Corporate Income Tax Highlights

2022 HIGHLIGHTS

 

Electronic Filing of Corporate Income Tax Returns


Electronic filing of Arizona corporate income tax returns is required for the 2022 taxable year. Please see the department’s website at https://azdor.gov 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. Form 292 is available at: https://azdor.gov/forms/other-forms/electronic-filing-and-payment-waiver-application.

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 2.98% 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. Form 292 is available at: https://azdor.gov/forms/other-forms/electronic-filing-and-payment-waiver-application.

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.

 

Change to MSP Election

Effective for taxable years beginning from and after December 31, 2019, the Multistate Service Provider election includes sales from services or sales from intangibles in its calculation. This includes sales derived from credit and charge card receivables, including fees, merchant discounts, interchanges, interest, and related revenue. Refer to the instructions for the MSP for additional information.

 

Changes to Tax Credits

Tax Credits Repealed

  • The Environmental Technology Facility Credit, claimed on Form 305, has been repealed for taxable years beginning from and after December 31, 2021.
  • The Employment Credit for Healthy Forest Enterprises, claimed on Form 332, has been repealed for taxable years beginning from and after December 31, 2021.

 

New Tax Credit

  • Affordable Housing Tax Credit - A.R.S. § 43-1163 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. For more information, refer to the instructions for Form 354.
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