Arizona Senate Votes To Extend Income Tax Return Deadline

By Howard Fischer, Capitol Media Services
Published: Wednesday, March 6, 2019 - 7:22pm
Updated: Thursday, March 7, 2019 - 10:21am

With state tax laws in limbo, the Senate voted Wednesday to give Arizonans an extra two months to file their income tax returns.

And, taxpayers will get additional time to decide whether to make donations that could be used to reduce their 2018 taxes.

The move comes as the Republican lawmakers who control the House and Senate have refused to accede to the demand by Gov. Doug Ducey that they conform Arizona tax law with changes made by Congress in the Internal Revenue Code. And when GOP lawmakers proposed their own solution, the governor vetoed it.

That leaves a stalemate — and now less than six weeks until taxes are due.

Sen. J.D. Mesnard, Republican from Chandler, said the additional time SB 1481 gives people to file their taxes will give Republican lawmakers a chance to negotiate a deal with Ducey without taxpayers having to worry that the forms they filed will prove inaccurate. That's because the forms the Department of Revenue have so far made available are based on what Ducey said he wants the law to be, not as the law actually reads.

At this point, the Department of Revenue is accepting filings. In fact, more than 1.1 million individual tax returns already have been filed, 93 percent of these electronically, about a third of what is likely due.

Agency spokesman Ed Greenberg also has said if the final version of the law proves different than the forms, his agency will go through each taxpayer's returns, make the adjustments, and either send a refund or inform the taxpayer what is owed.

There may, however, be situations where a taxpayer who filed by April 15 needs to file an amended return to provide the agency some deduction figures that simply were not sought on the forms the agency has made available. SB 1481, which needs a roll-call vote before going to the House, allows taxpayers to put down their pencils and computer programs and wait to see what comes from negotiations between Ducey and GOP lawmakers.

The bill also recognizes that people can contribute to charities, public schools and for private school scholarships up until April 15 and have the credits booked as if they were made in the prior tax year. As approved Wednesday, the measure also pushes that date back to June 15.

All that, however, presumes that Ducey will agree to sign SB 1481 to provide the filing extension.

"Obviously, that's up to him,'' Mesnard said. "But it seems to me that, given there is uncertainty, in the law, that taxpayers deserve to have extra time.''

"We do not comment on pending legislation,'' responded gubernatorial press aide Patrick Ptak.

It isn't that lawmakers are necessarily opposed to conformity, a move that makes it easier for Arizonans to prepare their own returns once they've completed their federal tax forms.

It's the objection to the fact that simple conformity would increase the tax burden on Arizona residents by about $190 million a year, offset by a $40 million reduction in business taxes. More to the point, it's the fact that Ducey wants the state to keep the extra cash while denying it amounts to a tax hike.

What's behind the issue is the massive change in federal tax law signed by President Trump in late 2017 affecting 2018 income taxes.

On one hand it eliminates and caps many deductions, notably for taxes paid to state and local governments and certain mortgage interest expenses. But that is offset by doubling the standard deduction that many individuals can take, eliminating their need to itemize.

Ducey's conformity plan would follow suit on the caps and eliminations of deductions. But there is no commensurate increase in the standard deduction, resulting in the net $150 million in state collections.

The solution offered by Mesnard and Rep. Ben Toma, Republican from Peoria, would conform Arizona's deductions to the federal changes for the 2018 tax forms now due April 15 but offset that with a 0.11 percentage point cut in income tax rates. Ducey vetoed the measure, insisting that he wants his way, at least for the 2018 tax year.

But Toma, who chairs the House Ways and Means Committee, told Capitol Media Services the governor is mistaken if he thinks GOP lawmakers who control both the House and Senate will approve anything that increases the tax burden.

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