Tax News

CCH (cch.taxgroup.com) reports:

  Arizona has enacted legislation that generally conforms its corporate and personal income tax provisions to the Internal Revenue Code (IRC) as in effect on January 1, 2009 (previously, January 1, 2008), makes temporary adjustments to the Arizona withholding tax rates, and decouples Arizona's withholding rates from the federal withholding rates.

  IRC conformity. -- For taxable years beginning January 1, 2009, Arizona generally conforms to the IRC as in effect on January 1, 2009, including the federal provisions that became effective during 2008, including all federal retroactive effective dates, and includes the provisions of:

  -- the Economic Stimulus Act of 2008;

  -- the Heartland, Habitat, Harvest and Horticulture Act of 2008;

  -- the Heroes Earnings Assistance and Relief Tax Act of 2008;

  -- the Housing Assistance Tax Act of 2008;

  -- the Emergency Economic Stabilization Act of 2008; and

  -- the Worker, Retiree and Employer Recovery Act of 2008.

  Withholding rates. -- Effective April 30, 2009, the withholding tax rates have been modified to help offset the effects of the Making Work Pay federal income tax credit which provided a reduction in federal withholding rates. Arizona's withholding is a percentage of the amount of the federal income tax withheld, so a reduction in federal withholding automatically creates a reduction in state withholding. The new Arizona withholding rates effective April 30, 2009, through December 31, 2009, are:

  -- 11.5%, for employees with a withholding rate of 10% immediately before May 1, 2009;

  -- 21.9%, for employees with a withholding rate of 19% immediately before May 1, 2009;

  -- 26.5%, for employees with a withholding rate of 23% immediately before May 1, 2009;

  -- 28.8%, for employees with a withholding rate of 25% immediately before May 1, 2009;

  -- 35.7%, for employees with a withholding rate of 31% immediately before May 1, 2009; and

  -- 42.6%, for employees with a withholding rate of 37% immediately before May 1, 2009.

  The Arizona withholding rates from January 1, 2010, through June 30, 1010, are:

  -- 10.7%, for employees with a withholding rate of 11.5% immediately before January 1, 2010;

  -- 20.3%, for employees with a withholding rate of 21.9% immediately before January 1, 2010;

  -- 24.5%, for employees with a withholding rate of 26.5% immediately before January 1, 2010;

  -- 26.7%, for employees with a withholding rate of 28.8% immediately before January 1, 2010;

  -- 33.1%, for employees with a withholding rate of 35.7% immediately before January 1, 2010; and

  -- 39.5%, for employees with a withholding rate of 42.6% immediately before January 1, 2010.

  Effective July 1, 2010, Arizona will decouple its withholding rates from federal withholding rates. The Arizona Department of Revenue is required to develop new withholding tables and submit them to the Joint Legislative Budget Committee by March 15, 2010.

  Subscribers can view the legislation.
 
Ch. 2 (S.B. 1185), Laws 2009, effective April, 9, 2009, and applicable as noted above; Arizona State Senate Fact Sheet for S.B. 1185, April 13, 2009