 necessary to support the activities of the manufacturing facility. 38 3. State that the city, town or county will commit all of its 39 portion of the revenue received pursuant to section 42-5029, subsection D 40 derived from contracts subject to section 42-5075 to construct buildings 41 and associated improvements for the benefit of the manufacturing facility 42 for public infrastructure improvements that benefit the manufacturing 43 facility. 44

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- 8 - 4. State that the city, town or county will immediately notify the 1 department when monies received under this section exceed eighty percent 2 of the cost of the infrastructure improvements THE APPLICABLE PERCENTAGE 3 OF THE TOTAL COST OF THE PUBLIC INFRASTRUCTURE IMPROVEMENTS PRESCRIBED BY 4 SUBSECTION C OF THIS SECTION and will return the amount of the excess to 5 the state treasurer for deposit in the state general fund. 6 5. Stipulate the actual amount of the construction funding that 7 will be derived from sources other than this state. 8 6. STATE THAT THE CITY, TOWN OR COUNTY WILL PROVIDE AT LEAST FIVE 9 PERCENT OF THE ACTUAL AMOUNT OF THE CONSTRUCTION FUNDING STIPULATED TO 10 UNDER PARAGRAPH 5 OF THIS SUBSECTION. 11 6. 7. Identify the persons who will be prime contractors on the 12 construction of buildings and associated improvements for the benefit of a 13 manufacturing facility and state that each prime contractor has been 14 notified as to which portion of the contractor's income shall be 15 separately identified to the department pursuant to section 42-5075, 16 subsection H. 17 7. 8. State that the city, town or county agrees that any amounts 18 paid by the department to a prime contractor as identified under paragraph 19 6 7 of this subsection resulting from an audit adjustment or claim for 20 credit or refund of taxes described in subsection C of this section shall 21 be recovered by the department from the city, town or county by reducing 22 the amount paid to the city, town or county under section 42-5029 from 23 monies designated as distribution base in the month next succeeding the 24 month in which the adjustment or claim is paid. 25 8. 9. State that the city, town or county agrees that the 26 department will use the amounts subject to any distribution required under 27 subsection A of this section in calculating the maximum amount set by 28 subsection C of this section. 29 9. 10. State that the city, town or county agrees that if, on 30 notification by the department, the state treasurer ceases payments 31 because of the condition described in subsection H of this section, the 32 city, town or county has no claim to additional payments if the department 33 subsequently pays amounts to a prime contractor identified in an agreement 34 with any city, town or county, as described in paragraph 6 7 of this 35 subsection, due to an audit adjustment or claim for credit or refund of 36 taxes described in subsection C of this section. 37 11. STATE THAT THE CITY, TOWN OR COUNTY WILL PROVIDE TO THE 38 DEPARTMENT AN ANALYSIS OF THE ANTICIPATED DIRECT AND INDIRECT REVENUES 39 THIS STATE WILL RECEIVE AS A RESULT OF CONSTRUCTING THE MANUFACTURING 40 FACILITY. THE ANALYSIS MUST INCLUDE MEASURES RELATING TO THE ANTICIPATED 41 NEW JOBS TO BE DIRECTLY CREATED BY THE MANUFACTURING FACILITY, INCLUDING 42 THE TOTAL NUMBER OF NEW JOBS, THE RANGE OF ANNUAL WAGES PER EMPLOYEE AND 43 THE MEDIAN ANNUAL WAGES PER EMPLOYEE. THE DEPARTMENT SHALL RETAIN THE 44 ANALYSIS AND MAY PROVIDE THE ANALYSIS ON REQUEST. INFORMATION IN THE 45

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- 9 - ANALYSIS THAT QUALIFIES AS A TRADE SECRET AS DEFINED IN SECTION 44-401 OR 1 AS CONFIDENTIAL PROPRIETARY INFORMATION THAT, IF MADE PUBLIC, COULD HARM 2 THE COMPETITIVE POSITION OF THE MANUFACTURING FACILITY IS CONFIDENTIAL, IS 3 NOT A PUBLIC RECORD AND MAY NOT BE DISCLOSED BY THE DEPARTMENT. 4 10. 12. Provide any other information deemed necessary by the 5 department. 6 H. On notification by the department, the state treasurer shall 7 cease payments under subsection A of this section if either of the 8 following occurs: 9 1. The city, town or county has received monies that meet or exceed 10 eighty percent THE APPLICABLE PERCENTAGE of the TOTAL cost of the public 11 infrastructure improvements PRESCRIBED BY SUBSECTION C OF THIS SECTION 12 that are necessary to support the activities related to the manufacturing 13 facility as described in the written agreement pursuant to subsection G of 14 this section. 15 2. The total amount subject to any distribution required under 16 subsection A of this section has met the maximum amount set by subsection 17 C of this section. 18 I. NOTWITHSTANDING SUBSECTION H, PARAGRAPH 2 OF THIS SECTION, THE 19 DEPARTMENT'S PROCESSING AND PAYMENT OF ELIGIBLE REQUESTS FOR PAYMENT ARE 20 SUBJECT TO ALL OF THE FOLLOWING: 21 1. THE DEPARTMENT MAY CONTINUE TO RECEIVE AND PROCESS ELIGIBLE 22 REQUESTS FOR PAYMENT, INCLUDING PARTIAL PAYMENTS, AFTER THE STATE 23 TREASURER HAS CEASED PAYMENTS PURSUANT TO SUBSECTION H, PARAGRAPH 2 OF 24 THIS SECTION. 25 2. AMOUNTS SEPARATELY ACCOUNTED FOR UNDER SECTION 42-5075, 26 SUBSECTION H THAT HAVE NOT BEEN DISTRIBUTED TO THE APPLICABLE CITY, TOWN 27 OR COUNTY SHALL BE RETAINED BY THE DEPARTMENT AND REMAIN AVAILABLE FOR 28 DISTRIBUTION TO THE APPLICABLE CITY, TOWN OR COUNTY WHEN THE REMAINING 29 CAPACITY AND AMOUNTS SEPARATELY ACCOUNTED FOR UNDER SECTION 42-5075, 30 SUBSECTION H FOR THE CITY, TOWN OR COUNTY ARE SUFFICIENT TO PROCESS AN 31 ELIGIBLE REQUEST FOR PAYMENT, SUBJECT TO PARAGRAPH 6 OF THIS SUBSECTION. 32 3. THE DEPARTMENT SHALL PROCESS ELIGIBLE REQUESTS FOR PAYMENT 33 DURING EACH REPORTING PERIOD IN WHICH THE DEPARTMENT CLOSES AND RECONCILES 34 TRANSACTION PRIVILEGE TAX COLLECTIONS UNDER THIS SECTION. PAYMENT OF EACH 35 ELIGIBLE REQUEST FOR PAYMENT IS SUBJECT TO THE AVAILABILITY OF AMOUNTS 36 SEPARATELY ACCOUNTED FOR UNDER SECTION 42-5075, SUBSECTION H FOR THE 37 APPLICABLE CITY, TOWN OR COUNTY. IF THE REMAINING CAPACITY IS SUFFICIENT 38 TO PAY ALL ELIGIBLE REQUESTS FOR PAYMENT ON HAND, THE DEPARTMENT SHALL 39 INSTRUCT THE STATE TREASURER TO PAY EACH REQUEST. AN ELIGIBLE REQUEST FOR 40 PAYMENT, OR ANY UNPAID BALANCE OF A PARTIALLY PAID REQUEST, THAT CANNOT BE 41 FULLY PAID DURING A REPORTING PERIOD REMAINS ON HAND FOR PROCESSING IN 42 SUBSEQUENT REPORTING PERIODS, SUBJECT TO THIS SUBSECTION. 43

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- 10 - 4. IF THE REMAINING CAPACITY IS INSUFFICIENT TO PAY ALL ELIGIBLE 1 REQUESTS FOR PAYMENT ON HAND, THE DEPARTMENT SHALL ALLOCATE THE REMAINING 2 CAPACITY AMONG THE ELIGIBLE REQUESTS FOR PAYMENT ON A PRO RATA BASIS 3 ACCORDING TO THE REQUESTED AMOUNTS. IF THE PRO RATA SHARE ALLOCATED TO A 4 CITY, TOWN OR COUNTY EXCEEDS THE AMOUNTS SEPARATELY ACCOUNTED UNDER 5 SECTION 42-5075, SUBSECTION H FOR THAT CITY, TOWN OR COUNTY, THE EXCESS 6 REMAINING CAPACITY SHALL BE REALLOCATED ON A PRO RATA BASIS AMONG THE 7 REMAINING ELIGIBLE REQUESTS FOR PAYMENT. 8 5. A CITY, TOWN OR COUNTY THAT HAS NOT SUBMITTED AN ELIGIBLE 9 REQUEST FOR PAYMENT DURING A REPORTING PERIOD DOES NOT REDUCE THE 10 REMAINING CAPACITY AVAILABLE TO CITIES, TOWNS OR COUNTIES THAT HAVE 11 SUBMITTED ELIGIBLE REQUESTS FOR PAYMENT DURING THAT REPORTING PERIOD. 12 6. WHEN THE REMAINING CAPACITY IS ZERO AND THE MAXIMUM AMOUNT 13 PRESCRIBED IN SUBSECTION C, PARAGRAPH 3 OF THIS SECTION HAS BEEN MET, THE 14 DEPARTMENT SHALL DISTRIBUTE ANY AMOUNTS RETAINED UNDER PARAGRAPH 2 OF THIS 15 SUBSECTION TO THE STATE GENERAL FUND AND TO CITIES, TOWNS AND COUNTIES 16 PURSUANT TO THE DISTRIBUTION PROVISIONS OF THIS CHAPTER THAT WOULD HAVE 17 APPLIED IF THE AMOUNTS HAD NOT BEEN SEPARATELY ACCOUNTED FOR UNDER THIS 18 SECTION. 19 J. THE DEPARTMENT SHALL POST ON THE DEPARTMENT'S WEBSITE THE 20 INTERGOVERNMENTAL AGREEMENTS ENTERED INTO WITH A CITY, TOWN OR COUNTY 21 PURSUANT TO THIS SECTION AND THE DEVELOPMENT AGREEMENTS ENTERED INTO IN 22 CONNECTION WITH THIS SECTION. ON REQUEST BY THE DEPARTMENT, A CITY, TOWN 23 OR COUNTY THAT HAS ENTERED INTO AN AGREEMENT PURSUANT TO SUBSECTION G OF 24 THIS SECTION SHALL PROVIDE THE DEPARTMENT WITH A COPY OF ANY DEVELOPMENT 25 AGREEMENT BETWEEN THE CITY, TOWN OR COUNTY AND A MANUFACTURING FACILITY 26 ENTERED INTO IN CONNECTION WITH THIS SECTION. BEFORE POSTING A DEVELOPMENT 27 AGREEMENT, THE DEPARTMENT SHALL: 28 1. PROVIDE THE MANUFACTURING FACILITY WITH WRITTEN NOTICE AND A 29 REASONABLE OPPORTUNITY TO DESIGNATE, WITHIN THIRTY DAYS AFTER RECEIVING 30 THE NOTICE, SPECIFIC INFORMATION IN THE AGREEMENT THAT THE MANUFACTURING 31 FACILITY CONSIDERS TO BE EITHER: 32 (a) A TRADE SECRET AS DEFINED IN SECTION 44-401. 33 (b) CONFIDENTIAL PROPRIETARY INFORMATION THAT, IF MADE PUBLIC, 34 COULD HARM THE COMPETITIVE POSITION OF THE MANUFACTURING FACILITY. 35 2. REDACT INFORMATION DESIGNATED BY THE MANUFACTURING FACILITY 36 UNDER PARAGRAPH 1 OF THIS SUBSECTION BEFORE POSTING THE AGREEMENT, UNLESS 37 THE DEPARTMENT DETERMINES AFTER CONSULTATION WITH THE MANUFACTURING 38 FACILITY THAT THE DESIGNATION IS NOT REASONABLE UNDER THE CIRCUMSTANCES. 39 INFORMATION DESIGNATED AND REDACTED UNDER THIS PARAGRAPH IS CONFIDENTIAL, 40 IS NOT A PUBLIC RECORD AND MAY NOT BE DISCLOSED BY THE DEPARTMENT. 41 I. K. For the purposes of this section: 42 1. "Associated improvement" includes any public infrastructure 43 improvement that is made for the benefit of the manufacturing facility 44

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- 11 - outside of the parcel or parcels of real property where the manufacturing 1 facility is located. 2 2. "Capital investment" means an expenditure to acquire, lease or 3 improve property that is used for the benefit of a manufacturing facility, 4 including land, buildings, machinery and fixtures. 5 3. "ELIGIBLE REQUEST FOR PAYMENT" MEANS A REQUEST FOR PAYMENT 6 SUBMITTED BY A CITY, TOWN OR COUNTY UNDER AN AGREEMENT ENTERED INTO 7 PURSUANT TO SUBSECTION G OF THIS SECTION THAT THE DEPARTMENT HAS 8 DETERMINED COMPLIES WITH THE APPLICABLE AGREEMENT. 9 3. 4. "Manufacturing facility": 10 (a) Means an establishment that is engaged in the mechanical, 11 physical or chemical transformation or fabrication of materials, 12 substances or components into new products in this state, that is 13 classified within sections 31 through 33 inclusive of the 2007 edition of 14 the North American industry classification system as published by the 15 national technical information service of the United States department of 16 commerce and that agrees to either: 17 (i) Make at least $500,000,000 $3,000,000,000 in capital investment 18 if the manufacturing facility is located in a county that has a population 19 of eight hundred thousand persons or more. 20 (ii) Make at least $50,000,000 $100,000,000 in capital investment 21 if the manufacturing facility is located in a county that has a population 22 of less than eight hundred thousand persons. 23 (b) Does not include mining, milling or smelting mineral ore or 24 generating electricity. 25 4. 5. "Population" means the population determined in the most 26 recent United States decennial census or the most recent special census as 27 provided in section 28-6532. 28 5. 6. "Public infrastructure" means water production, delivery and 29 disposal facilities, wastewater production, RECLAMATION, RECYCLING, 30 TREATMENT, STORAGE, delivery and disposal facilities and roads that are 31 necessary to support the activities of the manufacturing facility. 32 7. "REMAINING CAPACITY" MEANS THE AMOUNT BY WHICH THE APPLICABLE 33 MAXIMUM AMOUNT PRESCRIBED IN SUBSECTION C OF THIS SECTION EXCEEDS THE 34 TOTAL AMOUNT DISTRIBUTED TO ALL CITIES, TOWNS AND COUNTIES UNDER 35 SUBSECTION A OF THIS SECTION. 36 Sec. 11. Section 42-11111, Arizona Revised Statutes, is amended to 37 read: 38 42-11111. Exemption for property; widows and widowers; persons 39 with a total and permanent disability; veterans 40 with a disability; definitions 41 A. The property of widows and widowers, of persons with total and 42 permanent disabilities and of veterans with service or nonservice 43 connected disabilities who are residents of this state is exempt from 44

