Arizona Department of Revenue

Revision Date: 
Thursday, August 31, 2023

Agency Contact Information

Arizona Department of Revenue

Authority:

The Arizona Department of Revenue was established in 1973 to administer Arizona’s tax laws (Laws 1973, Chapter 123, effective July 1, 1974). Statutory authority is outlined in two titles of Arizona Revised Statutes: Title 42 – Taxation and Title 43 – Taxation of Income. Regulatory rules are found in the Arizona Administrative Code, Title 15.

Function:

The mission of the Arizona Department of Revenue is to serve taxpayers. The Department administers and enforces collection of individual and corporate income tax, transaction privilege (sales), use, luxury, withholding, property, estate, fiduciary, bingo, and severance taxes. The Department oversees county assessors in the administration of locally assessed property taxes.

The director is appointed by the Governor, serves as a member of the Governor’s cabinet, and is responsible for the direction, operation, and control of the department. The chief deputy director and deputy director assist the director in the day-to-day operations of the department. The chief deputy director serves as acting director when the director is absent. The problem resolution officer acts as the taxpayer advocate within the Department.

The Department’s major objectives are tax collection and processing, enforcement of tax laws, and accurate valuation of property. See the Arizona Department of Revenue website.

The Municipal Tax Code Commission (Commission), originally established by Laws 1988, Chapter 107, currently consists of nine appointed members and the director or designee of the Department as an ex officio member. The Commission provides a forum for taxpayers and municipalities to present recommendations for changes to the Model City Tax Code (Code) according to specific guidelines and timeframes. The Department updates and maintains the official copy of the Code and is required to present a legal analysis of proposed amendments to the Commission. In addition, the Department provides staff support and meeting accommodations for the Commission and is also responsible for posting proposed amendments, meeting notices, and agendas.

In 2023, the process to adopt changes to the Model City Tax Code was modified, requiring a two-thirds vote of the Commission to adopt an amendment to the Code if it either repeals an exemption from taxation or expands the types of business activities that are considered taxable. See Laws 2023, Chapter 192.

History

The State Tax Commission was established in 1912 to assess and equalize taxes; to exercise general supervision of the state’s taxation system; and to advise and direct Assessors, County Boards of Equalization, and County Boards of Supervisors regarding assessment of real and personal property. The Governor appointed three members to the Commission, who also served as ex-officio members of the State Board of Equalization (Laws 1912, Chapter 23).

In 1912, the State Board of Equalization (SBE) was incorporated into the State Tax Commission, and in 1967 the SBE duties were transferred to the newly created State Board of Property Tax Appeals. In 1973 the State Board of Property Tax Appeals was renamed the State Board of Tax Appeals. (Arizona State Archives finding guide – Record Group 80.)

From 1935 to 1949 the State Tax Commission regulated horse and dog racing, granted racing licenses, and established rules for use of pari-mutuel machines. In 1949, the Arizona Racing Commission was created and assumed racing-related responsibilities from the State Tax Commission. (Arizona State Archives finding guide, Record Group 80.)

The Arizona Department of Revenue was created in 1973 and assumed the responsibilities of the Department of Property Valuation and the Estate Tax Commissioner as well as certain functions of the of the State Tax Commission. The State Board of Tax Appeals was established in 1973, assuming the functions of the State Board of Property Tax Appeals and serving as the appellate board for other taxes. The Department also assumed responsibility for the Division of Unclaimed Property (Laws 1973, Chapter 123, Sections 1, 170, and 171). The effective date of the act was July 1, 1974.

Laws 1978, Chapter 213 repealed and rewrote Title 43 (Taxation of Income) to adopt the provisions of the federal Internal Revenue Code in order to calculate Arizona adjusted gross income tax liabilities for individuals and to calculate taxable income for corporations, trusts, estates, and partnerships. The 1978 enactment included a savings clause for “The Income Tax Act of 1933” and “The Income Tax Act of 1954” in order to provide a transition from the old laws to the new law. The 1978 measure was effective for tax years beginning January 1, 1979.

Note: Title 42 was reorganized and renumbered in 1979 (Laws 1979, Chapter 199) and again in 1997 (Laws 1997, Chapter 150). A follow-up bill containing conforming changes was enacted the next year in order to incorporate the 1997 statutory enactments into the recodified title. The effective date was January 1, 1999 (Laws 1998, Chapter 1). Title 43 was rewritten and renumbered in 1978 (Laws 1978, Chapter 213).

Laws 2020, Chapter 71 modified the notice, review, and hearing process used to amend the Model City Tax Code. The measure also modified related responsibilities of the Commission and the Department.

Laws 2021, Chapter 342 authorized ADOR to issue draft rulings, procedures, notices, and administrative announcements and outlined the Department process and timeline to do so. The measure also modified ADOR authority and responsibilities relating to private taxpayer ruling requests.

Laws 2021, Chapter 430 established the affordable housing tax credit, administered by the Department of Housing (DOH), to increase the number of affordable housing units in the state. The measure requires the Department of Insurance and Financial Institutions (DIFI) and the Department of Revenue to work with DOH to implement the program, develop administrative rules, and publish forms and procedures.

In 2022, the Legislature authorized ADOR to implement a multi-year integrated tax system modernization project, also known as the state tax accounting and reconciliation system (STARS). The Department will phase in the updates by tax type. Laws 2022, Chapter 321 established the Integrated Tax System Project (ITSP) Fund to upgrade Department tax systems. The fund consists of fees assessed from local governments, a portion of the education sales tax, and a portion of the marijuana excise tax. Monies in the fund are subject to legislative appropriation and will be used solely for costs to develop and implement tax system modernization upgrades. A legislative intent clause provides guidelines for assessment and collection of fees, which remain in effect from July 1, 2022, through June 30, 2028. The measure also established the 10-member ITSP Advisory Committee to serve as the liaison between the Department and users of the tax system. The Committee is repealed on January 1, 2030. (See Sections 2, 3, 4, 6 and 18).

Laws 2023, Chapter 192 modified the process to amend the Model City Tax Code.

Sources:

Arizona Department of Revenue website

Arizona Memory Project Arizona Department of Revenue agency collection

Master List of State Programs

Revenue Impact of Arizona’s Tax Expenditure

Sunset Reviews, Arizona Department of Revenue, sunset factors

Performance Audits, Arizona Department of Revenue

The Joint Legislative Budget Committee Tax Handbook provides a description of each state tax and certain other revenue categories; a history of the collections and distributions for each revenue category; and includes summaries of all statutory revisions.

Related collections at Arizona State Archives:

  • Record Group 80 – State Tax Commission
  • Record Group 84 – Territorial Board of Equalization
  • Record Group 169 – Department of Revenue
Related Histories: 
Municipal Tax Code Commission