Tax forms would assume federal conformity, with set deadlines for updates if Arizona departs

The department would write income tax forms and instructions assuming lawmakers will adopt the federal tax code, and would update them if lawmakers choose not to. The assumption applies only to federal provisions that affect federal adjusted gross income or federal taxable income, and to implementing section 43-1042. If the legislature enacts nonconformity, the department must supplement the published forms and instructions. Lawmakers say they want a consistent cycle with timely forms, fewer midyear changes, and certainty about which tax year changes apply to.

If the legislature enacts nonconformity, the department must publish supplemental forms and instructions by set dates. Nonconformity means conformity plus another change that departs from the federal code, or no conformity amendment for the tax year. For departures enacted on or before February 15 of the year after the tax year, updates must come as quickly as practicable. For departures enacted after that, updates are due on or before January 1 of the second year after the tax year. If there is no conformity amendment for the year, updates are due on or before July 15 of the second year after the tax year. Deadlines run from the close of the tax year.

No interest or penalty would be charged on extra tax caused by nonconformity if the taxpayer amends the return and pays by the deadline. This applies to taxpayers who filed and paid on time using the department's published forms and instructions for a year when conformity did not occur. The department must have supplemented its forms and instructions and required an amended return. The taxpayer must report the deficiency and pay the extra tax in the way the department sets. The taxpayer must amend on or before the extended due date for the second year after the close of the tax year.