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No deal on tax conformity as deadline to file tax returns looms

Ben Giles//April 1, 2019//[read_meter]

No deal on tax conformity as deadline to file tax returns looms

Ben Giles//April 1, 2019//[read_meter]

tax-web

With two weeks until the deadline for Arizonans to file individual income tax returns, Republican lawmakers and Gov. Doug Ducey have yet to strike a deal that will finalize the state’s tax laws for 2018.

Ducey has been at odds with Republican legislators for months over how to adjust Arizona’s tax code to changes made at the federal level. The governor favors collecting extra cash from taxpayers by conforming to federal changes that eliminated certain deductions as part of President Trump’s tax overhaul in 2017, and pocketing the new revenues in the state’s rainy-day fund.

GOP lawmakers tried in January to offset estimates of higher tax collections, but were rebuffed by Ducey’s veto.

With the pending April 15 tax filing deadline, lawmakers are now trying to negotiate a compromise with the governor that may mean higher taxes for some Arizonans this year, but the promise of a tax break down the line.

Rep. Ben Toma and Sen. J.D. Mesnard told the Arizona Capitol Times that deals being discussed with the governor’s office are designed to ensure that Arizona taxpayers don’t have to submit amended filings later this year.

The Department of Revenue issued guidance to taxpayers in January assuming the Legislature would conform to some, but not all, changes in federal tax code, just as Ducey wants. Diverting from that guidance could be disastrous for some of the 1.8 million Arizona taxpayers who’ve already filed individual income tax returns.

Hundreds of thousands more may still be filed in the next two weeks – according to the Department of Revenue, more than 3 million individual income tax returns were filed a year go. Altering the tax code at this late stage would force some taxpayers to file amended returns.

“I don’t think anyone has an appetite for the necessity of millions of amended returns,” said Toma, R-Peoria.

Mesnard, R-Chandler, said at this late stage in the year, it’s the Legislature’s goal to ensure that conformity occurs in the least disruptive way possible. That would require lawmakers to approve changes to the 2018 tax code that adhere to Ducey’s wishes, and would mean higher tax bills for some Arizonans.

In the short term, that may be a tough pill to swallow. But Mesnard said he’s OK with that, so long as taxpayers are “equal or better off than they were,” even if that means waiting to provide tax relief until 2020.

“There’s no doubt that time has been working against us. In some ways, I guess it’s been working against the governor just as much,” Mesnard said. “It requires the legislature and the governor to act on whatever we have planned.

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