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- 12 - taxation as provided by article IX, section 2, Constitution of Arizona, 1 and subject to the conditions and limits prescribed by this section. 2 B. Pursuant to article IX, section 2, subsection F, Constitution of 3 Arizona, the exemptions from taxation under this section are allowed as 4 provided in subsections C, D, and E, F AND G of this section. 5 C. The primary residence of a veteran with a service-connected 6 disability whose disability rating by the United States department of 7 veterans affairs is one hundred percent OR WHOSE DISABILITY STATUS IS 8 TOTAL DISABILITY BASED ON INDIVIDUAL UNEMPLOYABILITY is fully exempt from 9 taxation. The surviving spouse of a veteran whose primary residence is 10 receiving the exemption under this subsection may continue to claim the 11 full exemption for the surviving spouse's primary residence as long as the 12 surviving spouse does not remarry. For the purposes of this subsection, a 13 primary residence that is owned by a veteran who is eligible for the 14 exemption under this subsection and the veteran's spouse shall be treated 15 as if owned solely by the veteran. 16 D. The property of a veteran with a nonservice-connected disability 17 whose disability rating by the United States department of veterans 18 affairs is one hundred percent or less or with a service-connected 19 disability whose disability rating by the United States department of 20 veterans affairs is less than one hundred percent is exempt in the amount 21 of $4,188. The limit under this subsection is further limited by 22 multiplying the total exemption amount by the percentage of the veteran's 23 disability, as rated by the United States department of veterans affairs. 24 E. EXCEPT AS PROVIDED IN SUBSECTION F OR G OF THIS SECTION, the 25 property of a widow or widower or a person with a total and permanent 26 disability WHOSE INCOME FROM ALL SOURCES DOES NOT EXCEED THE LIMITS 27 PRESCRIBED BY SUBSECTION J OF THIS SECTION is exempt in the amount of: 28 1. $4,188 if the person's total assessment does not exceed the 29 amount provided in paragraph 2 of this subsection. 30 2. No exemption if the person's total assessment exceeds $28,459. 31 F. THE PRIMARY RESIDENCE OF A WIDOW OR WIDOWER WHO IS THE SURVIVING 32 SPOUSE OF A VETERAN WHO WAS ELIGIBLE FOR THE EXEMPTION UNDER SUBSECTION C 33 OF THIS SECTION IS FULLY EXEMPT FROM TAXATION. 34 G. THE PRIMARY RESIDENCE OF A WIDOW OR WIDOWER WHO IS THE SURVIVING 35 SPOUSE OF A VETERAN WHO WAS ELIGIBLE FOR THE EXEMPTION UNDER SUBSECTION D 36 OF THIS SECTION IS EXEMPT IN THE AMOUNT OF $4,188. THE LIMIT UNDER THIS 37 SUBSECTION IS FURTHER LIMITED BY MULTIPLYING THE TOTAL EXEMPTION AMOUNT BY 38 THE PERCENTAGE OF THAT VETERAN'S DISABILITY, AS RATED BY THE UNITED STATES 39 DEPARTMENT OF VETERANS AFFAIRS. 40 F. H. On or before December 31 of each year, the department shall 41 increase the following amounts: 42 1. The total allowable exemption amount under subsection D, and 43 subsection E, paragraph 1 AND SUBSECTION G of this section based on the 44

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- 13 - average annual percentage increase, if any, in the GDP price deflator in 1 the two most recent complete state fiscal years. 2 2. Beginning in tax year 2026, the total assessment limit amount 3 under subsection E, paragraph 2 of this section based on the average 4 annual percentage increase, if any, in the federal house price index for 5 the two most recent complete state fiscal years. 6 3. The total income limit amounts under subsection H J, paragraphs 7 1 and 2 of this section based on the average annual percentage increase, 8 if any, in the GDP price deflator in the two most recent complete state 9 fiscal years. 10 G. I. For the purpose of determining the amount of the allowable 11 exemption pursuant to subsection E of this section, the person's total 12 assessment shall not include the value of any vehicle that is taxed under 13 title 28, chapter 16, article 3. 14 H. J. Pursuant to article IX, section 2, subsection F, 15 Constitution of Arizona, to qualify for an THE exemption under PRESCRIBED 16 IN SUBSECTION E OF this section, the total income from all sources of the 17 claimant and the claimant's spouse and the income from all sources of all 18 of the claimant's children who resided with the claimant in the claimant's 19 residence in the year immediately preceding the year for which the 20 claimant applies for the exemption shall not exceed: 21 1. $34,901 if none of the claimant's children under eighteen years 22 of age resided with the claimant in the claimant's residence. 23 2. $41,870 if one or more of the claimant's children residing with 24 the claimant in the claimant's residence either: 25 (a) Were under eighteen years of age. 26 (b) Had a total and permanent physical or mental disability, as 27 certified by competent medical authority as provided by law. 28 I. For the purposes of subsection H of this section, "income from 29 all sources" means the sum of the following, excluding the items listed in 30 subsection J of this section: 31 1. Adjusted gross income as defined by the department. 32 2. The amount of capital gains excluded from adjusted gross income. 33 3. Nontaxable strike benefits. 34 4. Nontaxable interest that is received from the federal government 35 or any of its instrumentalities. 36 5. Payments that are received from a retirement program and paid 37 by: 38 (a) This state or any of its political subdivisions. 39 (b) The United States through any of its agencies, 40 instrumentalities or programs, except as provided in subsection J of this 41 section. 42 6. The gross amount of any pension or annuity that is not otherwise 43 exempted. 44

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- 14 - J. Notwithstanding subsection I of this section, income from all 1 sources does not include monies received from: 2 1. Cash public assistance and relief. 3 2. Railroad retirement benefits. 4 3. Payments under the federal social security act (49 Stat. 620). 5 4. Payments under the unemployment insurance laws of this state. 6 5. Payments from any veterans pensions. 7 6. Workers' compensation payments. 8 7. Loss of time insurance. 9 8. Gifts from nongovernmental sources, surplus foods or other 10 relief in kind supplied by a governmental agency. 11 K. A widow or widower, a person with a total and permanent 12 disability or a veteran with a disability PERSON shall establish 13 eligibility for exemption under this section by filing an affidavit with 14 the county assessor under section 42-11152 when initially claiming the 15 exemption AND, IF CLAIMING THE EXEMPTION UNDER SUBSECTION F OR G OF THIS 16 SECTION, PROVIDING EVIDENCE OF THE VETERAN SPOUSE'S DISABILITY RATING BY 17 THE UNITED STATES DEPARTMENT OF VETERANS AFFAIRS OR TOTAL DISABILITY BASED 18 ON INDIVIDUAL UNEMPLOYABILITY TO THE COUNTY ASSESSOR. Each year 19 thereafter, the person WHO CLAIMS THE EXEMPTION PRESCRIBED IN SUBSECTION E 20 OF THIS SECTION or the person's representative shall annually calculate 21 income from the preceding year to ensure that the person still qualifies 22 for the exemption. and THE PERSON OR THE PERSON'S REPRESENTATIVE SHALL 23 notify the county assessor in writing of any DISQUALIFYING event that 24 disqualifies the person from further exemption. Regardless of whether the 25 person or THE PERSON'S representative notifies the COUNTY assessor as 26 required by this subsection, the property is subject to tax as provided by 27 law from the date of disqualification THE DISQUALIFYING EVENT, including 28 interest, penalties and proceedings for tax delinquencies. Disqualifying 29 events include A DISQUALIFYING EVENT INCLUDES: 30 1. Except as provided in subsection C of this section, The person's 31 death. 32 2. The remarriage of a widow or widower. 33 3. FOR THE EXEMPTION PRESCRIBED IN SUBSECTION E OF THIS SECTION, 34 the person's income from all sources exceeding the limits prescribed by 35 subsection H J of this section. 36 4. The conveyance of title to the property to another owner. 37 L. IN ORDER FOR A SUBSEQUENT PRIMARY RESIDENCE OF A PERSON WHO 38 CLAIMS ANY OF THE EXEMPTIONS PRESCRIBED BY THIS SECTION TO BE ELIGIBLE FOR 39 EXEMPTION, WITHIN SIXTY DAYS AFTER THE SUBSEQUENT PRIMARY RESIDENCE 40 BECOMES THE PERSON'S PRIMARY RESIDENCE THE PERSON MUST FILE WITH THE 41 COUNTY ASSESSOR OF THE COUNTY IN WHICH THE SUBSEQUENT PRIMARY RESIDENCE IS 42 LOCATED A FULLY COMPLETED EXEMPTION TRANSFER FORM AS PRESCRIBED BY THE 43 DEPARTMENT. 44

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- 15 - L. M. Any dollar amount of exemption that is unused in a tax year 1 against the limited property value of property and improvements owned by 2 the individual may be applied for the tax year against the value of 3 personal property subject to special property taxes, including the taxes 4 collected pursuant to title 5, chapter 3, article 3 and title 28, chapter 5 16, article 3. 6 M. N. The property tax exemptions provided PRESCRIBED in 7 subsections C, D, and E, F AND G of this section are exclusive from each 8 other, and an individual is not entitled to property tax exemptions under 9 more than one category as a widow or widower, a person with a total and 10 permanent disability or a veteran with a disability SUBSECTION even if the 11 individual is eligible for an exemption in more than one 12 category SUBSECTION. 13 N. O. For the purposes of this section: 14 1. "Competent medical authority" means any of the following: 15 (a) An individual licensed under title 32, chapter 8, 13, 14, 17, 16 19.1, 25 or 29 or a comparable law of another state. 17 (b) A registered nurse practitioner as defined in section 32-1601. 18 (c) The United States department of veterans affairs, as evidenced 19 by a disability award letter. 20 2. "Federal house price index" means the average measure of 21 movement of single-family house prices in the United States published by 22 the federal housing finance agency, or its successor, for this state. 23 3. "GDP price deflator" means the average of the four implicit 24 price deflators for the gross domestic product reported by the United 25 States department of commerce or its successor for the four quarters of 26 the state fiscal year. 27 4. "INCOME FROM ALL SOURCES": 28 (a) MEANS THE SUM OF THE FOLLOWING: 29 (i) ADJUSTED GROSS INCOME AS DEFINED BY THE DEPARTMENT. 30 (ii) THE AMOUNT OF CAPITAL GAINS EXCLUDED FROM ADJUSTED GROSS 31 INCOME. 32 (iii) NONTAXABLE STRIKE BENEFITS. 33 (iv) NONTAXABLE INTEREST THAT IS RECEIVED FROM THE FEDERAL 34 GOVERNMENT OR ANY OF ITS INSTRUMENTALITIES. 35 (v) PAYMENTS THAT ARE RECEIVED FROM A RETIREMENT PROGRAM AND PAID 36 BY THIS STATE OR ANY POLITICAL SUBDIVISION OF THIS STATE OR THE UNITED 37 STATES THROUGH ANY OF ITS AGENCIES, INSTRUMENTALITIES OR PROGRAMS, EXCEPT 38 AS PROVIDED IN SUBDIVISION (b) OF THIS PARAGRAPH. 39 (vi) THE GROSS AMOUNT OF ANY PENSION OR ANNUITY THAT IS NOT 40 OTHERWISE EXEMPTED. 41 (b) DOES NOT INCLUDE MONIES RECEIVED FROM: 42 (i) CASH PUBLIC ASSISTANCE AND RELIEF. 43 (ii) RAILROAD RETIREMENT BENEFITS. 44

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- 16 - (iii) PAYMENTS UNDER THE FEDERAL SOCIAL SECURITY ACT (49 STAT. 1 620). 2 (iv) PAYMENTS UNDER THE UNEMPLOYMENT INSURANCE LAWS OF THIS STATE. 3 (v) PAYMENTS FROM ANY VETERANS PENSIONS. 4 (vi) WORKERS' COMPENSATION PAYMENTS. 5 (vii) LOSS OF TIME INSURANCE. 6 (viii) GIFTS FROM NONGOVERNMENTAL SOURCES, SURPLUS FOODS OR OTHER 7 RELIEF IN KIND SUPPLIED BY A GOVERNMENTAL AGENCY. 8 (iv) VETERANS DISABILITY PAYMENTS DUE TO THE DISABILITY RATING OR 9 STATUS OF TOTAL DISABILITY BASED ON INDIVIDUAL UNEMPLOYABILITY. 10 4. 5. "Person with a total and permanent disability" means a 11 person who is unable to engage in any substantial gainful activity, for 12 pay or profit, by reason of any physical or mental impairment that is 13 expected to last for a continuous period of at least twelve months or 14 result in death within twelve months as certified by a competent medical 15 authority. 16 5. 6. "Veteran" means an individual who has served in, and been 17 discharged, separated or released under honorable conditions from, active 18 or inactive service in the uniformed services of the United States, 19 including: 20 (a) All regular, reserve and national guard components of the 21 United States army, navy, air force, marine corps and coast guard. 22 (b) The commissioned corps of the national oceanic and atmospheric 23 administration. 24 (c) The commissioned corps of the United States public health 25 service. 26 (d) A nurse in the service of the American red cross or in the army 27 and navy nurse corps. 28 (e) Any other civilian service that is authorized by federal law to 29 be considered active military duty for the purpose of laws administered by 30 the United States secretary of veterans affairs. 31 Sec. 12. Section 43-105, Arizona Revised Statutes, is amended to 32 read: 33 43-105. Internal revenue code; definition; application 34 A. FOR THE PURPOSES OF COMPUTING INCOME TAX PURSUANT TO THIS TITLE, 35 FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, "INTERNAL 36 REVENUE CODE" MEANS THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS 37 AMENDED, IN EFFECT ON JANUARY 1, 2026, INCLUDING THOSE PROVISIONS THAT 38 BECAME EFFECTIVE DURING 2025 WITH THE SPECIFIC ADOPTION OF ALL RETROACTIVE 39 EFFECTIVE DATES, BUT EXCLUDING ANY CHANGES TO THE CODE ENACTED AFTER 40 JANUARY 1, 2026. 41 A. B. For the purposes of computing income tax pursuant to this 42 title, for taxable years beginning from and after December 31, 2024 43 THROUGH DECEMBER 31, 2025, "internal revenue code" means the United States 44 internal revenue code of 1986, as amended, in effect on January 1, 2025, 45

