This bill creates a standing, annual process for Arizona’s budget and legislative fiscal offices to evaluate whether adopting recent federal Internal Revenue Code changes for state AGI will materially change Arizona income tax receipts, and it requires the governor to notify legislative leaders if action is needed.
The bill also amends Arizona’s filing statute to refine eligibility for short and simplified individual returns, remove the voluntary refund-contribution line from the simplified form, expand electronic filing mandates for preparers and business returns, preserve waiver authority, and bar the department from issuing forms that conflict with statutes.
At a Glance
What It Does
The bill directs the governor’s office of strategic planning and budgeting (OSPB) and the Joint Legislative Budget Committee (JLBC) to evaluate annual federal IRC changes for their state revenue impact and requires the governor to decide whether a special session is necessary and notify legislative leaders. It also revises Arizona’s income-tax filing statute to set eligibility rules for short and simplified returns, prohibit a charity‑contribution line on the simplified form, mandate electronic filing in specified circumstances, and preserve waiver procedures.
Who It Affects
State fiscal offices (OSPB, JLBC) and the governor’s office must produce and act on fiscal determinations; the Arizona Department of Revenue must update forms and enforce e‑file rules. Individual taxpayers who qualify for short/simplified returns, tax preparers (especially those filing more than ten returns), and entities filing fiduciary, partnership, withholding and corporate returns will be directly affected. Tax-preparation software vendors and charities that solicit refund contributions will also feel practical effects.
Why It Matters
It creates a formal trigger and timeline for state action when federal tax law changes materially affect Arizona revenues, potentially accelerating legislative responses. At the same time, it tightens filing mechanics—reducing certain taxpayer choices and increasing e‑filing coverage—shifting administrative burdens to preparers, the department and software vendors while simplifying some taxpayer experiences.
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What This Bill Actually Does
The bill assigns OSPB and the Joint Legislative Budget Committee the annual task of evaluating whether changes in the federal Internal Revenue Code—if adopted into Arizona law for determining state adjusted gross income—would raise or lower Arizona income tax receipts by a substantial amount. Those fiscal offices must run the analysis using whatever revenue-estimating methods they employ and present findings so the governor can determine whether legislative action is warranted.
If the governor decides the state should act, the bill requires a written notification to the president of the senate and the speaker of the house explaining that determination.
On the filing side, the bill sharpens the statutory descriptions of two streamlined individual return options the Department of Revenue may provide: a short form with narrow eligibility and a simplified return targeted at low-complexity filers who meet residency, filing status, age and exemption criteria. For the simplified return the bill explicitly removes any space to allow a taxpayer to redirect a portion of a refund to charitable or other funds, an administrative choice that changes how low-barrier contributions can be solicited at tax time.The bill also expands electronic-filing expectations.
It requires individual income tax preparers who file more than ten original, timely returns in a taxable year to submit those returns electronically and forbids charging taxpayers separate fees for using the department’s e‑file program; taxpayers still may choose paper filing or rely on non‑technical exceptions. Separately, fiduciary, partnership, withholding and corporate returns are set to be filed electronically for taxable years beginning after December 31, 2019 or when the department implements an e‑file program, whichever is later, subject to an annual waiver process that the director can grant for limited circumstances like lack of internet access.
Finally, the bill adds a backstop preventing the department from issuing return forms that conflict with statutes in effect when the forms are issued, constraining administrative drafting where statutory language has changed.
The Five Things You Need to Know
OSPB and the Joint Legislative Budget Committee must annually analyze whether conforming to federal IRC changes would change Arizona income tax revenue by $100,000,000 or more.
The governor must, before September 30 each year, determine whether a special legislative session is necessary based on that analysis and notify the president of the senate and the speaker of the house in writing with supporting reasons.
The statute forbids including any space on the simplified individual return for a taxpayer to contribute a portion of a refund (i.e.
no voluntary refund-contribution line on the simplified form).
Individual income tax preparers who prepare more than ten original, timely returns in a taxable year must e‑file all such individual returns and may not charge a separate fee to the taxpayer for using the department’s e‑file program (with limited exceptions).
Fiduciary, partnership, withholding and corporate returns are required to be filed electronically for taxable years beginning after December 31, 2019 or once the department establishes an electronic filing program, and taxpayers can apply for an annual waiver from that requirement.
Section-by-Section Breakdown
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Annual fiscal-analysis duty assigned to OSPB and JLBC
This provision requires the governor’s office of strategic planning and budgeting and the Joint Legislative Budget Committee to run an annual evaluation of federal IRC changes to determine whether adopting those changes for state AGI would move Arizona income-tax receipts by $100 million or more. Practically, that creates a standing analytical workflow: revenue-estimating models must be run with and without conformity to quantify the delta and document assumptions, data sources and uncertainty around the estimate.
