If this bill were to become law, it would amend current statutes regarding the taxation of income by expanding the individual income tax subtraction for active service compensation. Specifically, it would replace the term "armed forces" with "uniformed services" in the relevant section of the Arizona Revised Statutes. This change would allow compensation received for active service in the U.S. Uniformed Services, which includes the U.S. Armed Forces as well as the Public Health Service and the National Oceanic and Atmospheric Administration, to be subtracted from Arizona gross income when calculating Arizona adjusted gross income.

Additionally, the bill specifies that these changes would take effect for taxable years beginning after December 31, 2025. This means that starting January 1, 2026, individuals serving in the U.S. Uniformed Services would benefit from the expanded tax subtraction, potentially resulting in a state General Fund cost of approximately $976,800 beginning in FY 2027, as estimated by the Joint Legislative Budget Committee.

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