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- 17 - including those provisions that became effective during 2024 with the 1 specific adoption of all retroactive effective dates, but excluding any 2 changes to the code enacted after January 1, 2025 AND INCLUDING THOSE 3 PROVISIONS OF PUBLIC LAW 119-21 THAT ARE RETROACTIVELY EFFECTIVE DURING 4 TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024 THROUGH DECEMBER 5 31, 2025. 6 B. C. For the purposes of computing income tax pursuant to this 7 title, for taxable years beginning from and after December 31, 2023 8 through December 31, 2024, "internal revenue code" means the United States 9 internal revenue code of 1986, as amended, in effect on January 1, 2024, 10 including those provisions that became effective during 2023 with the 11 specific adoption of all retroactive effective dates, and including those 12 provisions OF PUBLIC LAW 119-21 that are retroactively effective during 13 taxable years beginning from and after December 31, 2023 through December 14 31, 2024. 15 C. D. For the purposes of computing income tax pursuant to this 16 title, for taxable years beginning from and after December 31, 17 2022 through December 31, 2023, "internal revenue code" means the United 18 States internal revenue code of 1986, as amended, in effect on January 1, 19 2023, including those provisions that became effective during 2022 with 20 the specific adoption of all retroactive effective dates, and including 21 those provisions OF PUBLIC LAW 119-21 that are retroactively effective 22 during taxable years beginning from and after December 31, 2022 through 23 December 31, 2023. 24 D. E. For the purposes of computing income tax pursuant to this 25 title, for taxable years beginning from and after December 31, 2021 26 through December 31, 2022, "internal revenue code" means the United States 27 internal revenue code of 1986, as amended, in effect on January 1, 2022, 28 including those provisions that became effective during 2021 with the 29 specific adoption of all retroactive effective dates, and including those 30 provisions of the chips and science act of 2022 (P.L. 117-167), the 31 inflation reduction act of 2022 (P.L. 117-169), and the consolidated 32 appropriations act, 2023 (P.L. 117-328) AND PUBLIC LAW 119-21 that are 33 retroactively effective during taxable years beginning from and after 34 December 31, 2021 through December 31, 2022. 35 E. F. For the purposes of computing income tax pursuant to this 36 title, for taxable years beginning from and after December 31, 2020 37 through December 31, 2021, "internal revenue code" means the United States 38 internal revenue code of 1986, as amended, in effect on March 11, 2021, 39 including those provisions that became effective during 2020 with the 40 specific adoption of all retroactive effective dates and including those 41 provisions of the PPP extension act of 2021 (P.L. 117-6) and the 42 infrastructure investment and jobs act (P.L. 117-58) that are 43 retroactively effective during taxable years beginning from and after 44 December 31, 2020 through December 31, 2021. 45

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- 18 - F. G. For the purposes of computing income tax pursuant to this 1 title, for taxable years beginning from and after December 31, 2019 2 through December 31, 2020, "internal revenue code" means the United States 3 internal revenue code of 1986, as amended, in effect on January 1, 2020, 4 including those provisions that became effective during 2019 with the 5 specific adoption of all retroactive effective dates, and including those 6 provisions of the families first coronavirus response act (P.L. 116-127), 7 the coronavirus aid, relief, and economic security act (P.L. 116-136), the 8 paycheck protection program flexibility act of 2020 (P.L. 116-142), the 9 consolidated appropriations act, 2021 (P.L. 116-260) and the American 10 rescue plan act of 2021 (P.L. 117-2) that are retroactively effective 11 during taxable years beginning from and after December 31, 2019 through 12 December 31, 2020. 13 G. H. For the purposes of computing income tax pursuant to this 14 title, for taxable years beginning from and after December 31, 2018 15 through December 31, 2019, "internal revenue code" means the United States 16 internal revenue code of 1986, as amended, in effect on January 1, 2019, 17 including those provisions that became effective during 2018 with the 18 specific adoption of all retroactive effective dates, and including those 19 provisions of the taxpayer first act (P.L. 116-25), the further 20 consolidated appropriations act, 2020 (P.L. 116-94), the coronavirus aid, 21 relief, and economic security act (P.L. 116-136) and the consolidated 22 appropriations act, 2021 (P.L. 116-260) that are retroactively effective 23 during taxable years beginning from and after December 31, 2018 through 24 December 31, 2019. 25 H. I. For the purposes of computing income tax pursuant to this 26 title, for taxable years beginning from and after December 31, 2017 27 through December 31, 2018, "internal revenue code" means the United States 28 internal revenue code of 1986, as amended, in effect on January 1, 2018, 29 including those provisions that became effective during 2017 with the 30 specific adoption of all retroactive effective dates, and including those 31 provisions of the bipartisan budget act of 2018 (P.L. 115-123), the 32 consolidated appropriations act, 2018 (P.L. 115-141), the further 33 consolidated appropriations act, 2020 (P.L. 116-94), the coronavirus aid, 34 relief, and economic security act (P.L. 116-136) and the consolidated 35 appropriations act, 2021 (P.L. 116-260) that are retroactively effective 36 during taxable years beginning from and after December 31, 2017 through 37 December 31, 2018. 38 I. J. For the purposes of computing income tax pursuant to this 39 title, for taxable years beginning from and after December 31, 2016 40 through December 31, 2017, "internal revenue code" means the United States 41 internal revenue code of 1986, as amended, in effect on January 1, 2017, 42 including those provisions that became effective during 2016 with the 43 specific adoption of all federal retroactive effective dates, and 44 including those provisions of the disaster tax relief and airport and 45

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- 19 - airway extension act of 2017 (P.L. 115-63), the tax cuts and jobs act 1 (P.L. 115-97), the bipartisan budget act of 2018 (P.L. 115-123), the 2 consolidated appropriations act, 2018 (P.L. 115-141), the further 3 consolidated appropriations act, 2020 (P.L. 116-94) and the coronavirus 4 aid, relief, and economic security act (P.L. 116-136) that are 5 retroactively effective during taxable years beginning from and after 6 December 31, 2016 through December 31, 2017. 7 J. K. For the purposes of computing income tax pursuant to this 8 title, for taxable years beginning from and after December 31, 2015 9 through December 31, 2016, "internal revenue code" means the United States 10 internal revenue code of 1986, as amended, in effect on January 1, 2016, 11 including those provisions that became effective during 2015 with the 12 specific adoption of all federal retroactive effective dates, and 13 including those provisions of the United States appreciation for olympians 14 and paralympians act of 2016 (P.L. 114-239), the tax cuts and jobs act 15 (P.L. 115-97), the consolidated appropriations act, 2018 (P.L. 115-141), 16 the further consolidated appropriations act, 2020 (P.L. 116-94) and the 17 coronavirus aid, relief, and economic security act (P.L. 116-136) that are 18 retroactively effective during taxable years beginning from and after 19 December 31, 2015 through December 31, 2016. 20 K. For the purposes of computing income tax pursuant to this title, 21 for taxable years beginning from and after December 31, 2014 through 22 December 31, 2015, "internal revenue code" means the United States 23 internal revenue code of 1986, as amended, in effect on January 1, 2015, 24 including those provisions that became effective during 2014 with the 25 specific adoption of all federal retroactive effective dates, and 26 including those provisions of the slain officer family support act of 2015 27 (P.L. 114-7), the don't tax our fallen public safety heroes act 28 (P.L. 114-14), the surface transportation and veterans health care choice 29 improvement act of 2015 (P.L. 114-41), the consolidated appropriations 30 act, 2016 (P.L. 114-113), the consolidated appropriations act, 2018 31 (P.L. 115-141) and the coronavirus aid, relief, and economic security act 32 (P.L. 116-136) that are retroactively effective during taxable years 33 beginning from and after December 31, 2014 through December 31, 2015. 34 Sec. 13. Section 43-222, Arizona Revised Statutes, is amended to 35 read: 36 43-222. Income tax credit review schedule 37 The joint legislative income tax credit review committee shall 38 review the following income tax credits: 39 1. For years ending in 0 and 5, sections 43-1079.01, 43-1088, 40 43-1089.04, 43-1167.01 and 43-1175. 41 2. For years ending in 1 and 6, sections 43-1072.02, 43-1074.02, 42 43-1075, 43-1076.01, 43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43 43-1164.03 and 43-1183. 44

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- 20 - 3. For years ending in 2 and 7, sections 43-1073, 43-1082, 43-1085, 1 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164, 43-1165, 2 and 43-1181. 3 4. For years ending in 3 and 8, sections 43-1074.01, 4 43-1168, 43-1170 and 43-1178. 5 5. For years ending in 4 and 9, sections 43-1073.01, 43-1081.01, 6 43-1083.03, 43-1084, 43-1164.04, 43-1164.05 and 43-1184. 7 Sec. 14. Section 43-1021, Arizona Revised Statutes, is amended to 8 read: 9 43-1021. Addition to Arizona gross income 10 In computing Arizona adjusted gross income, the following amounts 11 shall be added to Arizona gross income: 12 1. A beneficiary's share of the fiduciary adjustment to the extent 13 that the amount determined by section 43-1333 increases the beneficiary's 14 Arizona gross income. 15 2. An amount equal to the ordinary income portion of a lump sum 16 distribution that was excluded from federal adjusted gross income pursuant 17 to the special rule for individuals who attained fifty years of age before 18 January 1, 1986 under Public Law 99-514, section 1122(h)(3). 19 3. The amount of interest income received on obligations of any 20 state, territory or possession of the United States, or any political 21 subdivision thereof, located outside of this state, reduced, for taxable 22 years beginning from and after December 31, 1996, by the amount of any 23 interest on indebtedness and other related expenses that were incurred or 24 continued to purchase or carry those obligations and that are not 25 otherwise deducted or subtracted in arriving at Arizona gross income. 26 4. The excess of a partner's share of partnership taxable income 27 required to be included under chapter 14, article 2 of this title over the 28 income required to be reported under section 702(a)(8) of the internal 29 revenue code. 30 5. The excess of a partner's share of partnership losses determined 31 pursuant to section 702(a)(8) of the internal revenue code over the losses 32 allowable under chapter 14, article 2 of this title. 33 6. Any amount of agricultural water conservation expenses that were 34 deducted pursuant to the internal revenue code for which a credit is 35 claimed under section 43-1084. 36 7. The amount by which the depreciation or amortization computed 37 under the internal revenue code with respect to property for which a 38 credit was taken under section 43-1081.01 or that is pollution control 39 equipment for which a credit was taken before taxable year 2022 exceeds 40 the amount of depreciation or amortization computed pursuant to the 41 internal revenue code on the Arizona adjusted basis of the property. 42 8. The amount by which the adjusted basis computed under the 43 internal revenue code with respect to property for which a credit was 44 claimed under section 43-1074.02 or 43-1081.01 or that is pollution 45

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- 21 - control equipment for which a credit was taken before taxable year 2022 1 and that is sold or otherwise disposed of during the taxable year exceeds 2 the adjusted basis of the property computed under section 43-1074.02 or 3 43-1081.01 or for pollution control equipment, the section in which the 4 credit was taken, as applicable. 5 9. The deduction referred to in section 1341(a)(4) of the internal 6 revenue code for restoration of a substantial amount held under a claim of 7 right. 8 10. The amount by which a net operating loss carryover or capital 9 loss carryover allowable pursuant to section 1341(b)(5) of the internal 10 revenue code exceeds the net operating loss carryover or capital loss 11 carryover allowable pursuant to section 43-1029, subsection F. 12 11. The amount of any depreciation allowance allowed pursuant to 13 section 167(a) of the internal revenue code to the extent not previously 14 added. 15 12. The amount of a nonqualified withdrawal, as defined in section 16 15-1871, from a college savings plan established pursuant to section 529 17 of the internal revenue code that is made to a distributee to the extent 18 the amount is not included in computing federal adjusted gross income, 19 except that the amount added under this paragraph shall not exceed the 20 difference between the amount subtracted under section 43-1022 in prior 21 taxable years and the amount added under this section in any prior taxable 22 years. 23 13. If a subtraction is or has been taken by the taxpayer under 24 section 43-1024, in the current or a prior taxable year for the full 25 amount of eligible access expenditures paid or incurred to comply with the 26 requirements of the Americans with disabilities act of 1990 (P.L. 101-336) 27 or title 41, chapter 9, article 8, any amount of eligible access 28 expenditures that is recognized under the internal revenue code, including 29 any amount that is amortized according to federal amortization schedules, 30 and that is included in computing taxable income for the current taxable 31 year. 32 14. For taxable years beginning from and after December 31, 2017, 33 the amount of any net capital loss included in Arizona gross income for 34 the taxable year that is derived from the exchange of one kind of legal 35 tender for another kind of legal tender. For the purposes of this 36 paragraph: 37 (a) "Legal tender" means a medium of exchange, including specie, 38 that is authorized by the United States Constitution or Congress to pay 39 debts, public charges, taxes and dues. 40 (b) "Specie" means coins having precious metal content. 41 15. For taxable years beginning from and after December 31, 2021, 42 the amount deducted by the partnership or S corporation pursuant to the 43 internal revenue code for the amount paid to this state under section 44 43-1014 and for taxes that the department determines are substantially 45

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- 22 - similar to the tax imposed under section 43-1014. This amount shall be 1 reflected in the partner's or shareholder's Arizona gross income and the 2 partnership's or S corporation's Arizona taxable income. 3 16. The amount of any motion picture production costs that was 4 deducted pursuant to the internal revenue code for which a tax credit is 5 claimed under section 43-1082. 6 17. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, 7 THE AMOUNT OF THE SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED PRODUCTION 8 PROPERTY ALLOWED PURSUANT TO SECTION 168(n) OF THE INTERNAL REVENUE CODE 9 FOR THE TAXABLE YEAR TO THE EXTENT NOT PREVIOUSLY ADDED. 10 Sec. 15. Section 43-1022, Arizona Revised Statutes, is amended to 11 read: 12 43-1022. Subtractions from Arizona gross income 13 In computing Arizona adjusted gross income, the following amounts 14 shall be subtracted from Arizona gross income: 15 1. The amount of exemptions allowed by section 43-1023. 16 2. Benefits, annuities and pensions in an amount totaling not more 17 than $2,500 received from one or more of the following: 18 (a) The United States government service retirement and disability 19 fund, the United States foreign service retirement and disability system 20 and any other retirement system or plan established by federal law, except 21 retired or retainer pay of the uniformed services of the United States 22 that qualifies for a subtraction under paragraph 26 of this section. 23 (b) The Arizona state retirement system, the corrections officer 24 retirement plan, the public safety personnel retirement system, the 25 elected officials' retirement plan, an optional retirement program 26 established by the Arizona board of regents under section 15-1628, an 27 optional retirement program established by a community college district 28 board under section 15-1451 or a retirement plan established for employees 29 of a county, city or town in this state. 30 3. A beneficiary's share of the fiduciary adjustment to the extent 31 that the amount determined by section 43-1333 decreases the beneficiary's 32 Arizona gross income. 33 4. Interest income received on obligations of the United States, 34 minus any interest on indebtedness, or other related expenses, and 35 deducted in arriving at Arizona gross income, that were incurred or 36 continued to purchase or carry such obligations. 37 5. The excess of a partner's share of income required to be 38 included under section 702(a)(8) of the internal revenue code over the 39 income required to be included under chapter 14, article 2 of this title. 40 6. The excess of a partner's share of partnership losses determined 41 pursuant to chapter 14, article 2 of this title over the losses allowable 42 under section 702(a)(8) of the internal revenue code. 43

