WeVote
Log In

Bill

Bill

SB 1861

taxation; omnibus; 2026-2027.

57th Legislature - Second Regular Session Introduced by Dave Farnsworth

Arizona SB 1861 updates and harmonizes state tax law, including premium taxes, credits, exemptions, and internal revenue code references, while funding infrastructure and public sa

DP
0
WeVote Research Nonpartisan
Bill Summary · SB 1861

Overview

SB 1861 is a comprehensive omnibus taxation bill proposed in the Arizona Legislature (57th-2nd regular session, 2026). It makes broad amendments to multiple tax-related statutes, repeals certain provisions, reorganizes definitions and administrative terms, and adjusts various tax rates, exemptions, and credits across insurance premium taxes, personal and corporate taxes, property tax exemptions, and related administration. The bill also modifies internal revenue code references for Arizona tax calculations and reallocates or coordinates several revenue streams and program funding (notably related to police/public safety and infrastructure programs).

Main purpose and intent

  • Modernize and harmonize Arizona tax law with updated administrative processes and align several tax bases, credits, and exemptions.
  • Update references to the Internal Revenue Code for computing Arizona income tax across multiple tax years.
  • Create, modify, or repeal various premium taxes, credits, and exemptions to reflect policy priorities and fiscal needs.
  • Introduce or adjust program funding mechanisms tied to specific revenue streams (e.g., public safety retirement system, highway infrastructure accounts, and municipal/volunteer fire district funding).

Key provisions and changes

  • Premium tax (insurance) framework (Section 1, 2, 4, and 7):

    • Revisions to reporting and taxation of net premiums by insurers, with specific rates for fire, disability, health care service plans, and other insurance categories.
    • Introduces phased rate adjustments for “other insurance” premiums, with rates decreasing from 1.95% (2016) to 1.70% (and continuing thereafter).
    • Separate treatment and allocation of a significant portion of fire premium tax revenue to municipal/public safety retirement systems and related funds; establishes reallocations by actuarial procedures.
    • Provisions for premium tax credits and refunds, including conditions for eligibility and redress for overpayments.
    • Electronic filing mandate possibility and related third-party service listings for premium tax reporting.
    • Repeals Section 20-224.03 (existing additional premium tax provisions).

  • Specified tax exemptions and credits (Sections 4, 5, 6, 11, 12, 13):

    • Updates to exemptions and tax credit structure across corporate and health-related entities (e.g., health care service organizations, prepaid dental plans, prepaid legal insurance).
    • Clarifies and expands premium tax credits related to specific sections (20-224.03, 20-224.04, 20-224.05, 20-224.06, 20-224.07).
    • Aligns definitions and computation with updated Internal Revenue Code references.

  • Internal Revenue Code references and date alignment (Section 12 and 15):

    • Establishes a comprehensive, year-by-year structure for which version of the federal Internal Revenue Code applies to Arizona tax computations for each taxable year (2015–2026 and beyond), incorporating retroactive effective dates from federal law where applicable.
    • Addresses specific acts and laws (e.g., CARES Act, Inflation Reduction Act, American Rescue Plan, CHIPS, etc.) as they retroactively impact Arizona tax computations in specified years.

  • Repeals and amendments to exemptions and definitions (Sections 8, 9, 10, 11, 13):

    • Repeals certain statutory sections (e.g., 41-1507 and 41-1525) and makes targeted amendments to infrastructure-related distributions and definitions associated with manufacturing facilities.
    • Introduces or adjusts definitions relevant to property, manufacturing facilities, capital investment, public infrastructure, and related funding mechanisms.

  • Property tax exemptions (Section 11, 15):

    • Retains and adjusts exemptions for widows/widowers, disabled individuals, and veterans, including annual GDP price deflator adjustments and federal housing price index adjustments for exemption thresholds.
    • Clarifies eligibility, income thresholds, and documentation for exemptions, including transfer requirements for subsequent primary residences.

  • Infrastructure and manufacturing facility funding (Section 10):

    • Creates a framework for state-funded infrastructure improvements tied to manufacturing facilities, including caps, certification requirements, and a complex allocation process to city, town, or county governments.
    • Requires sworn certifications of capital investment thresholds and enforces agreements detailing funding sources, costs, and allocation mechanisms.
    • Establishes procedures for monitoring capacity, distributions, and potential recapture or clawback in certain audit or credit scenarios.

  • Definitions and administration (Section 9, 12, 15):

    • Updates various definitions (e.g., “electronic portal,” “internal revenue code,” “associated improvement,” “capital investment”) to reflect modern administration and technology-enabled filing.
    • Specifies how electronically transmitted communications and secure portals operate for tax filings.

Who would be affected

  • Insurance companies operating in Arizona (premium tax changes and reporting requirements; potential credits and refunds for overpayments).
  • Policyholders and taxpayers in Arizona (indirectly affected via premium costs, property tax exemptions, and credit eligibility).
  • Local governments (cities, towns, and counties) and fire districts (through allocation of fire premium tax revenues to retirement systems and related funds).
  • Health care service organizations, prepaid dental and legal insurance entities (through amended taxes and credits).
  • Manufacturing facilities and municipalities participating in infrastructure incentive programs (Section 42-5032.02 framework) and the associated agreements with the Arizona commerce authority.
  • Arizona taxpayers generally, due to updated Internal Revenue Code adoption schedules and the adjustments to standard deductions and various credits (through Section 43-1041 and related subsections).

Procedural and timeline aspects

  • If enacted, electronic filing may be required starting after December 31, 2017 (per Section 1, Subsection K), with department guidance on acceptable third-party services.
  • The manufacturing facility infrastructure framework includes time-bound milestones (e.g., sworn certification within 180 days of construction commencement; certification thresholds for capital investments; annual or periodic reporting to the department and treasurer).
  • Infrastructure funding caps are scheduled to apply through specified dates (e.g., up to $250M through 2027, $300M through 2028, $350M thereafter).
  • For Internal Revenue Code references, the bill prescribes detailed, year-specific codes to be used for Arizona tax calculations, spanning multiple years from 2015–2026 and referencing retroactive federal changes where applicable.
  • Repeal of certain statutes (Sections 41-1507 and 41-1525) would remove existing provisions, with readers needing to consult the bill for the precise legislative effect and transitional rules.

Note: This summary focuses on substantive provisions and potential impact based on the text provided. Readers should consult the bill’s full text and fiscal notes for precise language, effective dates, implementation details, and any amendments introduced during committee deliberations.

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.