Governor must decide on special session and notify leaders
Based on the fiscal evaluation, the governor must decide annually—by a legislatively specified date—whether a special session is necessary to conform state law to federal changes, and must provide written notification to the presiding officers of both chambers with the reasons supporting that choice. The statute makes the governor’s determination an executive duty tied to the fiscal analysis, creating an administrative trigger for potential legislative action rather than leaving the question to ad hoc political timing.
Narrow eligibility for short and simplified returns; simplified form content limited
The department must offer a short form for a narrow group and may offer a simplified return for certain low-complexity, full-year resident filers who meet specific status, age and exemption criteria. The drafters also forbid the simplified return from including a space for the taxpayer to contribute part of a refund. That change standardizes the simplified form content and removes an avenue for low-friction charitable or state-fund contributions on that particular filing pathway.
Preparer e‑file mandate and fee prohibition
Any individual preparer who files more than ten original, timely individual returns in a taxable year must submit those returns electronically for that year and going forward; the preparer cannot charge a separate fee to the taxpayer for using the department’s e‑file system. The text preserves two narrow exceptions: the taxpayer may opt for paper, or a technical inability to e‑file exists for reasons beyond the preparer’s control. Enforcement will hinge on tracking preparer volume and monitoring improper fee practices.
E‑file for business returns, director waiver authority, and form-statutory consistency
Fiduciary, partnership, withholding and corporate returns are required to be filed electronically for tax years starting after December 31, 2019 or when the department implements e‑filing, whichever is later. The director can grant an annual waiver for lack of computer/internet or other worthy circumstances, renewable once. The department is also barred from issuing forms that conflict with statutes in force on the date forms are released, which restricts administrative discretion when statute and form templates diverge.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Governor’s office and legislative fiscal staff — They gain a formal, recurring analytic product (and a statutory trigger) to inform whether state law should be conformed to federal changes, improving information flow for budget planning and legislative decisions.
- Arizona Department of Revenue — The statute clarifies who may use short/simplified forms and tightens rules on permissible form content, simplifying outreach and reducing ambiguity about what the department can and cannot include on a simplified return.
- Taxpayers eligible for short/simplified returns — Low-complexity filers who meet the criteria may benefit from clearer filing pathways and forms tailored to their situation, potentially reducing compliance time and error.
- Tax-preparation software vendors and e‑file service providers — Expanded e‑file coverage increases transaction volume and creates demand for compliant software, integrations, and batch-filing solutions, offering market opportunities.
Who Bears the Cost
- Individual tax preparers (especially small firms) — Preparers who cross the ten-return threshold face compliance costs to e‑file and are barred from charging taxpayers extra for e‑file via the department program, squeezing margins or requiring investment in e‑file infrastructure.
- Arizona Department of Revenue — OSPB/JLBC analyses and department updates to forms, e‑file systems, waiver processing and enforcement will require staff time, technical capacity and possibly budget increases to implement and maintain the new workflows.
- Charities and state-designated funds that rely on voluntary refund contributions — Removing the simplified-return contribution line reduces an easy mechanism to solicit small donations from taxpayers, potentially lowering donation flows from that channel.
- Certain taxpayers — Those who prefer paper-based charitable contributions or who rely on assisted preparers who now incur e‑file costs (not separately recoverable) could see diminished access to donation options or changes in preparer behavior.
Key Issues
The Core Tension
The bill balances two legitimate goals that pull in opposite directions: the state’s interest in rapidly identifying and responding to federal tax changes that materially affect Arizona’s budget versus taxpayers’ and practitioners’ need for stable, predictable filing rules and minimal administrative disruption. Requiring annual, numerical fiscal triggers and quick executive notification improves fiscal responsiveness but risks politicizing technical revenue estimates and imposing compliance costs on preparers and the department—while simultaneously narrowing taxpayer choices on simplified filing forms.
The $100 million revenue-impact threshold is a clear bright line, but the statute does not prescribe methodology or confidence intervals for the estimate. OSPB and JLBC use different models and assumptions in practice; the statute leaves potential methodological divergence unresolved, which could produce conflicting impressions of the same federal change.
Similarly, the statutory trigger for a governor’s determination is procedural—requiring notification and reasons—but it does not mandate calling a special session, leaving political discretion intact while creating expectations for prompt action.
On the administrative side, the preparer e‑file mandate and the prohibition on charging a separate e‑file fee present enforcement and economic questions. Tracking preparer filing counts requires reliable reporting and audit mechanisms; barring a fee for the department’s e‑file program could transfer costs onto preparers or prompt them to direct clients toward alternative paid e‑file services.
The retroactive phrasing for business e‑file (taxable years after December 31, 2019) is functionally odd and could create interpretation issues: it imports an effective date that already passed but remains relevant to compliance status, and departments will need to clarify how to treat past years. Finally, removing the donation line only from the simplified return—not from other returns—creates an uneven user experience and shifts where solicitations can occur, a practical policy choice with redistributive effects for charities and for ease-of-use of low-complexity filing pathways.
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