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- 23 - 7. The amount allowed by section 43-1025 for contributions during 1 the taxable year of agricultural crops to charitable organizations. 2 8. The portion of any wages or salaries paid or incurred by the 3 taxpayer for the taxable year that is equal to the amount of the federal 4 work opportunity credit, the empowerment zone employment credit, the 5 credit for employer paid social security taxes on employee cash tips and 6 the Indian employment credit that the taxpayer received under sections 7 45A, 45B, 51(a) and 1396 of the internal revenue code. 8 9. The amount of exploration expenses that is determined pursuant 9 to section 617 of the internal revenue code, that has been deferred in a 10 taxable year ending before January 1, 1990 and for which a subtraction has 11 not previously been made. The subtraction shall be made on a ratable 12 basis as the units of produced ores or minerals discovered or explored as 13 a result of this exploration are sold. 14 10. The amount included in federal adjusted gross income pursuant 15 to section 86 of the internal revenue code, relating to taxation of social 16 security and railroad retirement benefits. 17 11. To the extent not already excluded from Arizona gross income 18 under the internal revenue code, compensation received for active service 19 as a member of the reserves, the national guard or the armed forces of the 20 United States, including compensation for service in a combat zone as 21 determined under section 112 of the internal revenue code. 22 12. The amount of unreimbursed medical and hospital costs, adoption 23 counseling, legal and agency fees and other nonrecurring costs of 24 adoption. The subtraction under this paragraph may be taken for the costs 25 that are described in this paragraph and that are incurred in prior years, 26 but the subtraction may be taken only in the year during which the final 27 adoption order is granted. The amount subtracted may not exceed: 28 (a) In taxable years beginning before December 31, 2025, $3,000. In 29 the case of a husband and wife who file separate returns, the subtraction 30 may be taken by either taxpayer or may be divided between them, but the 31 total subtractions allowed both husband and wife may not exceed $3,000. 32 (b) In taxable years beginning from and after December 31, 2025, 33 $5,000 for a single individual or head of household. 34 (c) For taxable years beginning from and after December 31, 2025, 35 $10,000 for a married couple filing a joint return. In the case of a 36 husband and wife who file separate returns, the subtraction may be taken 37 by either taxpayer or may be divided between them, but the total 38 subtractions allowed both husband and wife may not exceed $10,000. 39 13. The amount authorized by section 43-1027 for the taxable year 40 relating to qualified wood stoves, wood fireplaces or gas fired 41 fireplaces. 42 14. The amount by which a net operating loss carryover or capital 43 loss carryover allowable pursuant to section 43-1029, subsection F exceeds 44

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- 24 - the net operating loss carryover or capital loss carryover allowable 1 pursuant to section 1341(b)(5) of the internal revenue code. 2 15. Any amount of qualified educational expenses that is 3 distributed from a qualified state tuition program determined pursuant to 4 section 529 of the internal revenue code and that is included in income in 5 computing federal adjusted gross income. 6 16. Any item of income resulting from an installment sale that has 7 been properly subjected to income tax in another state in a previous 8 taxable year and that is included in Arizona gross income in the current 9 taxable year. 10 17. For property placed in service: 11 (a) In taxable years beginning before December 31, 2012, an amount 12 equal to the depreciation allowable pursuant to section 167(a) of the 13 internal revenue code for the taxable year computed as if the election 14 described in section 168(k) of the internal revenue code had been made for 15 each applicable class of property in the year the property was placed in 16 service. 17 (b) In taxable years beginning from and after December 31, 2012 18 through December 31, 2013, an amount determined in the year the asset was 19 placed in service based on the calculation in subdivision (a) of this 20 paragraph. In the first taxable year beginning from and after 21 December 31, 2013, the taxpayer may elect to subtract the amount necessary 22 to make the depreciation claimed to date for the purposes of this title 23 the same as it would have been if subdivision (c) of this paragraph had 24 applied for the entire time the asset was in service. Subdivision (c) of 25 this paragraph applies for the remainder of the asset's life. If the 26 taxpayer does not make the election under this subdivision, subdivision 27 (a) of this paragraph applies for the remainder of the asset's life. 28 (c) In taxable years beginning from and after December 31, 2013 29 through December 31, 2015, an amount equal to the depreciation allowable 30 pursuant to section 167(a) of the internal revenue code for the taxable 31 year as computed as if the additional allowance for depreciation had been 32 ten percent of the amount allowed pursuant to section 168(k) of the 33 internal revenue code. 34 (d) In taxable years beginning from and after December 31, 2015 35 through December 31, 2016, an amount equal to the depreciation allowable 36 pursuant to section 167(a) of the internal revenue code for the taxable 37 year as computed as if the additional allowance for depreciation had been 38 fifty-five percent of the amount allowed pursuant to section 168(k) of the 39 internal revenue code. 40 (e) In taxable years beginning from and after December 31, 2016, an 41 amount equal to the depreciation allowable pursuant to section 167(a) of 42 the internal revenue code for the taxable year as computed as if the 43 additional allowance for depreciation had been the full amount allowed 44 pursuant to section 168(k) of the internal revenue code. 45

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- 25 - 18. With respect to property that is sold or otherwise disposed of 1 during the taxable year by a taxpayer that complied with section 43-1021, 2 paragraph 11 with respect to that property, the amount of depreciation 3 that has been allowed pursuant to section 167(a) of the internal revenue 4 code to the extent that the amount has not already reduced Arizona taxable 5 income in the current or prior taxable years. 6 19. The amount contributed during the taxable year to college 7 savings plans established pursuant to section 529 of the internal revenue 8 code on behalf of the designated beneficiary to the extent that the 9 contributions were not deducted in computing federal adjusted gross 10 income. The amount subtracted may not exceed: 11 (a) $2,000 per beneficiary for a single individual or a head of 12 household. 13 (b) $4,000 per beneficiary for a married couple filing a joint 14 return. In the case of a husband and wife who file separate returns, the 15 subtraction may be taken by either taxpayer or may be divided between 16 them, but the total subtractions allowed both husband and wife may not 17 exceed $4,000 per beneficiary. 18 20. The portion of the net operating loss carryforward that would 19 have been allowed as a deduction in the current year pursuant to section 20 172 of the internal revenue code if the election described in section 21 172(b)(1)(H) of the internal revenue code had not been made in the year of 22 the loss that exceeds the actual net operating loss carryforward that was 23 deducted in arriving at federal adjusted gross income. This subtraction 24 only applies to taxpayers who made an election under section 172(b)(1)(H) 25 of the internal revenue code as amended by section 1211 of the American 26 recovery and reinvestment act of 2009 (P.L. 111-5) or as amended by 27 section 13 of the worker, homeownership, and business assistance act of 28 2009 (P.L. 111-92). 29 21. For taxable years beginning from and after December 31, 2013, 30 the amount of any net capital gain included in federal adjusted gross 31 income for the taxable year derived from investment in a qualified small 32 business as determined by the Arizona commerce authority pursuant to 33 section 41-1518. 34 22. An amount of any net long-term capital gain included in federal 35 adjusted gross income for the taxable year that is derived from an 36 investment in an asset acquired after December 31, 2011, as follows: 37 (a) For taxable years beginning from and after December 31, 2012 38 through December 31, 2013, ten percent of the net long-term capital gain 39 included in federal adjusted gross income. 40 (b) For taxable years beginning from and after December 31, 2013 41 through December 31, 2014, twenty percent of the net long-term capital 42 gain included in federal adjusted gross income. 43

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- 26 - (c) For taxable years beginning from and after December 31, 2014, 1 twenty-five percent of the net long-term capital gain included in federal 2 adjusted gross income. For the purposes of this paragraph, a transferee 3 that receives an asset by gift or at the death of a transferor is 4 considered to have acquired the asset when the asset was acquired by the 5 transferor. If the date an asset is acquired cannot be verified, a 6 subtraction under this paragraph is not allowed. 7 23. If an individual is not claiming itemized deductions pursuant 8 to section 43-1042, the amount of premium costs for long-term care 9 insurance, as defined in section 20-1691. 10 24. The amount of eligible access expenditures paid or incurred 11 during the taxable year to comply with the requirements of the Americans 12 with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, 13 article 8 as provided by section 43-1024. 14 25. For taxable years beginning from and after December 31, 2017, 15 the amount of any net capital gain included in Arizona gross income for 16 the taxable year that is derived from the exchange of one kind of legal 17 tender for another kind of legal tender. For the purposes of this 18 paragraph: 19 (a) "Legal tender" means a medium of exchange, including specie, 20 that is authorized by the United States Constitution or Congress to pay 21 debts, public charges, taxes and dues. 22 (b) "Specie" means coins having precious metal content. 23 26. Benefits, annuities and pensions received as retired or 24 retainer pay of the uniformed services of the United States in amounts as 25 follows: 26 (a) For taxable years through December 31, 2018, an amount totaling 27 not more than $2,500. 28 (b) For taxable years beginning from and after December 31, 2018 29 through December 31, 2020, an amount totaling not more than $3,500. 30 (c) For taxable years beginning from and after December 31, 2020, 31 the full amount received. 32 27. For taxable years beginning from and after December 31, 2020, 33 the amount contributed during the taxable year to an achieving a better 34 life experience account established pursuant to section 529A of the 35 internal revenue code on behalf of the designated beneficiary to the 36 extent that the contributions were not deducted in computing federal 37 adjusted gross income. The amount subtracted may not exceed: 38 (a) $2,000 per beneficiary for a single individual or a head of 39 household. 40 (b) $4,000 per beneficiary for a married couple filing a joint 41 return. In the case of a husband and wife who file separate returns, the 42 subtraction may be taken by either taxpayer or may be divided between 43 them, but the total subtractions allowed both husband and wife may not 44 exceed $4,000 per beneficiary. 45

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- 27 - 28. For taxable years beginning from and after December 31, 2020, 1 Arizona small business gross income but only if an individual taxpayer has 2 elected to separately report and pay tax on the taxpayer's Arizona small 3 business adjusted gross income on the Arizona small business income tax 4 return. 5 29. To the extent not already excluded from Arizona gross income 6 under the internal revenue code, the value of virtual currency and 7 non-fungible tokens the taxpayer received pursuant to an airdrop at the 8 time of the airdrop. This paragraph may not be interpreted as providing a 9 subtraction for any appreciation in value that occurs from holding the 10 virtual currency after the initial receipt of the airdrop. For the 11 purposes of this paragraph: 12 (a) "Airdrop" means the receipt of virtual currency through a means 13 of distribution of virtual currency to the distributed ledger addresses of 14 multiple taxpayers. 15 (b) "Non-fungible token" has the same meaning prescribed in section 16 43-1028. 17 (c) "Virtual currency" has the same meaning prescribed in section 18 43-1028. 19 30. The amount allowed as a subtraction by section 43-1028 for gas 20 fees not already included in the taxpayer's virtual currency or 21 non-fungible token basis. 22 31. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024, 23 TO THE EXTENT NOT ALREADY EXCLUDED FROM ARIZONA GROSS INCOME UNDER THE 24 INTERNAL REVENUE CODE, THE AMOUNT OF QUALIFIED TIPS RECEIVED DURING THE 25 TAXABLE YEAR THAT IS DEDUCTED UNDER SECTION 224 OF THE INTERNAL REVENUE 26 CODE. 27 32. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024, 28 TO THE EXTENT NOT ALREADY EXCLUDED FROM ARIZONA GROSS INCOME UNDER THE 29 INTERNAL REVENUE CODE, THE AMOUNT OF QUALIFIED OVERTIME COMPENSATION 30 RECEIVED DURING THE TAXABLE YEAR THAT IS DEDUCTED UNDER SECTION 225 OF THE 31 INTERNAL REVENUE CODE. 32 33. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, 33 TO THE EXTENT NOT ALREADY EXCLUDED FROM ARIZONA GROSS INCOME UNDER THE 34 INTERNAL REVENUE CODE, THE AMOUNT OF A DISTRIBUTION FROM AN ACCOUNT 35 ESTABLISHED PURSUANT TO SECTION 530A OF THE INTERNAL REVENUE CODE. 36 34. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, 37 TO THE EXTENT NOT ALREADY EXCLUDED FROM ARIZONA GROSS INCOME UNDER THE 38 INTERNAL REVENUE CODE, THE AMOUNT OF CHILD AND DEPENDENT CARE EXPENSES FOR 39 A QUALIFYING INDIVIDUAL UNDER SECTION 21 OF THE INTERNAL REVENUE CODE PAID 40 OR INCURRED BY THE TAXPAYER FOR THE TAXABLE YEAR THAT EXCEEDS THE AMOUNT 41 OF THE FEDERAL CREDIT THAT THE TAXPAYER RECEIVED UNDER SECTION 21 OF THE 42 INTERNAL REVENUE CODE. 43

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- 28 - 35. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024, 1 TO THE EXTENT NOT ALREADY EXCLUDED FROM ARIZONA GROSS INCOME UNDER THE 2 INTERNAL REVENUE CODE, THE AMOUNT DEDUCTED FOR A QUALIFIED INDIVIDUAL 3 UNDER SECTION 151(d)(5)(C) OF THE INTERNAL REVENUE CODE. 4 36. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024 5 THROUGH DECEMBER 31, 2025, TO THE EXTENT NOT ALREADY EXCLUDED FROM ARIZONA 6 GROSS INCOME UNDER THE INTERNAL REVENUE CODE, THE AMOUNT DEDUCTED FOR 7 QUALIFIED PASSENGER VEHICLE LOAN INTEREST UNDER SECTION 163(h)(4) OF THE 8 INTERNAL REVENUE CODE. 9 Sec. 16. Section 43-1041, Arizona Revised Statutes, is amended to 10 read: 11 43-1041. Optional standard deduction 12 A. A taxpayer may elect to take a standard deduction as follows: 13 1. In the case of a single person or a married person filing 14 separately, the standard deduction is $12,200 $15,750, subject to 15 subsection H of this section. 16 2. In the case of a single person who is a head of a household, the 17 standard deduction is $18,350 $23,625, subject to subsection H of this 18 section. 19 3. In the case of a married couple filing a joint return, the 20 standard deduction is $24,400 $31,500, subject to subsection H of this 21 section. 22 B. The standard deduction provided for in subsection A of this 23 section is in lieu of all itemized deductions allowed by section 43-1042, 24 which are to be subtracted from Arizona adjusted gross income in computing 25 taxable income. 26 C. The standard deduction is allowed if the taxpayer so 27 elects. The election is made by the taxpayer claiming on the tax return 28 the amount provided for in this section in lieu of the itemized deductions 29 allowed under section 43-1042. Electing to file a short form return or a 30 simplified return that does not allow itemized deductions to be claimed is 31 considered to be an election to claim the standard deduction. 32 D. In the case of a husband and wife, the standard deduction 33 provided for in subsection A of this section is not allowed to either if 34 the taxable income of one of the spouses is determined without regard to 35 the standard deduction. 36 E. The standard deduction provided for by subsection A of this 37 section is not allowed in the case of a taxable year of less than twelve 38 months on account of a change in the accounting period. 39 F. Except as provided in subsection G of this section, a change of 40 an election to take, or not to take, the standard deduction for any 41 taxable year may be made after the filing of the return for that year. 42 G. A taxpayer is not allowed to change an election to take, or not 43 to take, the standard deduction if: 44

