Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 42-2001, Arizona Revised Statutes, is amended to read:

START_STATUTE42-2001. Definitions

In this article, unless the context otherwise requires:

1. "Confidential information":

(a) Includes the following information whether it concerns individual taxpayers or is aggregate information for specifically identified taxpayers:

(i) Returns and reports filed with the department for income tax, withholding tax, transaction privilege tax, luxury tax, use tax, property tax and severance tax.

(ii) Applications for transaction privilege licenses, luxury tax licenses, use tax licenses and withholding licenses.

(iii) Information discovered concerning taxes and receipts by the department, whether or not by compulsory process.

(iv) Return information obtained from the United States internal revenue service and United States bureau of alcohol, tobacco and firearms.

(v) Information that is supplied at the special request of the department by a taxpayer which and that the taxpayer requests to be held in confidence.

(vi) Guidelines, standards or procedures that are established by the department for, or other information relating to, selecting returns or taxpayers for examination or settling or compromising any tax liability.

(vii) A taxpayer's identity, the nature, source or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments or tax payments, whether the taxpayer's return was, is being or will be examined or subject to investigation, collection or processing or any other data received by, recorded by, prepared by, furnished to or collected by the department with respect to a return or with respect to the termination, or possible existence, of liability of any person for any tax, penalty or interest imposed pursuant to this title or title 43.

(viii) Information supplied by an employee to an employer regarding the employee's election to have the employee's withholding tax reduced for the purposes of contributions to qualifying charitable organizations, qualified school tuition organizations, or public schools or state university foundations pursuant to section 43‑401, subsection G.

(b) Does not include information that is otherwise a public record.

2. "Report" includes a notice of insurance payments, a request for a release of a bank account and an inventory of a safe deposit box.

3. "Return" includes any form prescribed by the department and any supporting schedules, attachments and lists.

4. "Tax administration" includes assessment, collection, investigation, litigation, statistical gathering functions, enforcement, policy making functions or management of those functions of the tax revenue laws of this state.

5. "Taxpayer", with respect to a joint return, means either party. END_STATUTE

Sec. 2. Section 43-222, Arizona Revised Statutes, is amended to read:

START_STATUTE43-222. Income tax credit review schedule

The joint legislative income tax credit review committee shall review the following income tax credits:

1. For years ending in 0 and 5, sections 43‑1079.01, 43‑1087, 43‑1088, 43‑1090.01, 43‑1167.01, 43‑1175 and 43‑1182.

2. For years ending in 1 and 6, sections 43‑1074.02, 43‑1083, 43‑1083.02, 43‑1085.01, 43‑1164.02, 43-1164.03 and 43‑1183.

3. For years ending in 2 and 7, sections 43‑1073, 43‑1079, 43‑1080, 43‑1085, 43‑1086, 43‑1089, 43‑1089.01, 43‑1089.02, 43-1089.03, 43‑1090, 43‑1164, 43‑1167, 43‑1169, 43‑1176 and 43‑1181.

4. For years ending in 3 and 8, sections 43‑1074.01, 43‑1081, 43‑1089.04, 43‑1168, 43‑1170 and 43‑1178.

5. For years ending in 4 and 9, sections 43‑1076, 43‑1076.01, 43‑1081.01, 43‑1083.01, 43‑1084, 43‑1162, 43‑1162.01, 43‑1164.01, 43‑1170.01 and 43-1184 and, beginning in 2019, sections 43-1083.03 and 43‑1164.04. END_STATUTE

Sec. 3. Section 43-401, Arizona Revised Statutes, is amended to read:

START_STATUTE43-401. Withholding tax; rates; election by employee

A. Except as provided by subsection B of this section, every employer at the time of the payment of wages, salary, bonus or other emolument to any employee whose compensation is for services performed within this state shall deduct and retain from the compensation an amount prescribed by tables adopted by the department.

