HB 2636 Summary

• Establishes a new simplified individual income tax system beginning January 1, 2013, repealing complex multi-bracket tax provisions in phases through December 31, 2014.

• Implements tiered tax rates for 2013-2014: rates ranging from 2.08% to 3.85% based on income brackets, with different brackets for single filers versus married/head of household filers, then transitions to a flat 2.08% rate for all taxpayers beginning January 1, 2015.

• Broadens the tax base by requiring additions (such as depreciation amounts exceeding certain thresholds) and allowing subtractions (such as unreimbursed employee business expenses and damages from judgments) to federal adjusted gross income in computing taxable income.

• Applies simplified tax computation rules to nonresidents, requiring them to pay tax only on income derived from Arizona sources and allowing proportional exemptions based on the ratio of Arizona income to federal adjusted gross income through December 31, 2013.

• Establishes a task force to recommend final income tax rates and base-broadening changes by December 31, 2011, with any recommended rate not to exceed 3 percent of taxable income and applying uniformly across all filing statuses.