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- 29 - 1. The spouse of the taxpayer filed a separate return for any 1 taxable year corresponding, for the purposes of subsection D of this 2 section, to the taxable year of the taxpayer unless both of the following 3 apply: 4 (a) The spouse makes a change of election with respect to the 5 standard deduction for the taxable year covered in the separate return 6 consistent with the change of election sought by the taxpayer. 7 (b) The taxpayer and spouse consent in writing to the assessment, 8 within such a period as may be agreed on with the department, of any 9 deficiency, to the extent attributable to the change of election, even 10 though at the time of filing the consent the assessment of the deficiency 11 would otherwise be prevented by the operation of any law or rule of law. 12 2. The tax liability of the taxpayer or the taxpayer's spouse for 13 the taxable year has been compromised. 14 H. For each taxable year beginning from and after December 31, 15 2019, the department shall adjust the dollar amounts prescribed by 16 subsection A, paragraphs 1, 2 and 3 of this section for inflation in the 17 same manner in which the federal basic standard deduction is adjusted for 18 inflation pursuant to section 63 of the internal revenue code. 19 I. For taxable years beginning from and after December 31, 2018, 20 The standard deduction allowed under subsection A of this section shall be 21 increased AS FOLLOWS: 22 1. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2018 23 THROUGH DECEMBER 31, 2025, by the amount equal to twenty-five percent of 24 the total amount of a taxpayer's charitable deductions that would have 25 been allowed if the taxpayer elected to claim itemized deductions under 26 section 43-1042 rather than elect the standard deduction. For taxable 27 years beginning from and after December 31, 2021 THROUGH DECEMBER 31, 28 2025, the department shall adjust the percentage prescribed in this 29 subsection PARAGRAPH according to the average annual change in the 30 metropolitan Phoenix consumer price index published by the United States 31 department of labor, bureau of labor statistics, except that the adjusted 32 percentage may not exceed one hundred percent. The revised percentage 33 shall be raised to the nearest whole percent and may not be revised below 34 the amounts prescribed in the prior taxable year. 35 2. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, BY 36 AN AMOUNT EQUAL TO THE TOTAL AMOUNT OF A TAXPAYER'S CHARITABLE 37 CONTRIBUTIONS AS DEFINED IN SECTION 170(c) OF THE INTERNAL REVENUE CODE. 38 THE INCREASE ALLOWED BY THIS PARAGRAPH MAY NOT EXCEED: 39 (a) IN THE CASE OF A SINGLE PERSON OR A MARRIED PERSON FILING 40 SEPARATELY, $1,000. 41 (b) IN THE CASE OF A MARRIED COUPLE FILING A JOINT RETURN, $2,000. 42

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- 30 - Sec. 17. Section 43-1042, Arizona Revised Statutes, is amended to 1 read: 2 43-1042. Itemized deductions 3 A. Except as provided by subsections B, and C AND D of this 4 section, at the election of the taxpayer, and in lieu of the standard 5 deduction allowed by section 43-1041, in computing taxable income the 6 taxpayer may take the amount of itemized deductions allowable for the 7 taxable year pursuant to subtitle A, chapter 1, subchapter B, parts VI and 8 VII, but subject to the limitations LIMITS prescribed by sections 67, 68 9 and 274 of the internal revenue code. 10 B. In lieu of the amount of the federal itemized deduction for 11 expenses paid for medical care allowed under section 213 of the internal 12 revenue code, the taxpayer may deduct the full amount of such expenses. 13 C. A taxpayer shall not claim both a deduction provided by this 14 section and a credit allowed by this title with respect to the same 15 charitable contributions. This subsection applies to any contribution for 16 which a credit is allowed by this title even if the contribution is 17 treated as a payment of state income tax. 18 D. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, IN 19 LIEU OF THE AMOUNT OF THE FEDERAL ITEMIZED DEDUCTION FOR STATE AND LOCAL 20 TAXES ALLOWED UNDER SECTION 164(b)(7) OF THE INTERNAL REVENUE CODE, THE 21 TAXPAYER MAY DEDUCT UP TO $10,000 OF THAT AMOUNT FOR SUCH STATE AND LOCAL 22 TAXES. 23 D. E. The taxpayer may add any interest expense paid by the 24 taxpayer for the taxable year that is equal to the amount of federal 25 credit for interest on certain home mortgages allowed by section 25 of the 26 internal revenue code. 27 Sec. 18. Section 43-1073.01, Arizona Revised Statutes, is amended 28 to read: 29 43-1073.01. Dependent tax credit 30 A. A credit is allowed against the taxes imposed by this title for 31 a taxable year for each dependent of a taxpayer as provided by this 32 section. 33 B. For taxpayers whose federal adjusted gross income is less than 34 $200,000 for a taxpayer who is a single person, a married person filing 35 separately or a head of household or is less than $400,000 for a married 36 couple filing a joint return, the amount of the credit is: 37 1. $100 $125 for each dependent who is under seventeen years of age 38 at the end of the taxable year. 39 2. $25 for each dependent who is at least seventeen years of age at 40 the end of the taxable year. 41 C. For taxpayers whose federal adjusted gross income is $200,000 or 42 more for a taxpayer who is a single person, a married person filing 43 separately or a head of household or is $400,000 or more for a married 44 couple filing a joint return, the amount of the credit is: 45

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- 31 - 1. $100 $125 minus five percent for each $1,000, or fraction 1 thereof, by which the taxpayer's federal adjusted gross income exceeds the 2 applicable threshold provided in this subsection for each dependent who is 3 under seventeen years of age at the end of the taxable year. 4 2. $25 minus five percent for each $1,000, or fraction thereof, by 5 which the taxpayer's federal adjusted gross income exceeds the applicable 6 threshold provided in this subsection for each dependent who is at least 7 seventeen years of age at the end of the taxable year. 8 D. In the case of a nonresident or part-year resident taxpayer, the 9 credit allowed under this section is allowed in the percentage that the 10 taxpayer's Arizona gross income is of the federal adjusted gross income. 11 Sec. 19. Repeal 12 Section 43-1074, Arizona Revised Statutes, is repealed. 13 Sec. 20. Section 43-1074.01, Arizona Revised Statutes, is amended 14 to read: 15 43-1074.01. Credit for increased research activities 16 A. A credit is allowed against the taxes imposed by this title in 17 an amount determined pursuant to section 41 of the internal revenue code, 18 except that: 19 1. The amount of the credit is based on the excess, if any, of the 20 qualified research expenses for the taxable year over the base amount as 21 defined in section 41(c) of the internal revenue code and is computed as 22 follows: 23 (a) If the excess is $2,500,000 or less: 24 (i) For taxable years beginning before December 31, 2030, the 25 credit is equal to twenty-four percent of that amount. 26 (ii) For taxable years beginning from and after December 31, 2030, 27 the credit is equal to twenty percent of that amount. 28 (b) If the excess is over $2,500,000: 29 (i) For taxable years beginning before December 31, 2030, the 30 credit is equal to $600,000 plus fifteen percent of any amount 31 exceeding $2,500,000. 32 (ii) For taxable years beginning from and after December 31, 2030, 33 the credit is equal to $500,000 plus eleven percent of any amount 34 exceeding $2,500,000. 35 (c) For taxable years beginning from and after December 31, 2011, 36 an additional credit amount is allowed if the taxpayer made basic research 37 payments during the taxable year to a university under the jurisdiction of 38 the Arizona board of regents. The additional credit amount is equal to 39 ten percent of the excess, if any, of the basic research payments over the 40 qualified organization base period amount for the taxable year. The 41 department shall not allow credit amounts under this subdivision and 42 section 43-1168, subsection A, paragraph 1, subdivision (d) that exceed, 43 in the aggregate, a combined total of $10,000,000 in any calendar year. 44 Subject to that limit, on application by the taxpayer, the department 45

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- 32 - shall certify credit amounts under this subdivision and section 43-1168, 1 subsection A, paragraph 1, subdivision (d) based on priority placement 2 established by the date that the taxpayer filed the application. For 3 taxable years beginning from and after December 31, 2014, any basic 4 research payments used to determine the additional credit under this 5 subdivision must first receive certification from the Arizona commerce 6 authority pursuant to section 41-1507.01. The additional credit amount 7 under this subdivision shall not exceed the amount allowed based on actual 8 basic research payments or the department's certification, whichever is 9 less. If an application, if certified in full, would exceed the 10 $10,000,000 limit, the department shall certify only an amount within that 11 limit. After the limit is attained, the department shall deny any 12 subsequent applications regardless of whether other certified amounts are 13 not actually claimed as a credit or other taxpayers fail to qualify to 14 actually claim certified amounts. Notwithstanding subsections SUBSECTION 15 B and C of this section, any amount of the additional credit under this 16 subdivision that exceeds the taxes otherwise due under this title is not 17 refundable, but may be carried forward to the next five consecutive 18 taxable years. For the purposes of this subdivision, "basic research 19 payments" and "qualified organization base period amount" have the same 20 meanings prescribed by section 41(e) of the internal revenue code without 21 regard to whether the taxpayer is or is not a corporation. 22 2. Qualified research includes only research conducted in this 23 state, including research conducted at a university in this state and paid 24 for by the taxpayer. 25 3. If two or more taxpayers, including partners in a partnership 26 and shareholders of an S corporation, as defined in section 1361 of the 27 internal revenue code, share in the eligible expenses, each taxpayer is 28 eligible to receive a proportionate share of the credit. 29 4. The credit under this section applies only to expenses incurred 30 from and after December 31, 2000. 31 5. The termination provisions of section 41 of the internal revenue 32 code do not apply. 33 B. Except as provided by subsection C of this section, If the 34 allowable credit under this section exceeds the taxes otherwise due under 35 this title on the claimant's income, or if there are no taxes due under 36 this title, the amount of the credit that is claimed for taxable years 37 beginning before January 1, 2022 and that is not used to offset taxes may 38 be carried forward to the next fifteen consecutive taxable years and the 39 amount of the credit that is claimed for taxable years beginning from and 40 after December 31, 2021 and that is not used to offset taxes may be 41 carried forward to the next ten consecutive taxable years. The amount of 42 credit carryforward from taxable years beginning from and after December 43 31, 2002 that may be used in any taxable year may not exceed the 44 taxpayer's tax liability under this title minus the credit under this 45

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- 33 - section for the current taxable year's qualified research expenses. 1 A taxpayer who carries forward any amount of credit under this subsection 2 may not thereafter claim a refund of any amount of the credit under 3 subsection C of this section. 4 C. For taxable years beginning from and after December 31, 2009, if 5 a taxpayer who claims a credit under this section employs fewer than one 6 hundred fifty persons in the taxpayer's trade or business and if the 7 allowable credit under this section exceeds the taxes otherwise due under 8 this title on the claimant's income, or if there are no taxes due under 9 this title, in lieu of carrying the excess amount of credit forward to 10 subsequent taxable years under subsection B of this section, the taxpayer 11 may elect to receive a refund as follows: 12 1. The taxpayer must apply to the Arizona commerce authority for 13 qualification for the refund pursuant to section 41-1507 and submit a copy 14 of the authority's certificate of qualification to the department of 15 revenue with the taxpayer's income tax return. 16 2. The amount of the refund is limited to seventy-five percent of 17 the amount by which the allowable credit under this section exceeds the 18 taxpayer's tax liability under this title for the taxable year. The 19 remainder of the excess amount of the credit is waived. 20 3. The refund shall be paid in the manner prescribed by section 21 42-1118. 22 4. The refund is subject to setoff under section 42-1122. 23 5. If the department determines that a credit refunded pursuant to 24 this subsection is incorrect or invalid, the excess credit issued may be 25 treated as a tax deficiency pursuant to section 42-1108. 26 Sec. 21. Section 43-1083.03, Arizona Revised Statutes, is amended 27 to read: 28 43-1083.03. Credit for qualified facilities 29 A. For taxable years beginning from and after December 31, 2012 30 through December 31, 2030, a credit is allowed against the taxes imposed 31 by this title for qualifying investment and employment in expanding or 32 locating a qualified facility in this state. To qualify for the credit, 33 after June 30, 2012 the taxpayer must invest in a new qualified facility 34 or expand an existing qualified facility in this state and produce new 35 full-time employment positions where the job duties are associated with 36 the location of the qualifying investment. The taxpayer must meet the 37 employee compensation and employee health benefit requirements prescribed 38 by section 41-1512. 39 B. The amount of the credit is computed as follows: 40 1. Ten percent of the lesser of: 41 (a) The total qualifying investment in the qualified facility. 42

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- 34 - (b) Either: 1 (i) If the total qualifying investment is less than $2,000,000,000, 2 $200,000 for each net new full-time employment position that has duties 3 associated with the qualified facility. 4 (ii) If the total qualifying investment is $2,000,000,000 or more, 5 $300,000 for each net new full-time employment position that has duties 6 associated with the qualified facility. 7 2. The amount of the credit shall not exceed the postapproval 8 amount determined by the Arizona commerce authority under section 41-1512, 9 subsection P. 10 3. Subject to subsections G and J I of this section: 11 (a) The credit amount computed under paragraph 1 of this subsection 12 is apportioned, and the taxpayer shall claim the credit in five equal 13 annual installments in each of five consecutive taxable years. 14 (b) The taxpayer may claim all five annual installments of a credit 15 that was preapproved before January 1, 2031 by the Arizona commerce 16 authority notwithstanding any intervening repeal or other termination of 17 the credit. 18 C. To claim the credit the taxpayer must: 19 1. Conduct a business that qualifies under section 41-1512. 20 2. Receive preapproval and postapproval from the Arizona commerce 21 authority pursuant to section 41-1512. 22 3. Submit to the department a copy of a current and valid 23 certification of qualification issued to the taxpayer by the Arizona 24 commerce authority. 25 D. To be counted for the purposes of the credit, an employee must 26 have been employed with job duties associated with the qualified facility 27 for at least ninety days during the taxable year in a permanent full-time 28 employment position of at least one thousand seven hundred fifty hours per 29 year. An employee who is hired during the last ninety days of the taxable 30 year shall be considered a new employee during the next taxable year. To 31 be counted for the purposes of the credit during the first taxable year of 32 employment, the employee must not have been previously employed by the 33 taxpayer within twelve months before the current date of hire. The terms 34 of employment must comply in all cases with the requirements of section 35 41-1512 and be certified by the Arizona commerce authority. 36 E. Co-owners of a business, including partners in a partnership, 37 members of a limited liability company and shareholders of an 38 S corporation, as defined in section 1361 of the internal revenue code, 39 may each claim only the pro rata share of the credit allowed under this 40 section based on the ownership interest. The total of the credits allowed 41 all owners of the business may not exceed the amount that would have been 42 allowed for a sole owner of the business. 43

