AZ HB2694

Creates a new individual income tax credit for small employers (1-50 employees) who provide individual coverage health reimbursement arrangements (ICHRAs) to their employees, effective for taxable years beginning after December 31, 2026

Credit amount equals $400 per employee who received health care benefits under the ICHRA during the taxable year, with employers required to contribute at least $400 per employee to qualify

Unused credits may be carried forward for up to five consecutive taxable years to offset future income tax liability

Co-owners of businesses, including partners and S corporation shareholders, may only claim their pro rata share of the credit based on ownership interest

Adds the new credit (section 43-1080) to the joint legislative income tax credit review schedule for review in years ending in 1 and 6