AZ SB1264

Allows a 50 percent subtraction of small business investor income for Arizona taxable income, capped at $125,000 per individual taxpayer or $250,000 for married couples filing jointly.

Defines qualifying small businesses as sole proprietorships, partnerships, limited liability partnerships, limited liability companies, S corporations, and other pass-through entities where distributive income is taxed only at the individual owner level.

Restricts the subtraction to business income received during the first 60 months following the business's organization as a qualifying small business.

Applies retroactively to taxable years beginning after December 31, 2015, with extended eligibility periods for businesses organized before December 31, 2015 (between 2011-2015).

Amends section 43-1022 to add the small business income subtraction as paragraph 31 of Arizona's income tax subtractions.