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- 35 - F. If the allowable tax credit for a taxable year exceeds the 1 income taxes otherwise due on the claimant's income, or if there are no 2 state income taxes due on the claimant's income, the amount of the claim 3 not used as an offset against income taxes shall be paid to the taxpayer 4 in the same manner as a refund under section 42-1118. Refunds made 5 pursuant to this subsection are subject to setoff under section 42-1122. 6 If the department determines that a refund is incorrect or invalid, the 7 excess refund may be treated as a tax deficiency pursuant to section 8 42-1108. 9 G. Except as provided by subsection H of this section, If, within 10 five taxable years after first receiving a credit pursuant to this 11 section, the certification of qualification of a business is terminated or 12 revoked under section 41-1512, other than for reasons beyond the control 13 of the business as determined by the Arizona commerce authority, the 14 taxpayer is disqualified from credits under this section in subsequent 15 taxable years. On a determination that the taxpayer has committed fraud 16 or relocated outside of this state within five taxable years after first 17 receiving a credit pursuant to this section, the credits allowed the 18 taxpayer in all taxable years pursuant to this section are subject to 19 recapture pursuant to this subsection. This subsection applies only in 20 the case of the termination or revocation of a certification of 21 qualification under section 41-1512. This subsection does not apply if, 22 in any taxable year, a taxpayer otherwise does not qualify for or fails to 23 claim the credit under this section. The recapture of credits is computed 24 by increasing the amount of taxes imposed in the year following the year 25 of termination or revocation by the full amount of all credits previously 26 allowed under this section. 27 H. A taxpayer who claims a credit under section 43-1074 may not 28 claim a credit under this section with respect to the same full-time 29 employment positions. 30 I. H. The department of revenue shall adopt rules and prescribe 31 forms and procedures as necessary for the purposes of this section. The 32 department of revenue and the Arizona commerce authority shall collaborate 33 in adopting rules as necessary to avoid duplication and contradictory 34 requirements while accomplishing the intent and purposes of this section. 35 J. I. Each taxable year after the postapproval of the credit under 36 section 41-1512, subsection P, when the taxpayer files the taxpayer's 37 income tax return, the taxpayer shall: 38 1. Notify the department, on a form prescribed by the department, 39 of any full-time employment position for which a credit was claimed under 40 this section and that was vacant for more than one hundred fifty days 41 after the date the full-time employment position was originally filled to 42 the end of that taxable year. The period that a full-time employment 43 position was vacant may not include the period before the full-time 44 employment position was filled for the first time. 45

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- 36 - 2. Reduce the portion of the credit claimed for the taxable year 1 pursuant to subsection B, paragraph 3 of this section by $4,000 for each 2 full-time employment position reported pursuant to paragraph 1 of this 3 subsection. 4 Sec. 22. Section 43-1121, Arizona Revised Statutes, is amended to 5 read: 6 43-1121. Additions to Arizona gross income; corporations 7 In computing Arizona taxable income for a corporation, the following 8 amounts shall be added to Arizona gross income: 9 1. The amount of interest income received on obligations of any 10 state, territory or possession of the United States, or any political 11 subdivision thereof, located outside this state, reduced, for taxable 12 years beginning from and after December 31, 1996, by the amount of any 13 interest on indebtedness and other related expenses that were incurred or 14 continued to purchase or carry those obligations and that are not 15 otherwise deducted or subtracted in arriving at Arizona gross income. 16 2. The excess of a partner's share of partnership taxable income 17 required to be included under chapter 14, article 2 of this title over the 18 income required to be reported under section 702(a)(8) of the internal 19 revenue code. 20 3. The excess of a partner's share of partnership losses determined 21 pursuant to section 702(a)(8) of the internal revenue code over the losses 22 allowable under chapter 14, article 2 of this title. 23 4. The amount of any depreciation allowance allowed pursuant to 24 section 167(a) of the internal revenue code to the extent not previously 25 added. 26 5. The amount of dividend income received from corporations and 27 allowed as a deduction pursuant to sections 243, 245, 245A and 28 250(a)(1)(B) of the internal revenue code. 29 6. Taxes that are based on income paid to states, local governments 30 or foreign governments and that were deducted in computing federal taxable 31 income. 32 7. Expenses and interest relating to tax-exempt income on 33 indebtedness incurred or continued to purchase or carry obligations the 34 interest on which is wholly exempt from the tax imposed by this title. 35 Financial institutions, as defined in section 6-101, shall be governed by 36 section 43-961, paragraph 2. 37 8. Commissions, rentals and other amounts paid or accrued to a 38 domestic international sales corporation controlled by the payor 39 corporation if the domestic international sales corporation is not 40 required to report its taxable income to this state because its income is 41 not derived from or attributable to sources within this state. If the 42 domestic international sales corporation is subject to article 4 of this 43 chapter, the department shall prescribe by rule the method of determining 44 the portion of the commissions, rentals and other amounts that are paid or 45

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- 37 - accrued to the controlled domestic international sales corporation and 1 that shall be deducted by the payor. For the purposes of this paragraph, 2 "control" means direct or indirect ownership or control of fifty percent 3 or more of the voting stock of the domestic international sales 4 corporation by the payor corporation. 5 9. The amount of net operating loss taken pursuant to section 172 6 of the internal revenue code. 7 10. The amount of exploration expenses determined pursuant to 8 section 617 of the internal revenue code to the extent that they exceed 9 $75,000 and to the extent that the election is made to defer those 10 expenses not in excess of $75,000. 11 11. Amortization of costs incurred to install pollution control 12 devices and deducted pursuant to the internal revenue code or the amount 13 of deduction for depreciation taken pursuant to the internal revenue code 14 on pollution control devices for which an election is made pursuant to 15 section 43-1129. 16 12. The amount of depreciation or amortization of costs of child 17 care facilities deducted pursuant to section 167 or 188 of the internal 18 revenue code for which an election is made to amortize pursuant to section 19 43-1130. 20 13. The loss of an insurance company that is exempt under section 21 43-1201 to the extent that it is included in computing Arizona gross 22 income on a consolidated return pursuant to section 43-947. 23 14. The amount by which the depreciation or amortization computed 24 under the internal revenue code with respect to property THAT IS POLLUTION 25 CONTROL EQUIPMENT for which a credit was taken under section 43-1170 26 BEFORE TAXABLE YEAR 2026 exceeds the amount of depreciation or 27 amortization computed pursuant to the internal revenue code on the Arizona 28 adjusted basis of the property. 29 15. The amount by which the adjusted basis computed under the 30 internal revenue code with respect to property THAT IS POLLUTION CONTROL 31 EQUIPMENT for which a credit was claimed under section 43-1170 TAKEN 32 BEFORE TAXABLE YEAR 2026 and that is sold or otherwise disposed of during 33 the taxable year exceeds the adjusted basis of the property computed under 34 section 43-1170 THE SECTION IN WHICH THE CREDIT WAS TAKEN. 35 16. The deduction referred to in section 1341(a)(4) of the internal 36 revenue code for restoration of a substantial amount held under a claim of 37 right. 38 17. The amount by which a capital loss carryover allowable pursuant 39 to section 1341(b)(5) of the internal revenue code exceeds the capital 40 loss carryover allowable pursuant to section 43-1130.01, subsection F. 41 18. Any wage expenses deducted pursuant to the internal revenue 42 code for which a credit is claimed under section 43-1175 and representing 43 net increases in qualified employment positions for employment of 44 temporary assistance for needy families recipients. 45

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- 38 - 19. Any amount of expenses that were deducted pursuant to the 1 internal revenue code and for which a credit is claimed under section 2 43-1178. 3 20. Any amount deducted pursuant to section 170 of the internal 4 revenue code representing contributions to a school tuition organization 5 for which a credit is claimed under section 43-1183 or 43-1184. 6 21. If a subtraction is or has been taken by the taxpayer under 7 section 43-1124, in the current or a prior taxable year for the full 8 amount of eligible access expenditures paid or incurred to comply with the 9 requirements of the Americans with disabilities act of 1990 (P.L. 101-336) 10 or title 41, chapter 9, article 8, any amount of eligible access 11 expenditures that is recognized under the internal revenue code, including 12 any amount that is amortized according to federal amortization schedules, 13 and that is included in computing Arizona taxable income for the current 14 taxable year. 15 22. For taxable years beginning from and after December 31, 2017, 16 the amount of any net capital loss included in Arizona gross income for 17 the taxable year that is derived from the exchange of one kind of legal 18 tender for another kind of legal tender. For the purposes of this 19 paragraph: 20 (a) "Legal tender" means a medium of exchange, including specie, 21 that is authorized by the United States Constitution or Congress to pay 22 debts, public charges, taxes and dues. 23 (b) "Specie" means coins having precious metal content. 24 23. The amount of any deduction that is claimed in computing 25 Arizona gross income and that represents a donation of a school site for 26 which a credit is claimed under section 43-1181. 27 24. The amount of any motion picture production costs that was 28 deducted pursuant to the internal revenue code for which a tax credit is 29 claimed under section 43-1165. 30 25. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2025, 31 THE AMOUNT OF THE SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED PRODUCTION 32 PROPERTY ALLOWED PURSUANT TO SECTION 168(n) OF THE INTERNAL REVENUE CODE 33 FOR THE TAXABLE YEAR TO THE EXTENT NOT PREVIOUSLY ADDED. 34 Sec. 23. Section 43-1122, Arizona Revised Statutes, is amended to 35 read: 36 43-1122. Subtractions from Arizona gross income; corporations 37 In computing Arizona taxable income for a corporation, the following 38 amounts shall be subtracted from Arizona gross income: 39 1. The excess of a partner's share of income required to be 40 included under section 702(a)(8) of the internal revenue code over the 41 income required to be included under chapter 14, article 2 of this title. 42

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- 39 - 2. The excess of a partner's share of partnership losses determined 1 pursuant to chapter 14, article 2 of this title over the losses allowable 2 under section 702(a)(8) of the internal revenue code. 3 3. The amount allowed by section 43-1025 for contributions during 4 the taxable year of agricultural crops to charitable organizations. 5 4. The portion of any wages or salaries paid or incurred by the 6 taxpayer for the taxable year that is equal to the amount of the federal 7 work opportunity credit, the empowerment zone employment credit, the 8 credit for employer paid social security taxes on employee cash tips and 9 the Indian employment credit that the taxpayer received under sections 10 45A, 45B, 51(a) and 1396 of the internal revenue code. 11 5. With respect to property that is sold or otherwise disposed of 12 during the taxable year by a taxpayer that complied with section 43-1121, 13 paragraph 4 with respect to that property, the amount of depreciation that 14 has been allowed pursuant to section 167(a) of the internal revenue code 15 to the extent that the amount has not already reduced Arizona taxable 16 income in the current taxable year or prior taxable years. 17 6. With respect to a financial institution as defined in section 18 6-101, expenses and interest relating to tax-exempt income disallowed 19 pursuant to section 265 of the internal revenue code. 20 7. Dividends received from another corporation owned or controlled 21 directly or indirectly by a recipient corporation. For the purposes of 22 this paragraph, "control" means direct or indirect ownership or control of 23 fifty percent or more of the voting stock of the payor corporation by the 24 recipient corporation. Dividends shall have the meaning provided in 25 section 316 of the internal revenue code. This subtraction shall apply 26 without regard to section 43-961, paragraph 2 and article 4 of this 27 chapter. 28 8. Interest income received on obligations of the United States. 29 9. The amount of dividend income from foreign corporations. For 30 the purposes of this paragraph, gross up income as described in section 78 31 of the internal revenue code, global intangible low-taxed THE income as 32 defined DESCRIBED in section 951A of the internal revenue code and subpart 33 F income as defined in section 952 of the internal revenue code shall be 34 considered foreign dividends. 35 10. The amount of net operating loss allowed by section 43-1123. 36 11. The amount of any state income tax refunds received that were 37 included as income in computing federal taxable income. 38 12. The amount of expense recapture included in income pursuant to 39 section 617 of the internal revenue code for mine exploration expenses. 40 13. The amount of deferred exploration expenses allowed by section 41 43-1127. 42

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- 40 - 14. The amount of exploration expenses related to the exploration 1 of oil, gas or geothermal resources, computed in the same manner and on 2 the same basis as a deduction for mine exploration pursuant to section 617 3 of the internal revenue code. This computation is subject to the 4 adjustments contained in section 43-1121, paragraph 10 and paragraphs 12 5 and 13 of this section relating to exploration expenses. 6 15. The amortization of pollution control devices allowed by 7 section 43-1129. 8 16. The amount of amortization of the cost of child care facilities 9 pursuant to section 43-1130. 10 17. The amount of income from a domestic international sales 11 corporation required to be included in the income of its shareholders 12 pursuant to section 995 of the internal revenue code. 13 18. The income of an insurance company that is exempt under section 14 43-1201 to the extent that it is included in computing Arizona gross 15 income on a consolidated return pursuant to section 43-947. 16 19. The amount by which a capital loss carryover allowable pursuant 17 to section 43-1130.01, subsection F exceeds the capital loss carryover 18 allowable pursuant to section 1341(b)(5) of the internal revenue code. 19 20. An amount equal to the depreciation allowable pursuant to 20 section 167(a) of the internal revenue code for the taxable year computed 21 as if the election described in section 168(k)(7) of the internal revenue 22 code had been made for each applicable class of property in the year the 23 property was placed in service. 24 21. The amount of eligible access expenditures paid or incurred 25 during the taxable year to comply with the requirements of the Americans 26 with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, 27 article 8 as provided by section 43-1124. 28 22. For taxable years beginning from and after December 31, 2017, 29 the amount of any net capital gain included in Arizona gross income for 30 the taxable year that is derived from the exchange of one kind of legal 31 tender for another kind of legal tender. For the purposes of this 32 paragraph: 33 (a) "Legal tender" means a medium of exchange, including specie, 34 that is authorized by the United States Constitution or Congress to pay 35 debts, public charges, taxes and dues. 36 (b) "Specie" means coins having precious metal content. 37 23. With respect to a public service corporation operating a water 38 system or sewage disposal facility, the amount of monies or property 39 received as a contribution in aid of construction. For the purposes of 40 this paragraph: 41 (a) "Contribution in aid of construction" means any amount of 42 monies or other property contributed to a public service corporation that 43 provides water or sewage disposal services to the extent that the purpose 44 of the contribution is to provide for expanding, improving or replacing 45