B. An employer may voluntarily elect to not withhold tax during December by notifying:

1. The department on a form prescribed by the department.

2. The employer's employees in writing in a manner prescribed by the department.

C. If the amount collected and payable by the employer to the department in each of the preceding four calendar quarters did not exceed an average of one thousand five hundred dollars, the amount collected shall be paid to the department on or before April 30, July 31, October 31 and January 31 for the preceding calendar quarter.� If such amount exceeded one thousand five hundred dollars in each of the preceding four calendar quarters, the employer shall pay to the department the amount the employer deducts and retains pursuant to this section at the same time as the employer is required to make deposits of federal tax pursuant to section 6302 of the internal revenue code.� On or before April 30, July 31, October 31 and January 31 each year, the employer shall reconcile the amounts payable during the preceding calendar quarter in a manner prescribed by the department, except that if the full amount collected and payable is paid timely to the department under this subsection, the employer may reconcile the amounts on or before May 10, August 10, November 10 and February 10 each year.� The department by rule may allow and determine which employers qualify for annual payments of withholding taxes, with an annual report by the employer pursuant to section 43‑412, subsection B, if the qualifying employer has established sufficient payment history to indicate that the employer is current and in good standing pursuant to standards established by rule.� For any business which that has not had a withholding certificate for the four preceding consecutive quarters, the quarterly average shall be computed in a manner prescribed by the department.

D. If an employer fails to make a timely monthly payment because prior to that reporting period it reported on a quarterly basis instead of on a monthly basis, the department shall notify the employer that it is out of compliance with this section. Notwithstanding section 42‑1125, the department shall not assess a penalty against an employer for failing to make a timely monthly payment if the employer had filed and remitted all taxes due on a quarterly basis and brings all filings and payments into current compliance within thirty days after being notified by the department.

E. Each employee shall elect the amount authorized by subsection A of this section to be withheld for application toward the employee's state income tax liability. The election provided under this subsection shall be exercised by each employee, in writing on a form prescribed by the department.� The election shall be made within five days of employment.� Each employer shall notify the employees of the election made available under this subsection and shall have election forms available at all times.� Each form shall be completed in triplicate, with one copy each for the department, the employer and the employee.� The employer shall file a copy of each completed form with the department.� Any employee failing to complete an election form as prescribed shall be deemed to have elected the withholding percentage prescribed by the department.

F. Before July 1 of each year, each employer who chooses to not withhold tax pursuant to subsection B of this section shall notify each employee that:

1. State income taxes will not be withheld from compensation in December.

2. The employee may elect to change the rate of withholding tax prescribed by this section to compensate for the resulting change in annual withholdings from the employee's compensation.

G. At an employee's written request, the employer may agree to reduce the amount withheld under this section by the amount of credit that the employee represents to the employer that the employee will qualify for and be entitled to under sections 43‑1088, 43‑1089, 43‑1089.01, and 43‑1089.03 and 43‑1089.04.� The employee's request must include the name and address of the qualifying charitable organization, qualified school tuition organization, or public school or state university foundation. Within thirty days after agreeing to the employee's request, the employer shall reduce the withholding amount by the amount of the credit, but not below zero, prorated for the number of pay periods remaining in the employee's taxable year after the employee makes the request.� If an employer agrees to reduce the withholding amount pursuant to this subsection, the following apply:

1. Within fifteen days after the end of each calendar quarter, the employer must pay the entire amount of the reduction in withholding tax for that quarter to the designated charitable organization, school tuition organization, or public school or state university foundation. These payments are considered to be on the employee's behalf, and not the employer's, for the purposes of qualifying for the income tax credits under sections 43‑1088, 43‑1089, 43‑1089.01, and 43‑1089.03 and 43-1089.04.

2. The employee is responsible and accountable for the accuracy and the amount of reduction in withholding tax and the payments to the charitable organization, school tuition organization, or public school or state university foundation.

3. The employer is responsible and accountable to the charitable organization, school tuition organization, or public school or state university foundation, to the employee and to the department for actually making the required payments.

4. Within thirty days after the end of each calendar year, or within fifteen days after the termination of employment, the employer must furnish to each electing employee and to the department a statement of the amount withheld and paid on behalf of the employee during that year. END_STATUTE

Sec. 4. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1089.04, to read:

START_STATUTE43-1089.04. Credit for contributions to state university foundation

A. A credit is allowed against the taxes imposed by this title for the amount of fees or cash contributions paid by a taxpayer or on the taxpayer's behalf pursuant to section 43-401, subsection G during the taxable year to a state university foundation located in this state.� The amount of the credit shall not exceed:

1. Two hundred fifty dollars in any taxable year for a single individual or a head of household.

2. Five hundred dollars in any taxable year for a married couple filing a joint return.

B. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the tax credit that would have been allowed for a joint return.

C. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes.

D. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability. END_STATUTE

Sec. 5. Purpose

Pursuant to section 43-223, Arizona Revised Statutes, the legislature enacts section 43-1089.04, Arizona Revised Statutes, as added by this act, to provide income tax relief for taxpayers who promote the efforts of state universities through contributions to state university foundations.