Arizona – To Conform or Not to Conform to Tax Legislation?

Your Guide to State, Local, Federal, Estate + International Taxation

One of our annual rites of passage here in Arizona, is the annual question we all ask – Will Arizona conform to the tax legislation that was passed by the federal government this year?

Okay, maybe everyone does not ask that – but those who are in the tax compliance business sure do!

And many of us sadly remember the 2009 tax year. Many of us made the assumption that, except for items related to depreciation and section 179 expensing, that Arizona would conform. Why did we assume that? Well, that had been their tactic for the past several years. We had nothing to go on that would lead us to determine otherwise.

But, that was not the case for the 2009 tax year. That year, the conformity bill did not pass until April 15, 2010. (See Arizona’s nonconformity with internal revenue code). This caused many Arizona taxpayers the necessity of amending their 2009 income tax returns – since the entire state did not go on extension for 2009!

However, either not all taxpayers received the message, or some just chose to ignore it. But Arizona is holding firm. There has been an Arizona Department of Revenue (ADOR) Hearing Office Decision (Decision 201400150-I) that upholds an initial assessment of income tax and interest on taxpayers who excluded from income the first $2,400 of unemployment earnings they received during 2009.

What is the moral to the story? Not really a good one – it is better for both taxpayers and tax preparers when Arizona decides on conformity much earlier in tax season. However, compared to 2009, anything done before the last efile form is released is earlier.

P.S. We are still waiting on conformity for the changes made by the late legislation passed by Congress in December 2014. Waiting, waiting, waiting.

By Donna H. Laubscher, CPA