Arizona Small Business Income Tax Highlights

2022 Highlights

 

Due date for Calendar Year Filers

Your 2022 Small Business Income tax return is due by midnight on April 15, 2023. Because April 15, 2023 falls on a weekend, and April 17, 2023 falls on a federal holiday, you have until Tuesday, April 18, 2023 to timely file your 2022 tax return. If you file under a valid extension, your extended due date to file your income tax return is October 15, 2023. Because October 15, 2023 falls on a weekend, you have until Monday, October 16, 2023 to timely file your 2022 tax return.

 

2022 Arizona Small Business Income (SBI) Tax

The tax rate applicable to small business taxable income reported on Forms 140-SBI, 140PY-SBI or Form 140NR-SBI was reduced from 3.5% in 2021 to 3.0% for 2022.

 

2022 Arizona Small Business Income Estimated Tax Payments

Beginning with tax year 2022, taxpayers filing a Small Business Income tax return are required to make estimated tax payments, if the taxpayer meets the income threshold, and will be subject to the underpayment of estimated tax penalty if any required amount is not made or less than the required amount for each quarter that a payment should have been made. See Form 140ES-SBI to compute the required payments and Form 221-SBI, to determine if the taxpayer is subject to the underpayment penalty.

Form 140ES-SBI is used to compute

 

Repealed Individual Tax Credits

Beginning with tax year 2022, the following income tax credits have been repealed. Taxpayers who claimed either of these tax credits and established unused carryover amounts from prior tax years, may still claim the carryover amounts for the remaining 5-year carryover period allowed by the credit.

• Pollution Control Credit (Form 315)
• Employment by a Healthy Forest Enterprise Credit (Form 332)

 

New Individual Tax Credits

Affordable Housing Tax Credit (Form 354)

Beginning with tax year 2022, Arizona Revised Statute (A.R.S.) § 43-1074 provides for the Affordable Housing Tax Credit, a nonrefundable credit for projects in Arizona that qualify for the federal low-income housing tax credit under Section 42 of the IRC. The tax credit may be claimed on either the individual’s personal income tax return (Form 140, 140NR or 140PY) or the Small Business Income tax return, if filing. (Form 140-SBI, 140NR-SBI or 140PY-SBI) For more information, see Credit Form 354 and instructions.

 

Pass-Through Entity (PTE) Tax (Form 355)

Beginning with tax year 2022, Arizona allows an individual partner of a partnership and an individual shareholder of an S Corporation a nonrefundable tax credit for the taxes paid by the PTE on the individual’s behalf for their share of the income distributed to the partner/shareholder. If the allowable credit exceeds the taxes otherwise due on the claimants small business income, or if the there are no taxes due, the amount of the claim not used to offset taxes may be carried for not more than five consecutive taxable years as a credit against subsequent years’ small business income tax liability. Arizona Revised Statute § 43-1077

For more information, see Credit Form 355, Credit for Entity-Level Tax, and instructions.

An individual taxpayer who claims the allowable PTE tax credit on the SBI tax return, must also adjust their Arizona Small Business gross income by adding the amount of the tax payment made by the PTE for which the tax credit is claimed. Arizona Revised Statute § 43-1021.