Exempt Organization Tax Highlights

2024 HIGHLIGHTS

 

Filing Requirement

Effective for taxable year 2018, organizations exempt under Internal Revenue Code § 501 are no longer required to submit Arizona Form 99 or federal Form 990 to the Department.

Exempt organizations subject to tax on its unrelated business taxable income as defined in section 512 of the internal revenue code must report that UBTI by filing Arizona Form 99T.

 

Nonprofit Medical Marijuana Dispensaries

Effective for tax years beginning after December 31, 2017, Nonprofit Medical Marijuana Dispensaries (NMMD) must file Arizona Form 99M. An NMMD must file Arizona Form 99M to meet the filing requirements of A.R.S. § 43-1242. A limited liability company (LLC) that is an NMMD but treated as a disregarded entity must file Arizona Form 99M.

Because NMMDs are not exempt organizations at the federal level, they do not have the option to file the federal return in place of Form 99M. An NMMD that is taxed as an S corporation or a partnership is required to file Arizona Form 120S or Arizona Form 165, as applicable, by the due date of those returns, in addition to filing Form 99M. An NMMD that is organized as a sole proprietorship must also file Arizona Form 140, 140PY, or 140NR, as applicable, by the due date of those returns, in addition to filing Form 99M.

An NMMD may apply for an Arizona extension by filing a completed Form 120EXT by the original due date of the return. The department grants an Arizona extension for filing Form 99M for a period of 6 months. The NMMD cannot use a federal extension to extend the due date of its return. The NMMD must request an Arizona extension on Arizona Form 120EXT.

  • An NMMD organized or taxed as an S corporation: File one Form 120EXT to apply for an Arizona extension to file Form 99M. File a second Form 120EXT to apply for an Arizona extension of time to file Form 120S. A valid federal extension may be used to file Form 120S, but cannot be used to file Form 99M. No extension payment is due.
  • An NMMD organized or taxed as a partnership: File one Form 120EXT to apply for an Arizona extension to file Form 99M. File a second Form 120EXT to apply for an Arizona extension of time to file Form 165. A valid federal extension may be used to file Form 165, but cannot be used to file Form 99M.
  • An NMMD organized as a sole proprietorship: File one Form 120EXT to apply for an Arizona extension to file Form 99M. File a second Form 204 to apply for an Arizona extension of time to file Form(s) 140, 140PY, or 140NR, as applicable. A valid federal extension may be use to file Form(s) 140, 140PY, or 140NR, but cannot be used to file Form 99M.

 

ORGANIZATIONS WITH UNRELATED BUSINESS TAXABLE INCOME (UBTI):

Electronic Funds Transfer

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

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

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

NOTE: An organizations who is required to pay by EFT but fails to do so is subject to a penalty of 5% of the amount of the payment not made by EFT. See Arizona Revised Statutes (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 from and after December 31, 2020, the Department may grant an extension request for a maximum of 7 months to:

  • An NMMD filing Arizona Form 99M that files an Arizona Extension Request on Arizona Form 120EXT.
  • An exempt organization filing Arizona Form 99T that has a valid federal extension request.
  • An exempt organization filing Arizona Form 99T that files an Arizona extension request on Arizona Form 120EXT.

 

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.