Tax Season Challenges in Arizona

PHOENIX — As individuals gear up for tax season, an unexpected issue has emerged. Arizona’s tax forms contain provisions that aren’t actually reflected in state law.

The forms feature tax cuts stemming from President Donald Trump’s One Big Beautiful Bill Act, along with other provisions directed by Governor Katie Hobbs for the Arizona Department of Revenue.

Last week, the agency informed state senators that, without changes from the legislature, about one-third of Arizona taxpayers might need to file amended state returns.

“Tax season has already started,” state Rep. Justin Olson relayed to ABC15. “Arizonans filing their taxes deserve clarity on whether the state will honor what’s stated in the returns they’ve submitted.”

Olson, a Republican from the 10th Legislative District, is advocating for an amendment through House Bill 2785. This bill aims to align current tax forms with state tax law.

“All of President Trump’s tax cuts should apply to Arizona tax law,” he noted. “Plus, it ensures compliance with forms taxpayers have already completed.”

Hobbs Requests Tax Adjustments

Modifying state laws to align with federal tax changes is usually standard procedure at state capitols, but not in this instance.

The governor and Democratic lawmakers have voiced concerns over the extent of the proposed tax cuts, insisting they become part of budget negotiations.

In December, Hobbs issued an executive order for the release of tax returns that include elements of the Trump tax cuts, such as increased deductions and new tax credits for seniors.

She has urged lawmakers to pass specific provisions now and negotiate the remaining aspects later.

“Taxpayer confidence is crucial,” she shared with reporters on Monday. “Right now, confusion persists because Republicans refuse to collaborate on the middle-class tax cut bill.”

Meanwhile, Congress approved the tax conformity bill during the first week of the session, but Hobbs vetoed it just hours before unveiling an executive budget proposal that only suspended middle-class tax cuts.

“We included all tax reforms requested by the governor in this package because to boost our economy, passing those tax cuts to Arizona taxpayers is essential,” Olson explained.

Still, Hobbs reiterated her position, reiterating that only part of the tax cut bill should be approved at this moment.

“We can’t advance the entire tax conformity bill without a way to fund all the proposed tax cuts in the budget, including those for billionaires and special interests,” she stated. “These discussions must occur during budget negotiations.”

Bureaucratic communication from Hobbs’ budget director indicated openness to negotiations, but Republican lawmakers express concern that the state budget may not be finalized before Tax Day. This could lead to many Arizonans needing to amend their returns for compliance.

If Hobbs vetoes the bill, Olson argued, she will eventually have to adopt some form of compliance for the 2025 tax year, as it is unlikely Congress would require a significant tax amendment affecting so many state residents.

House Bill 2785 cleared the House Ways and Means Committee following a party-line vote on Wednesday. In the Senate, Senate Bill 1638 is set for discussion in the Senate Finance Committee soon.