A.R.S. tit. 43 ch. 14 — Arizona Revised Statutes Title 43 Chapter 14 — Partnerships

43-1401. Definitions In this chapter, unless the context otherwise requires: 1. "Arizona gross income" of a partnership means its taxable income for the year, computed according to subtitle A, chapter 1, subchapter K of the internal revenue code, exclusive of items requiring separate computation under section 43-1412, paragraphs 1 through 16. For purposes of this title the provisions relating to interest on investment indebtedness contained in section 163(d) of the internal revenue code shall not apply. 2. "Arizona taxable income" of a partnership means its Arizona gross income adjusted by the modifications specified in sections 43-1021 and 43-1022 and section 43-1414, subsection A. 43-1411. Partnership, individual partnership liability An individual carrying on a business in partnership shall be liable for income tax only in his individual capacity. 43-1412. Partner's distributive share In computing taxable income of each partner, he shall include, whether or not distribution is made to him, his distributive share of the partnership's: 1. Gains and losses from sales or exchanges of capital assets computed pursuant to the internal revenue code. 2. Gains and losses from sales or exchanges of property described in section 1231 of the internal revenue code, relating to certain property used in a trade or business and involuntary conversions. 3. Dividends with respect to which there is provided an exclusion under section 116 or a deduction under subtitle A, chapter 1, subchapter B, part VIII of the internal revenue code. 4. Income taxes imposed by and paid to another state or country. 5. Additional first year depreciation computed pursuant to section 179 of the internal revenue code. 6. Recoveries of bad debts, prior taxes and delinquency amounts pursuant to section 111 of the internal revenue code. 7. Gains and losses from wagering transactions pursuant to section 165(d) of the internal revenue code. 8. Soil and water conservation expenditures pursuant to section 175 of the internal revenue code. 9. Nonbusiness expenses as described in section 212 of the internal revenue code. 10. Expenses for care of certain dependents pursuant to section 214 of the internal revenue code. 11. Payments pursuant to section 215 of the internal revenue code. 12. Amounts representing taxes and interest paid to cooperative housing corporations pursuant to section 216 of the internal revenue code. 13. Intangible drilling and development costs pursuant to section 263(c) of the internal revenue code. 14. Certain mining exploration expenditures pursuant to section 617 of the internal revenue code. 15. Income, gain or loss to the partnership under section 751(b) of the internal revenue code. 16. Any items of income, gain, loss or deduction subject to a special allocation under the partnership agreement which differs from the allocation of partnership taxable income or loss generally. 17. Arizona taxable income. 43-1413. Year in which partnership income is includible In computing the taxable income of a partner for a taxable year the inclusions required by section 43-1412 with respect to a partnership shall be based on the income, gain, loss, deduction or credit of the partnership for any taxable year of the partnership ending within or with the taxable year of the partner. 43-1414. Federal assessment of imputed underpayment; definitions A. A partnership that is audited by the internal revenue service and that is assessed an imputed underpayment pursuant to section 6225 of the internal revenue code as added by the bipartisan budget act of 2015 (P.L. 114-74), a partnership that makes the election under section 6226 of the internal revenue code as added by the bipartisan budget act of 2015 (P.L. 114-74) or a partnership that amends its return under section 6227 of the internal revenue code as added by the bipartisan budget act of 2015 (P.L. 114-74) shall file a return for the reviewed year on a form prescribed by the department that shows the adjustments to income or the gain, loss or deduction on which the federal imputed underpayment was based as well as any of the correlative adjustments to the additions required under section 43-1021 or the subtractions required under section 43-1022. B. If the adjustments determined in subsection A of this section are: 1. A net increase in Arizona taxable income and paragraph 2 of this subsection does not apply: (a) Within ninety days after the final determination regarding the adjustment from the internal revenue service, the partnership shall pay the tax on the adjustments in lieu of passing the adjustments through to the partners. (b) The tax shall be imposed on the Arizona share of the adjustments at the highest tax rate imposed on individuals under section 43-1011. (c) Interest shall be computed pursuant to section 42-1123 for the period beginning on the day after the partnership return due date for the reviewed year, without regard to any extensions. (d) For the purposes of imposing penalties under section 42-1125, the due date of the return under subsection A of this section is the ninetieth day after the final determination of the partnership adjustments by the internal revenue service. 2. A net reduction in Arizona taxable income or a net increase in Arizona taxable income of a partnership that makes the election under section 6226 of the internal revenue code as added by the bipartisan budget act of 2015 (P.L. 114-74), within ninety days after the final determination regarding the adjustment from the internal revenue service, the partnership shall furnish to each partner of the partnership and to the department a statement on a form prescribed by the department of the partner's share of the adjustments required in subsection A of this section. The amount reported to the partner under this subsection is an adjustment to the partner's share of partnership taxable income. A partnership that had a net increase under this paragraph and that fails to timely provide the statements required to the partners and to the department shall pay the tax pursuant to paragraph 1 of this subsection in lieu of the partners reporting the adjustment. C. If a partnership fails to file the return that is required under subsection A of this section or if the department is not satisfied with the return or the payment of the tax required to be paid, the department may issue a deficiency assessment to the partnership under section 42-1108. D. If the partnership incorrectly reported the adjustments under subsection A of this section that resulted in: 1. An understatement of the distribution of Arizona taxable income to the partners under subsection B, paragraph 2 of this section, the partnership shall pay the tax on the understatement by applying the calculation in subsection B, paragraph 1 of this section to the unreported adjustments. 2. An overstatement of Arizona taxable income, any adjustment shall be handled as follows: (a) If the adjustments were originally passed through to the partners under subsection B, paragraph 2 of this section, the adjustment shall be passed through to the partners. The partnership shall amend the return under subsection A of this section and amend the statements provided to the partners and the department under subsection B, paragraph 2 of this section. (b) If the tax on the adjustments was originally paid by the partnership pursuant to subsection B, paragraph 1 of this section, the partnership shall amend the return filed pursuant to subsection B, paragraph 1 of this section to claim any refund. This subdivision does not allow a partnership to claim a refund for amounts not actually paid by the partnership. E. For the purposes of this section: 1. "Arizona share of the adjustments" means the adjustments determined in subsection A of this section, subject to the allocation and apportionment provisions of chapter 11, article 4 of this title. 2. "Final determination" has the same meaning prescribed in section 43-327. 3. "Reviewed year" means the partnership taxable year to which the items adjusted by the internal revenue service relate.