Arizona Republican lawmakers propose new bill to resolve tax filing confusion

PHOENIX – Arizona Republicans have proposed new tax conformity legislation designed to end confusion as filing season begins.

The state tax code has to be updated to align with changes to the federal code under President Donald Trump’s One Big Beautiful Bill Act.

However, Republicans, who control both chambers of the Legislature, and Democratic Gov. Katie Hobbs can’t agree on the tax conformity details. