If this bill were to become law, it would amend section 43-1022 of the Arizona Revised Statutes to establish a new individual income tax subtraction for tips received by employees. Specifically, for taxable years beginning January 1, 2025, individuals would be allowed to subtract compensation received as tips during the taxable year, provided these tips are reported to the employer and are not already excluded from Arizona gross income under the Internal Revenue Code.

The bill would insert language clarifying that this subtraction applies to tips reported to employers as per federal regulations, specifically referencing 26 U.S.C. § 6053. This change aims to provide tax relief for individuals who receive tips, potentially reducing state General Fund revenues by an estimated $31 million annually starting in FY 2026. The current statute remains unchanged except for the addition of this new provision regarding tipped wages.

Statutes affected:
Introduced Version: 43-1022
House Engrossed Version: 43-1022