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- 41 - the public service corporation's water system or sewage disposal 1 facilities, including any amount of monies or other property contributed 2 to a public service corporation for a water system or sewage disposal 3 facility subject to a contingent obligation to repay the amount, in whole 4 or in part, to the contributor. 5 (b) "Public service corporation" means a public service corporation 6 as defined in article XV, section 2, Constitution of Arizona, that is 7 regulated by the corporation commission. 8 Sec. 24. Repeal 9 Section 43-1161, Arizona Revised Statutes, is repealed. 10 Sec. 25. Section 43-1164.04, Arizona Revised Statutes, is amended 11 to read: 12 43-1164.04. Credit for qualified facilities 13 A. For taxable years beginning from and after December 31, 2012 14 through December 31, 2030, a credit is allowed against the taxes imposed 15 by this title for qualifying investment and employment in expanding or 16 locating a qualified facility in this state. To qualify for the credit, 17 after June 30, 2012 the taxpayer must invest in a new qualified facility 18 or expand an existing qualified facility in this state and produce new 19 full-time employment positions where the job duties are associated with 20 the location of the qualifying investment. The taxpayer must meet the 21 employee compensation and employee health benefit requirements prescribed 22 by section 41-1512. 23 B. The amount of the credit is computed as follows: 24 1. Ten percent of the lesser of: 25 (a) The total qualifying investment in the qualified facility. 26 (b) Either: 27 (i) If the total qualifying investment is less than $2,000,000,000, 28 $200,000 for each net new full-time employment position that has job 29 duties associated with the qualified facility. 30 (ii) If the total qualifying investment is $2,000,000,000 or more, 31 $300,000 for each net new full-time employment position that has job 32 duties associated with the qualified facility. 33 2. The amount of the credit shall not exceed the postapproval 34 amount determined by the Arizona commerce authority under section 41-1512, 35 subsection P. 36 3. Subject to subsections G and J I of this section: 37 (a) The credit amount computed under paragraph 1 of this subsection 38 is apportioned, and the taxpayer shall claim the credit in five equal 39 annual installments in each of five consecutive taxable years. 40 (b) The taxpayer may claim all five annual installments of a credit 41 that was preapproved before January 1, 2031 by the Arizona commerce 42 authority notwithstanding any intervening repeal or other termination of 43 the credit. 44

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- 42 - C. To claim the credit the taxpayer must: 1 1. Conduct a business that qualifies under section 41-1512. 2 2. Receive preapproval and postapproval from the Arizona commerce 3 authority pursuant to section 41-1512. 4 3. Submit to the department a copy of a current and valid 5 certification of qualification issued to the taxpayer by the Arizona 6 commerce authority. 7 D. To be counted for the purposes of the credit, an employee must 8 have been employed with job duties associated with the qualified facility 9 for at least ninety days during the taxable year in a permanent full-time 10 employment position of at least one thousand seven hundred fifty hours per 11 year. An employee who is hired during the last ninety days of the taxable 12 year shall be considered a new employee during the next taxable year. To 13 be counted for the purposes of the credit during the first taxable year of 14 employment, the employee must not have been previously employed by the 15 taxpayer within twelve months before the current date of hire. The terms 16 of employment must comply in all cases with the requirements of section 17 41-1512 and be certified by the Arizona commerce authority. 18 E. Co-owners of a business, including corporate partners in a 19 partnership and members of a limited liability company, may each claim 20 only the pro rata share of the credit allowed under this section based on 21 the ownership interest. The total of the credits allowed all owners of 22 the business may not exceed the amount that would have been allowed for a 23 sole owner of the business. 24 F. If the allowable tax credit for a taxable year exceeds the 25 income taxes otherwise due on the claimant's income, or if there are no 26 state income taxes due on the claimant's income, the amount of the claim 27 not used as an offset against income taxes shall be paid to the taxpayer 28 in the same manner as a refund under section 42-1118. Refunds made 29 pursuant to this subsection are subject to setoff under section 42-1122. 30 If the department determines that a refund is incorrect or invalid, the 31 excess refund may be treated as a tax deficiency pursuant to section 32 42-1108. 33 G. Except as provided by subsection H of this section, If, within 34 five taxable years after first receiving a credit pursuant to this 35 section, the certification of qualification of a business is terminated or 36 revoked under section 41-1512, other than for reasons beyond the control 37 of the business as determined by the Arizona commerce authority, the 38 taxpayer is disqualified from credits under this section in subsequent 39 taxable years. On a determination that the taxpayer has committed fraud 40 or relocated outside of this state within five taxable years after first 41 receiving a credit pursuant to this section, the credits allowed the 42 taxpayer in all taxable years pursuant to this section are subject to 43 recapture pursuant to this subsection. This subsection applies only in 44 the case of the termination or revocation of a certification of 45

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- 43 - qualification under section 41-1512. This subsection does not apply if, 1 in any taxable year, a taxpayer otherwise does not qualify for or fails to 2 claim the credit under this section. The recapture of credits is computed 3 by increasing the amount of taxes imposed in the year following the year 4 of termination or revocation by the full amount of all credits previously 5 allowed under this section. 6 H. A taxpayer that claims a credit under section 43-1161 may not 7 claim a credit under this section with respect to the same full-time 8 employment positions. 9 I. H. The department of revenue shall adopt rules and prescribe 10 forms and procedures as necessary for the purposes of this section. The 11 department of revenue and the Arizona commerce authority shall collaborate 12 in adopting rules as necessary to avoid duplication and contradictory 13 requirements while accomplishing the intent and purposes of this section. 14 J. I. Each taxable year after the postapproval of the credit under 15 section 41-1512, subsection P, when the taxpayer files the taxpayer's 16 income tax return, the taxpayer shall: 17 1. Notify the department, on a form prescribed by the department, 18 of any full-time employment position for which a credit was claimed under 19 this section and that was vacant for more than one hundred fifty days 20 after the date the full-time employment position was originally filled to 21 the end of that taxable year. The period that a full-time employment 22 position was vacant may not include the period before the full-time 23 employment position was filled for the first time. 24 2. Reduce the portion of the credit claimed for the taxable year 25 pursuant to subsection B, paragraph 3 of this section by $4,000 for each 26 full-time employment position reported pursuant to paragraph 1 of this 27 subsection. 28 Sec. 26. Section 43-1168, Arizona Revised Statutes, is amended to 29 read: 30 43-1168. Credit for increased research activity 31 A. A credit is allowed against the taxes imposed by this title in 32 an amount determined pursuant to section 41 of the internal revenue code, 33 except that: 34 1. The amount of the credit is computed as follows: 35 (a) Add: 36 (i) The excess, if any, of the qualified research expenses for the 37 taxable year over the base amount as defined in section 41(c) of the 38 internal revenue code. 39 (ii) The basic research payments determined under section 40 41(e)(1)(A) of the internal revenue code. 41 (b) If the sum computed under subdivision (a) of this paragraph is 42 $2,500,000 or less: 43 (i) For taxable years beginning before December 31, 2030, the 44 credit is equal to twenty-four percent of that amount. 45

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- 44 - (ii) For taxable years beginning from and after December 31, 2030, 1 the credit is equal to twenty percent of that amount. 2 (c) If the sum computed under subdivision (a) of this paragraph is 3 over $2,500,000: 4 (i) For taxable years beginning before December 31, 2030, the 5 credit is equal to $600,000 plus fifteen percent of any amount exceeding 6 $2,500,000. 7 (ii) For taxable years beginning from and after December 31, 2030, 8 the credit is equal to $500,000 plus eleven percent of any amount 9 exceeding $2,500,000. 10 (d) For taxable years beginning from and after December 31, 2011, 11 an additional credit amount is allowed if the taxpayer made basic research 12 payments during the taxable year to a university under the jurisdiction of 13 the Arizona board of regents. The additional credit amount is equal to 14 ten percent of the excess, if any, of the basic research payments over the 15 qualified organization base period amount for the taxable year. The 16 department shall not allow credit amounts under this subdivision and 17 section 43-1074.01, subsection A, paragraph 1, subdivision (c) that 18 exceed, in the aggregate, a combined total of $10,000,000 in any calendar 19 year. Subject to that limit, on application by the taxpayer, the 20 department shall certify credit amounts under this subdivision and section 21 43-1074.01, subsection A, paragraph 1, subdivision (c) based on priority 22 placement established by the date that the taxpayer filed the application. 23 For taxable years beginning from and after December 31, 2014, any basic 24 research payments used to determine the additional credit under this 25 subdivision must first receive certification from the Arizona commerce 26 authority pursuant to section 41-1507.01. The additional credit amount 27 under this subdivision shall not exceed the amount allowed based on actual 28 basic research payments or the department's certification, whichever is 29 less. If an application, if certified in full, would exceed the 30 $10,000,000 limit, the department shall certify only an amount within that 31 limit. After the limit is attained, the department shall deny any 32 subsequent applications regardless of whether other certified amounts are 33 not actually claimed as a credit or other taxpayers fail to qualify to 34 actually claim certified amounts. Notwithstanding subsections SUBSECTION 35 B and C of this section, any amount of the additional credit under this 36 subdivision that exceeds the taxes otherwise due under this title is not 37 refundable, but may be carried forward to the next five consecutive 38 taxable years. For the purposes of this subdivision, "basic research 39 payments" and "qualified organization base period amount" have the same 40 meanings prescribed by section 41(e) of the internal revenue code. 41 2. Qualified research includes only research conducted in this 42 state, including research conducted at a university in this state and paid 43 for by the taxpayer. 44

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- 45 - 3. If two or more taxpayers, including corporate partners in a 1 partnership, share in the eligible expenses, each taxpayer is eligible to 2 receive a proportionate share of the credit. 3 4. The credit under this section applies only to expenses incurred 4 from and after December 31, 1993. 5 5. The termination provisions of section 41 of the internal revenue 6 code do not apply. 7 B. Except as provided by subsection C of this section, If the 8 allowable credit under this section exceeds the taxes otherwise due under 9 this title on the claimant's income, or if there are no taxes due under 10 this title, the amount of the credit claimed for taxable years beginning 11 before January 1, 2022 not used to offset taxes may be carried forward to 12 the next fifteen consecutive taxable years, and the amount of the credit 13 claimed for taxable years beginning from and after December 31, 2021 not 14 used to offset taxes may be carried forward to the next ten consecutive 15 taxable years. The amount of credit carryforward from taxable years 16 beginning from and after December 31, 2002 that may be used under this 17 subsection in any taxable year may not exceed the taxpayer's tax liability 18 under this title minus the credit under this section for the current 19 taxable year's qualified research expenses. A taxpayer that carries 20 forward any amount of credit under this subsection may not thereafter 21 claim a refund of any amount of the credit under subsection C of this 22 section. 23 C. For taxable years beginning from and after December 31, 2009, if 24 a taxpayer that claims a credit under this section employs fewer than one 25 hundred fifty persons in the taxpayer's trade or business and if the 26 allowable credit under this section exceeds the taxes otherwise due under 27 this title on the claimant's income, or if there are no taxes due under 28 this title, in lieu of carrying the excess amount of credit forward to 29 subsequent taxable years under subsection B of this section, the taxpayer 30 may elect to receive a refund as follows: 31 1. The taxpayer must apply to the Arizona commerce authority for 32 qualification for the refund pursuant to section 41-1507 and submit a copy 33 of the authority's certificate of qualification to the department of 34 revenue with the taxpayer's income tax return. 35 2. The amount of the refund is limited to seventy-five percent of 36 the amount by which the allowable credit under this section exceeds the 37 taxpayer's tax liability under this title for the taxable year. The 38 remainder of the excess amount of the credit is waived. 39 3. The refund shall be paid in the manner prescribed by section 40 42-1118. 41 4. The refund is subject to setoff under section 42-1122. 42 5. If the department determines that a credit refunded pursuant to 43 this subsection is incorrect or invalid, the excess credit issued may be 44 treated as a tax deficiency pursuant to section 42-1108. 45

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- 46 - Sec. 27. Repeal 1 Section 43-1170, Arizona Revised Statutes, is repealed. 2 Sec. 28. Section 43-1183, Arizona Revised Statutes, is amended to 3 read: 4 43-1183. Credit for contributions to school tuition 5 organization 6 A. Beginning from and after June 30, 2006, a credit is allowed 7 against the taxes imposed by this title for the amount of voluntary cash 8 contributions made by the taxpayer during the taxable year to a school 9 tuition organization that is certified pursuant to chapter 15 of this 10 title at the time of donation. 11 B. The amount of the credit is the total amount of the taxpayer's 12 contributions for the taxable year under subsection A of this section and 13 is preapproved by the department of revenue pursuant to subsection D of 14 this section. 15 C. The department of revenue: 16 1. Shall not allow tax credits under this section and section 17 20-224.06 that exceed in the aggregate a combined total of $135,000,000 18 $110,000,000 in fiscal year 2024-2025 2026-2027 and each fiscal year 19 thereafter. 20 2. Shall preapprove tax credits under this section and section 21 20-224.06 subject to subsection D of this section. 22 3. Shall allow the tax credits under this section and section 23 20-224.06 on a first-come, first-served basis. 24 D. For the purposes of subsection C, paragraph 2 of this section, 25 before making a contribution to a school tuition organization, the 26 taxpayer under this title or title 20 must notify the school tuition 27 organization of the total amount of contributions that the taxpayer 28 intends to make to the school tuition organization. Before accepting the 29 contribution, the school tuition organization shall request preapproval 30 from the department of revenue for the taxpayer's intended contribution 31 amount. The department of revenue shall preapprove or deny the requested 32 amount within twenty days after receiving the request from the school 33 tuition organization. If the department of revenue preapproves the 34 request, the school tuition organization shall immediately notify the 35 taxpayer, and the department of insurance and financial institutions in 36 the case of a credit under section 20-224.06, that the requested amount 37 was preapproved by the department of revenue. In order to receive a tax 38 credit under this subsection, the taxpayer shall make the contribution to 39 the school tuition organization within twenty days after receiving notice 40 from the school tuition organization that the requested amount was 41 preapproved. If the school tuition organization does not receive the 42 preapproved contribution from the taxpayer within the required twenty 43 days, the school tuition organization shall immediately notify the 44 department of revenue, and the department of insurance and financial 45

