AZ SB1208

Establishes a tax credit for employers equal to 10% of increased hourly labor costs resulting from paying a local minimum wage that exceeds Arizona's state minimum wage, effective for taxable years beginning after December 31, 2022.

Applies to both individual income taxes (section 43-1079) and corporate income taxes (section 43-1165), with identical credit calculation and qualification requirements.

Allows employers to carry forward unused credits for up to five consecutive taxable years if the credit exceeds taxes otherwise due.

Requires the Department of Revenue to notify the State Treasurer of cities and towns where credit-claiming employers operate, so the Treasurer can withhold an equivalent amount from those cities' and towns' urban revenue sharing distributions to reimburse the state.

Increases the urban revenue sharing fund allocation from 15% to 18% of net state income tax proceeds beginning in fiscal year 2023-2024, effective through the withholding mechanism that offsets local minimum wage credit claims.