AZ HB2766

Modifies the corporate income tax credit cap for school tuition organization (STO) contributions by adding a limitation based on general fund appropriations, effective retroactively from June 30, 2022.

Establishes that beginning in fiscal year 2022-2023 and thereafter, the STO tax credit cap cannot increase to an amount exceeding 1% of the total state general fund appropriation for that fiscal year.

Allows the STO tax credit cap to increase by the greater of the annual metropolitan Phoenix consumer price index or 2% in fiscal year 2023-2024 and each subsequent fiscal year, subject to the 1% general fund limit.

Maintains the previous increase schedule for fiscal years 2020-2021 through 2021-2022 (15% and 10% increases respectively) with the new general fund percentage cap applying only to fiscal years 2022-2023 onward.

Changes the department of revenue's authority from "shall not allow" to "may not allow" tax credits to exceed the aggregate cap, aligning with the revised cap methodology.