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- 47 - institutions in the case of a credit under section 20-224.06, and the 1 department of revenue shall no longer include this preapproved 2 contribution amount when calculating the limit prescribed in subsection C, 3 paragraph 1 of this section. 4 E. If the allowable tax credit exceeds the taxes otherwise due 5 under this title on the claimant's income, or if there are no taxes due 6 under this title, the taxpayer may carry the amount of the claim not used 7 to offset the taxes under this title forward for not more than five 8 consecutive taxable years' income tax liability. 9 F. Co-owners of a business, including corporate partners in a 10 partnership and stockholders of an S corporation as defined in section 11 1361 of the internal revenue code, may each claim only the pro rata share 12 of the credit allowed under this section based on the ownership interest. 13 The total of the credits allowed all such owners may not exceed the amount 14 that would have been allowed a sole owner. 15 G. The credit allowed by this section is in lieu of any deduction 16 pursuant to section 170 of the internal revenue code and taken for state 17 tax purposes. 18 H. A taxpayer shall not claim a credit under this section and also 19 under section 43-1184 with respect to the same contribution. 20 I. The tax credit is not allowed if the taxpayer designates the 21 taxpayer's contribution to the school tuition organization for the direct 22 benefit of any specific student. 23 J. The department of revenue, with the cooperation of the 24 department of insurance and financial institutions, shall adopt rules and 25 publish and prescribe forms and procedures necessary to administer this 26 section. 27 Sec. 29. Section 48-4203, Arizona Revised Statutes, is amended to 28 read: 29 48-4203. Powers and duties of board of directors; reporting 30 requirements; conflict of interest 31 A. The board of directors, on behalf of the district, may: 32 1. Adopt and use a corporate seal. 33 2. Sue and be sued. 34 3. Enter into contracts, including intergovernmental agreements 35 under title 11, chapter 7, article 3, as necessary to carry out the 36 purposes and requirements of this chapter. The district may contract with 37 a county sports authority established under title 11, chapter 5 to carry 38 out any power of the district. 39 4. Adopt administrative rules as necessary to administer and 40 operate the district and any property under its jurisdiction. 41 5. Adopt rules that allow weighted voting by board members and 42 establish conditions for terminating the district. 43

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- 48 - 6. Employ an executive director and administrative and clerical 1 employees, or contract for other management personnel, and prescribe the 2 terms and conditions of their employment as necessary to carry out the 3 purposes of the district. 4 7. Acquire by any lawful means and operate, maintain, encumber and 5 dispose of real and personal property and interests in property. A 6 district established under section 48-4202, subsection A in a county with 7 a population of less than one million five hundred thousand persons may 8 acquire real property by eminent domain. A district established under 9 section 48-4202, subsection A in a county with a population of one million 10 five hundred thousand persons or more or section 48-4202, subsection B 11 shall not acquire real property by eminent domain. A district established 12 under section 48-4202, subsection C shall not acquire or own real property 13 or interests in real property. 14 8. Administer trusts declared or established for the district, 15 receive and hold in trust or otherwise property located in or out of this 16 state and, if not otherwise provided, dispose of the property for the 17 benefit of the district. 18 9. Retain legal counsel and other consultants as necessary to carry 19 out the purposes of the district. 20 B. The board of directors, on behalf of a district established 21 pursuant to section 48-4202, subsection B, may: 22 1. Use revenues paid to the district pursuant to section 42-5031 23 and other revenues the district may receive from other sources, for the 24 purposes set forth in section 48-4204, subsection B. 25 2. Enter into agreements with developers, contractors, tenants and 26 other users of all or part of a multipurpose facility as determined 27 appropriate. 28 3. Pledge all or part of the revenues described in section 42-5031, 29 subsection B to secure the district's bonds or other financial obligations 30 issued or incurred under this chapter for the construction of all or part 31 of a multipurpose facility. 32 C. The board of directors of a district established pursuant to 33 section 48-4202, subsection B shall provide public outreach and education 34 on the purpose and activities of the district, including: 35 1. Presentations to the governing bodies of the municipalities in 36 the county in which the district is located. 37 2. Presentations to community, civic and business organizations. 38 3. Printed or electronic materials that support the purposes of 39 this subsection. 40 D. The board of directors shall: 41 1. Appoint from among its members a chairperson, a secretary and 42 such other officers as may be necessary to conduct its business. The 43 board of directors may appoint the chief financial officer of the county 44 as the district treasurer of a countywide district established under 45

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- 49 - section 48-4202, subsection A in a county with a population of less than 1 one million five hundred thousand persons. If the board does not appoint 2 the chief financial officer, the county treasurer is designated ex officio 3 as the treasurer. The board of directors of a district that is 4 established pursuant to section 48-4202, subsection A in a county with a 5 population of one million five hundred thousand persons or more or section 6 48-4202, subsection B shall designate a member of the board with financial 7 management or accounting experience or a person with whom the board has 8 contracted for financial management as treasurer of the district. The 9 county treasurer is designated ex officio as the treasurer of a district 10 that is established pursuant to section 48-4202, subsection C. 11 2. Keep and maintain a complete and accurate record of all its 12 proceedings. All proceedings and records of the board shall be open to 13 the public as required by title 38, chapter 3, article 3.1 and title 39, 14 chapter 1. 15 3. Provide for the use, maintenance and operation of the properties 16 and interests controlled by the district. 17 E. The board of directors of a district that is established 18 pursuant to section 48-4202, subsection B shall: 19 1. Determine by agreement the distribution of revenues from 20 operating and using the multipurpose facilities among the municipalities 21 and any participating Indian tribe or community. 22 2. ENSURE THAT FROM THE AMOUNT OF BUDGETED INCOME THAT REMAINS 23 AFTER PAYING OPERATING EXPENSES AND DEBT SERVICE AT LEAST EIGHTY PERCENT 24 OF THE GRANTS AND OTHER FINANCIAL SUPPORT PROVIDED BY THE DISTRICT IN A 25 FISCAL YEAR IS PROVIDED FOR PROJECTS THAT GENERATE TRANSACTION PRIVILEGE 26 TAX REVENUES. 27 2. 3. Report to the legislature by October 1 of each year 28 regarding the activities, operations, revenues and expenditures of the 29 district for the immediately preceding fiscal year. The board shall 30 submit the annual report to the president of the senate and the speaker of 31 the house of representatives and provide a copy of the report to the 32 secretary of state. At the discretion of the chairpersons of the senate 33 finance committee and the house of representatives ways and means 34 committee, or their successor committees, the committees may hold separate 35 or joint hearings to consider the annual report prepared by the district. 36 3. 4. Present to the joint legislative committee on capital review 37 each project for the construction or reconstruction of any facility, 38 structure, infrastructure or other improvement to real property of any 39 kind in an amount exceeding $500,000. 40 F. The board of directors of a district that is established 41 pursuant to section 48-4202, subsection A in a county with a population of 42 more than one million five hundred thousand persons: 43 1. May enter into agreements with contractors, tenants and other 44 users of all or part of the major league baseball facility or any adjacent 45

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- 50 - building that is owned by the district and operated by the district or the 1 professional baseball franchise organization that occupies the major 2 league baseball facility or adjacent building as determined appropriate, 3 including agreements for reconstructing, equipping, repairing, maintaining 4 or improving the major league baseball facility or adjacent building. 5 2. On or before November 1 of each year through 2055, shall report 6 to the joint legislative budget committee and the governor's office of 7 strategic planning and budgeting regarding all new projects for 8 reconstructing, equipping, repairing, maintaining or improving a major 9 league baseball facility or any adjacent building that is paid for by the 10 district from the county stadium district fund established pursuant to 11 section 48-4231. The report shall indicate which projects the 12 professional baseball franchise organization contributed monies toward and 13 the amount of the contribution. 14 G. The directors, officers and employees of the district are 15 subject to title 38, chapter 3, article 8 relating to conflicts of 16 interest. 17 H. This state and political subdivisions of this state other than 18 the district are not liable for any financial or other obligations of the 19 district and the financial or other obligations do not constitute a debt 20 or liability of this state or any political subdivision of this state, 21 other than the district. 22 Sec. 30. Pinal county transportation excise tax monies; 23 retroactivity; definition 24 A. Notwithstanding any other law, all Pinal county transportation 25 excise tax monies that remain in the escrow account established to hold 26 those monies or that are held by the department of revenue after the 27 processing of refunds is complete must remain in the escrow account or 28 with the department of revenue until otherwise appropriated by the 29 legislature. 30 B. This section applies retroactively to from and after April 9, 31 2026. 32 C. For the purposes of this section, "Pinal county transportation 33 excise tax monies" means net revenues that are collected pursuant to 34 section 42-6106, Arizona Revised Statutes, and that are not distributed 35 pursuant to section 42-6106, subsection D, Arizona Revised Statutes, or 36 refunded pursuant to section 42-1118, Arizona Revised Statutes, and 37 interest earned on those monies. 38 Sec. 31. Arizona commerce authority; computer data center tax 39 relief; moratorium; retroactivity; delayed repeal 40 A. Notwithstanding any other law, beginning on July 1, 2026 through 41 June 30, 2029, the Arizona commerce authority may not accept applications 42 for any new computer data center pursuant to section 41-1519, Arizona 43 Revised Statutes, and no new computer data centers qualify for tax relief 44 under section 41-1519, Arizona Revised Statutes. 45

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- 51 - B. This section applies retroactively to from and after June 30, 1 2026. 2 C. This section is repealed from and after June 30, 2029. 3 Sec. 32. Public infrastructure distribution; interim processing 4 Eligible requests for payment received by the department of revenue 5 pursuant to section 42-5032.02, Arizona Revised Statutes, as amended by 6 this act, between June 1, 2026 and the effective date of this act shall be 7 processed and paid beginning on the effective date of this act, subject to 8 section 42-5032.02, subsection C, Arizona Revised Statutes, as amended by 9 this act, and section 42-5032.02, subsection I, Arizona Revised Statutes, 10 as added by this act. 11 Sec. 33. Unemployment insurance operating fund; exemption; 12 calculation; delayed repeal 13 A. Notwithstanding the contribution rate imposed by section 23-730, 14 Arizona Revised Statutes, for calendar year 2027 each employer with an 15 experience rating account shall pay an amount equal to 3.15 percent of the 16 contributions payable in that calendar quarter to be deposited as follows: 17 1. In the unemployment insurance operating fund established by 18 subsection C of this section, except not more than $8,000,000 may be 19 deposited in the fund in calendar year 2027. 20 2. Any monies in excess of the amount listed in paragraph 1 of this 21 subsection, in the unemployment compensation fund established by section 22 23-701, Arizona Revised Statutes. 23 B. Notwithstanding section 23-730, Arizona Revised Statutes, the 24 department of economic security shall reduce an employer's contribution by 25 3.15 percent on a quarterly basis or as otherwise prescribed by law. 26 C. The unemployment insurance operating fund is established 27 consisting of monies collected or received by the department of economic 28 security pursuant to subsection A of this section. The department of 29 economic security shall administer the fund. Monies in the fund are 30 continuously appropriated and exempt from the provisions of section 31 35-190, Arizona Revised Statutes, relating to lapsing of appropriations. 32 D. On notice from the department of economic security, the state 33 treasurer shall invest and divest monies in the unemployment insurance 34 operating fund as provided by section 35-313, Arizona Revised Statutes, 35 and monies earned from investment shall be credited to the unemployment 36 insurance operating fund. 37 E. The department of economic security shall use monies in the 38 unemployment insurance operating fund to administer the fund and pay 39 expenses for administering the federal-state unemployment compensation 40 program under title 23, chapter 4, Arizona Revised Statutes. 41 F. The director of the department of economic security may transfer 42 all or a portion of the monies from the unemployment insurance operating 43 fund to the unemployment compensation fund established by section 23-701, 44 Arizona Revised Statutes. 45

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- 52 - G. This section is repealed from and after December 31, 2027. 1 Sec. 34. Applicability 2 A. Sections 20-224.03, 41-1507, 41-1525, 43-1074, 43-1161 and 3 43-1170, Arizona Revised Statutes, as repealed by this act, apply to 4 taxable years beginning from and after December 31, 2025. 5 B. Section 42-11111, Arizona Revised Statutes, as amended by this 6 act, applies to tax years beginning from and after December 31, 2026. 7 C. Section 42-5032.02, subsection C, paragraphs 1, 2 and 3, Arizona 8 Revised Statutes, as added by this act, apply to all agreements entered 9 into pursuant to section 42-5032.02, Arizona Revised Statutes, as amended 10 by this act, regardless of when the agreement was entered into. 11 Sec. 35. Retroactivity 12 A. Sections 42-1001, 43-105, 43-1022, 43-1041, 43-1121 and 43-1122, 13 Arizona Revised Statutes, as amended by this act, apply retroactively to 14 taxable years beginning from and after December 31, 2024. 15 B. Sections 43-1021, 43-1042, 43-1073.01, 43-1074.01 and 43-1168, 16 Arizona Revised Statutes, as amended by this act, apply retroactively to 17 taxable years beginning from and after December 31, 2025. 18 C. Section 42-5032.02, subsection C, paragraphs 1, 2 and 3, Arizona 19 Revised Statutes, as added by this act, apply retroactively to from and 20 after June 30, 2026. 21 Sec. 36. Saving clause 22 A. The repeal of the premium and income tax credits by this act 23 does not affect the continuing validity of any amount of the credit 24 carried forward from previous taxable years for application against 25 subsequent tax liabilities as allowed by prior law. 26 B. Section 42-5032.02, subsection C, Arizona Revised Statutes, as 27 amended by this act, to reduce the percentage of the total cost of public 28 infrastructure improvements from eighty percent to seventy-five percent 29 applies only to agreements entered on or after the effective date of this 30 act. Agreements entered into before the effective date of this act remain 31 subject to the eighty percent limit in effect at the time of execution for 32 the duration of the agreement. 33 C. Section 42-5032.02, subsection D and subsection K, paragraph 4, 34 Arizona Revised Statutes, as amended by this act, apply only to 35 certifications filed on or after the effective date of this act. 36 Certifications filed before the effective date of this act remain valid 37 under the thresholds in effect at the time the certification was filed. 38 D. Section 42-5032.02, subsection G, paragraph 6, Arizona Revised 39 Statutes, as added by this act, applies only to agreements entered into on 40 or after the effective date of this act and does not apply to amendments 41 or changes to agreements entered before the effective date of this act. 42

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- 53 - E. Section 42-5032.02, subsection G, paragraph 11, Arizona Revised 1 Statutes, as added by this act, applies only to agreements entered into on 2 or after the effective date of this act. 3 F. Section 42-5032.02, subsection J, Arizona Revised Statutes, as 4 added by this act, applies only to development agreements entered into in 5 connection with agreements entered into pursuant to section 42-5032.02, 6 subsection G, Arizona Revised Statutes, as amended by this act, on or 7 after the effective date of this act. 8