AZ SB1221

Requires the Arizona Department of Revenue to notify the chairpersons of the Senate Finance Committee and House Ways and Means Committee before adopting any new tax interpretation that will adversely affect taxpayers, and allows affected taxpayers to also provide such notice.

Mandates the Department provide testimony at legislative hearings regarding why a proposed new tax interpretation or application is necessary.

Prohibits the Department from applying newly enacted tax laws retroactively or penalizing taxpayers for complying with prior law.

Ensures new interpretations or applications of tax law apply only prospectively (unless favorable to taxpayers) and bars retroactive assessment of taxes, penalties, or interest based on such changes.

Establishes that changes in tax interpretation serve as an affirmative defense against retroactive assessments in administrative or judicial proceedings.