SB 1783 Summary

• Establishes a new optional small business income tax (Chapter 17) allowing individual taxpayers who report small business income to elect filing a separate Arizona small business income tax return with rates ranging from 3.5% (2021) to 2.5% (2024 and beyond).

• Defines "Arizona small business gross income" to include amounts reported on federal Schedules B, C, E, F, Forms 4797 and 4835, and certain capital gains from disposition of business assets and non-publicly traded entity interests.

• Creates automatic tax rate reductions for estates and trusts when state general fund revenue reaches specified thresholds: 2.55% rate at $12.78 billion, 2.53% rate at $12.98 billion, and 2.5% flat rate when threshold is exceeded.

• Allows small business taxpayers to carry forward excess income tax credits from the small business tax to offset individual income tax liability in following years.

• Requires estimated tax payments from small business taxpayers with tax liability of $1,000 or more, with penalty provisions similar to federal requirements; applies retroactively to taxable years beginning after December 31, 2020.