Arizona 57th Legislature - Second Regular Session Status: To Executive 1 R cosponsors

HB 2785 — conformity; internal revenue code; deductions

Last action — Transmit to Governor

  1. ✓
    Introduced
  2. ✓
    In Committee
  3. ✓
    Passed House
  4. ✓
    Passed Senate
  5. 5
    To Executive
  6. 6
    Enacted

This bill died with 57th Legislature - Second Regular Session. It reached “To Executive” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.

Vetoed by Governor Katie Hobbs (Democratic) on February 12, 2026.

This bill is no longer active — its legislative session has ended, so there are no live odds of enactment. It would have to be reintroduced in the current session to move again.

Bill Text

What changed in the latest version

623 added · 632 removed

Plain-language change summary

The amendments to HB 2785 clarify how Arizona will define and apply the Internal Revenue Code for tax purposes starting in 2026. Specifically, it updates the references to include changes made up to January 1, 2026, but excludes any amendments to the code enacted after that date. This distinction ensures that taxpayers in Arizona know which tax laws to follow, which can affect tax calculations and planning for individuals and businesses. Understanding this change is crucial as it establishes the tax framework that will be in place for future tax years.

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Fifty-seventh Legislature Ways & Means Second Regular Session H.B.
House Engrossed conformity;
2785 PROPOSED HOUSE OF REPRESENTATIVES AMENDMENTS TO H.B.
internal revenue code;
2785 (Reference to printed bill) Amendment instruction key:
deductions State of Arizona House of Representatives Fifty-seventh Legislature Second Regular Session HOUSE BILL 2785 AN ACT AMENDING SECTIONS 42-1001, 43-105, 43-301, 43-323, 43-1022, 43-1041 AND 43-1122, ARIZONA REVISED STATUTES;
[GREEN UNDERLINING IN BRACKETS] indicates text added to statute or previously enacted session law.
RELATING TO TAXATION.
[Green underlining in brackets] indicates text added to new session law or text restoring existing law.
(TEXT OF BILL BEGINS ON NEXT PAGE) - i - H.B.
[GREEN STRIKEOUT IN BRACKETS] indicates new text removed from statute or previously enacted session law.
2785 Be it enacted by the Legislature of the State of Arizona:
[Green strikeout in brackets] indicates text removed from existing statute, previously enacted session law or new session law.
<<Green carets>> indicate a section added to the bill.
<<Green strikeout in carets>> indicates a section removed from the bill.
The bill as proposed to be amended is reprinted as follows:
House Amendments to H.B.
Sec.
2785 Sec.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2024 THROUGH DECEMBER 31, 2025, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2025, including those provisions that became effective during 2024 with the specific adoption of all retroactive effective dates, but excluding any changes to the code enacted after January 1, 2025 AND INCLUDING THOSE PROVISIONS [OF PUBLIC LAW 119-21] THAT ARE RETROACTIVELY EFFECTIVE DURING TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024 THROUGH DECEMBER 31, 2025.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2024 THROUGH DECEMBER 31, 2025, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2025, including those provisions that became effective during 2024 with the specific adoption of all retroactive effective dates, but excluding any changes to the code enacted after January 1, 2025 AND INCLUDING THOSE PROVISIONS OF PUBLIC LAW 119-21 THAT ARE RETROACTIVELY EFFECTIVE DURING - 1 - H.B.
2785 TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 2024 THROUGH DECEMBER 31, 2025.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2023 through December 31, 2024, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2024, including those provisions that became effective during 2023 with the specific adoption of all retroactive effective dates, and including those provisions [OF PUBLIC LAW 119-21] that are retroactively effective during taxable years beginning from and after December 31, 2023 through December 31, 2024.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2023 through December 31, 2024, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2024, including those provisions that became effective during 2023 with the specific adoption of all retroactive effective dates, and including those provisions OF PUBLIC LAW 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2023 through December 31, 2024.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2022 through December 31, 2023, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2023, including those provisions that became effective during 2022 with the specific adoption of all retroactive effective dates, and including those provisions [OF PUBLIC LAW 119-21] that are retroactively effective during taxable years beginning from and after December 31, 2022 through December 31, 2023.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2022 through December 31, 2023, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2023, including those provisions that became effective during 2022 with the specific adoption of all retroactive effective dates, and including those provisions OF PUBLIC LAW 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2022 through December 31, 2023.
117-169)[,] [and] the consolidated appropriations act, 2023 (P.L.
117-169), and the consolidated appropriations act, 2023 (P.L.
117-328) [AND PUBLIC LAW 119-21] that are -2- House Amendments to H.B.
117-328) AND PUBLIC LAW 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2021 through December 31, 2022.
2785 retroactively effective during taxable years beginning from and after December 31, 2021 through December 31, 2022.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2019 through December 31, 2020, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2020, including those provisions that became effective during 2019 with the specific adoption of all retroactive effective dates, and including those provisions of the families first coronavirus response act (P.L.
For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2019 through December 31, 2020, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2020, - 2 - H.B.
2785 including those provisions that became effective during 2019 with the specific adoption of all retroactive effective dates, and including those provisions of the families first coronavirus response act (P.L.
116-136) and the consolidated -3- House Amendments to H.B.
116-136) and the consolidated appropriations act, 2021 (P.L.
2785 appropriations act, 2021 (P.L.
116-94) and the coronavirus aid, relief, and economic security act (P.L.
116-94) and the coronavirus - 3 - H.B.
2785 aid, relief, and economic security act (P.L.
-4- House Amendments to H.B.
Sec 3.
2785 Sec 3.
C.
- 4 - H.B.
2785 C.
-5- House Amendments to H.B.
1.
2785 1.
Are not required to add any income under section 43-1021 and do not elect to claim any subtractions under section 43-1022 or file for any credits under chapter 10, article 5 of this title, except the credits provided by sections 43-1072.01, 43-1072.02 and 43-1073.
Are not required to add any income under section 43-1021 and do not elect to claim any subtractions under section 43-1022 or file for any - 5 - H.B.
2785 credits under chapter 10, article 5 of this title, except the credits provided by sections 43-1072.01, 43-1072.02 and 43-1073.
-6- House Amendments to H.B.
G.
2785 G.
(a) The United States government service retirement and disability fund, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law, except retired or retainer pay of the uniformed services of the United States that qualifies for a subtraction under paragraph 26 of this section.
- 6 - H.B.
2785 (a) The United States government service retirement and disability fund, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law, except retired or retainer pay of the uniformed services of the United States that qualifies for a subtraction under paragraph 26 of this section.
The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a -7- House Amendments to H.B.
The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made.
2785 taxable year ending before January 1, 1990 and for which a subtraction has not previously been made.
To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code.
To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the - 7 - H.B.
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2785 United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code.
(a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the -8- House Amendments to H.B.
(a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.
2785 internal revenue code for the taxable year computed as if the election described in section 168(k) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.
In the first taxable year beginning from and after December 31, 2013, the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service.
In the first taxable year beginning from and after - 8 - H.B.
2785 December 31, 2013, the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service.
In the case of a husband and wife who file separate returns, the -9- House Amendments to H.B.
In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary.
2785 subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary.
The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income.
The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section - 9 - H.B.
2785 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income.
-10- House Amendments to H.B.
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.
2785 (a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.
26.
- 10 - H.B.
2785 26.
-11- House Amendments to H.B.
30.
2785 30.
31.
- 11 - H.B.
2785 31.
-12- House Amendments to H.B.
- 12 - H.B.
-13- House Amendments to H.B.
- 13 - H.B.
<<Sec.
Sec.
9.
- 14 - H.B.
2785 9.
For the purposes of this paragraph, gross up income as described in section 78 of the internal revenue code, [global intangible low-taxed] [THE] income -14- House Amendments to H.B.
For the purposes of this paragraph, gross up income as described in section 78 of the internal revenue code, global intangible low-taxed THE income as defined DESCRIBED in section 951A of the internal revenue code and subpart F income as defined in section 952 of the internal revenue code shall be considered foreign dividends.
2785 [as defined] [DESCRIBED] in section 951A of the internal revenue code and subpart F income as defined in section 952 of the internal revenue code shall be considered foreign dividends.
For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender.
For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal - 15 - H.B.
2785 tender for another kind of legal tender.
-15- House Amendments to H.B.
23.
2785 23.
(b) "Public service corporation" means a public service corporation as defined in article XV, section 2, Constitution of Arizona, that is regulated by the corporation commission.>> Sec.
(b) "Public service corporation" means a public service corporation as defined in article XV, section 2, Constitution of Arizona, that is regulated by the corporation commission.
Sec.
Enroll and engross to conform Amend title to conform JUSTIN OLSON 2785OLSON.docx 02/02/2026 11:45 AM C:
- 16 -
ED 130JNVKSI -16-
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Action History

  1. Transmit to Governor

  2. Vetoed by Governor

  3. Transmit to Senate

  4. Transmit to House

  5. Senate First Reading

  6. PASSED

  7. PASSED

  8. PASSED

  9. DPA

  10. DPA

  11. House Second Reading

  12. House First Reading.

Sponsors

Sponsorship breakdown

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1 sponsors · 0 co-sponsors · 92 not signed on

Sponsors (1)

Co-sponsors (0)

None.

Not signed on (92)

92 members have not signed on to this bill.

Show all 92 →

"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

Whip count is in markup. Polling the chamber and every recorded vote this session. Only the first open is slow. It’s instant for you after this. Calling the roll · Tallying · Engrossing

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taxation
Cross-referencing the record. Reading this bill against every other bill in the corpus by meaning, not keywords. Only the first open is slow. It’s instant for you after this. Matching · Ranking · Engrossing

Frequently asked questions

Who sponsors HB 2785?
HB 2785 is sponsored by Justin Olson (Republican).
What is the current status of HB 2785?
This bill died with 57th Legislature - Second Regular Session. It reached “To Executive” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
Where can I track HB 2785?
Track HB 2785 free on One Click Politics — get push/email alerts when it moves.

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