SB 1800 establishes a new 2.6% income tax rate on earnings exceeding $1 million for high-income earners in Arizona, effective for taxable years beginning after December 31, 2026. Revenue from this tax is deposited into a dedicated K-12 infrastructure fund, specifically for repairing and renewing public school buildings, including systems like HVAC, plumbing, and electrical. The bill requires these funds to supplement - never replace - existing school construction budgets. Its goal is to ensure all public schools have safe, functional facilities meeting state learning standards, with the tax rate adjusted every five years based on median income tax data.
SB 1575 changes how Arizona businesses calculate their state corporate tax liability by adjusting the formulas used to allocate income between states. For most businesses, it offers two apportionment methods (using property, payroll, and sales factors) that gradually increase the weight given to sales factor over time, shifting toward a model where sales location determines tax responsibility. The bill specifically modifies rules for service sales, requiring businesses to increasingly base tax on where customers are located (market sales) rather than where work is performed, with a full transition to market-based sales starting in 2026. This directly affects corporations operating in Arizona with income from multiple states, particularly those providing services or selling intangible goods.
HB 2491 modifies Arizona's corporate tax calculation method for businesses operating across state lines. It changes how taxable income is apportioned between states, gradually shifting from a formula balancing property, payroll, and sales factors to using *only* the sales factor for most businesses starting in 2016 (through 2026). This directly affects corporations with operations in multiple states, as it increases the weight of sales activity within Arizona for tax purposes. The bill specifies different calculation formulas for various time periods, with the 2016-2026 period requiring businesses to use the sales factor alone to determine Arizona tax liability.
HB 2629 amends Arizona's corporate income tax law to increase the minimum tax for corporations with 50 or more employees from $50 to $1,000. Smaller corporations (fewer than 50 employees) remain subject to the $50 minimum tax. The bill also updates the tax rate schedule for corporate income (e.g., lowering rates from 6.968% to 4.9% over time), but the primary change is the higher minimum tax for larger businesses. This amendment applies to taxable years beginning after December 31, 2026.
HB 2738 provides tax relief to owners and operators of computer data centers in Arizona that meet specific investment requirements, with qualified colocation tenants also eligible for the benefit. To qualify, data centers must apply for certification, submit a cost responsibility agreement (requiring them to pay for utility infrastructure upgrades), and meet either a $25 million investment threshold (in counties under 800,000 people) or $50 million (in larger counties) within five years of certification. Failure to meet these thresholds results in revoked certification and potential recapture of tax relief, with new applications no longer accepted after December 31, 2033.
HB 2826 amends Arizona's tax code to expand tax deductions for prime contractors (construction businesses) by adding specific exemptions to their taxable income calculation. It directly affects contractors working on projects like environmental cleanup, groundwater monitoring devices (required under water law), and manufacturing facilities for environmental technology. Key provisions include deducting 65% of gross income for qualifying work, such as hazardous substance remediation, installation of irrigation-related groundwater devices, and construction of qualified environmental manufacturing facilities. The bill also creates a new deduction for machinery/equipment work with "independent functional utility," excluding real property modifications.
HB 2747 would allow Arizona small businesses to subtract certain federal hiring credits from their state taxable income. Specifically, it adds a new subtraction for amounts claimed under federal work opportunity credits, empowerment zone credits, and other similar programs. This directly affects small businesses that qualify for these federal credits and file Arizona income tax returns. The change would reduce their Arizona tax liability by the amount of those federal credits, without altering the federal credit rules themselves.
HB 2636 proposes to increase Arizona's individual income tax rates for taxable years beginning after December 31, 2021. The bill would amend tax brackets to raise rates across all income levels for both residents and nonresidents earning income within Arizona. Key provisions include adjusting the percentage rates applied to different income ranges, such as increasing the top marginal rate for single filers and married couples filing jointly. This legislation directly affects all Arizona taxpayers subject to individual income tax, with changes applying to future tax years. The bill is currently in early legislative stages (House First/Second Reading in 2026).
HB 2269 repeals a tax deduction for gas and electric utilities in Arizona once state revenue loss from the deduction reaches $2.3 billion. It requires utilities claiming this deduction to report annual sales data, and the state department must calculate when the $2.3 billion threshold is met. If the threshold is projected to be reached within a year, the department must notify state leaders and set an expiration date for the deduction. Utilities must then notify customers 60 days before the deduction expires, including the new tax rate that will apply. This bill directly affects Arizona gas and electric utilities that currently claim the deduction under Section 42-5063(C)(3)(c).
SB 1430, the "Tax Corrections Act of 2026," amends Arizona's retail tax code to clarify and correct exemptions from the sales tax. It adds 25 specific exemptions, including sales of medical equipment (like prosthetics, hearing aids, and durable medical devices), prescription drugs, food, textbooks, and nonprofit sales. This directly affects businesses selling these items by ensuring they are exempt from the tax, resolving prior ambiguities in the code. The bill is a technical correction to the tax code, not a change in tax rates or policy.
