HB 2288 amends Arizona’s corporate income tax subtraction statute, A.R.S. § 43-1122, to add a new subtraction for dividend income from foreign corporations. The bill specifies that, for this purpose, certain related amounts are also treated as foreign dividends, including gross-up income under IRC § 78, global intangible low-taxed income (GILTI), net controlled foreign corporation tested income, and subpart F income. In practical terms, the measure would allow corporations to exclude these foreign-related dividend amounts from Arizona gross income when calculating Arizona taxable income.
The bill is a targeted change to the corporate income tax base rather than a broad rewrite of Arizona tax law. It would affect corporations with foreign-source income and multinational structures, potentially reducing Arizona taxable income for some taxpayers and lowering state revenue associated with those income streams. The bill leaves the rest of the subtraction list intact and does not alter individual income tax provisions.
The available legislative history shows little recorded debate, but the bill was not advanced out of House Ways & Means and was held in committee. The recorded vote on January 21, 2026, shows the measure was held with no yeas or nays, suggesting it did not receive a formal up-or-down committee vote. Overall sentiment appears neutral to cautious, with the bill receiving procedural consideration but no clear momentum toward passage.
The main point of contention is likely fiscal and policy-related: whether Arizona should continue to conform more closely to federal treatment of foreign corporate income or instead preserve a broader state tax base. Supporters would likely view the subtraction as a competitiveness or conformity measure for multinational corporations, while opponents may be concerned about revenue loss and the preferential treatment of foreign dividend income. Because the bill was held, those concerns appear to have outweighed support at this stage.
Impact
HB 2288 would amend A.R.S. § 43-1122, which governs subtractions from Arizona gross income for corporations, by adding and clarifying a subtraction for foreign dividend income and related international tax items. This would reduce Arizona taxable income for affected corporations by excluding foreign dividends, GILTI, tested income, subpart F income, and IRC § 78 gross-up amounts from the state tax base. The bill would primarily affect multinational corporations and other entities with foreign-source earnings, and could reduce corporate income tax collections for the state.
Sentiment
The bill’s recorded legislative treatment suggests limited support or at least insufficient support to move forward. It was held in House Ways & Means with no recorded yeas or nays, and there is no committee transcript indicating substantive debate. The overall sentiment appears neutral-to-cautious, with the measure considered but not advanced.
Contention
The likely contention centers on tax policy tradeoffs: whether Arizona should conform to federal international tax concepts and provide a subtraction for foreign dividend-related income, or whether doing so would unnecessarily narrow the corporate tax base and reduce state revenue. Support would likely come from business and corporate tax interests seeking conformity and reduced double taxation, while fiscal conservatives or revenue-focused lawmakers may object to the revenue impact and the preferential treatment of multinational corporate income. The fact that the bill was held indicates unresolved concern at the committee stage.