Corporate Income Tax Highlights

2024 HIGHLIGHTS

 

Electronic Filing of Corporate Income Tax Returns


Electronic filing of Arizona corporate income tax returns is required for the 2024 taxable year. Please see the Department’s website at https://azdor.gov/file-and-pay/e-file-services/approved-vendors for a list of approved software vendors.

Any corporate taxpayer that is required to file its income tax return electronically may apply to the director for an annual waiver from the electronic filing requirement. The waiver may be granted if any of the following apply:

  • The taxpayer has no computer.
  • The taxpayer has no internet access.
  • Any other circumstance considered to be worthy by the director.

Waivers are granted on an annual basis and expire at the end of the requested tax year. Waivers must be renewed each calendar year. If a waiver is not renewed, you will be subject to statutory electronic filing and payment requirements at the expiration of your waiver.

To request a waiver, submit Form 292, Electronic Filing and Payment Waiver Application, to the Department. 

A waiver is not required if the corporate income tax return cannot be electronically filed for reasons beyond the taxpayer’s control, including situations in which the taxpayer was instructed by either the Internal Revenue Service or the Arizona Department of Revenue to file by paper.

Please contact the Department at [email protected] if you need assistance in electronically submitting your Arizona corporate income tax return.

 

S Corporations and the Pass-Through Entity Election

For taxable years beginning from and after December 31, 2021 the shareholders of an S Corporation may consent to be taxed at the entity level in Arizona. The Arizona Pass Through Entity (PTE) income tax is assessed at a rate of 2.5% of the income attributable to the S Corporation’s resident shareholders and the income derived from sources within Arizona attributable to the nonresident shareholders.

This election must be made by the S Corporation no later than the due date or extended due date of its return. Shareholders that are not individuals or estates and trusts may not participate in this election. Shareholders who are individuals or estates and trusts who opt out of this election also may not participate in this election.

For additional information, see the instructions for Form 120S.

 

Electronic Funds Transfer

Corporations are required to pay their tax liability by electronic funds transfer (EFT) if the corporation owes $500 or more for any taxable year beginning from and after December 31, 2020.

A corporation may apply to the director for an annual waiver from the electronic payment requirement. The application must be received by December 31 of each year. The director may grant the waiver if any of the following applies:

  • The corporation has no computer.
  • The corporation has no internet access.
  • Any other circumstance considered to be worthy by the director exists, including:
    • The corporation has a sustained record of timely payments, and
    • The corporation has delinquent tax account with the Department.

To request a waiver, submit Form 292, Electronic Filing and Payment Waiver Application, to the Department. 

NOTE: A corporation who is required to pay by EFT but who fails to do so is subject to a penalty of 5% of the amount of the payment not made by EFT. See A.R.S. § 42-1125(O).
For additional information on electronic funds transfer, refer to A.R.S. § 42-1129 and the related Arizona Administrative Code rules (A.A.C. R15-10-301 through R15-10-307) for detailed information.

 

Extension of Time to File a Return

Effective for taxable years beginning after December 31, 2020, the Department may grant an extension request for a maximum of 7 months to a C Corporation:

  • That has a valid federal extension.
  • That filed an Arizona extension request on Arizona Form 120EXT.

NOTE: The maximum length of time for an extension granted to an S Corporation remains 6 months.

 

Inclusion of Federal Return with Arizona return

The Department requests that taxpayers include a copy of their “as-filed” federal return (i.e. federal Form(s) 1120, 1120-S, 1120-F, 1120-RIC, etc.) and all its schedules and attachments with their Arizona return.

 

Changes to Tax Credits

Arizona Credit for Increased Research Activities
For taxable years beginning from and after December 31, 2022, Arizona will permit taxpayers to compute the Credit for Increased Research Activities using:

  • The regular method – the excess of Arizona qualified research expenses for the taxable year over the base amount and the Arizona basic research payments; or,
  • The Alternative Simplified Credit – the excess of Arizona qualified research expenses for the taxable year over the average Arizona qualified research expenses for the previous three years.

See the instructions for Form 308 for additional information.

For taxable years beginning before January 1, 2023, taxpayers may file an amended return to claim the Arizona Credit for Increased Research Activities using the Alternative Simplified Credit (ASC) method of computing the Credit for Increased Research Activities.

See the instructions for Form 308-ASC for additional information.

 

Tax Credits Repealed

The carryover period for The Credit for Solar Energy Devices – Commercial and Industrial Applications, claimed on Form 336, has expired and is no longer available to taxpayers.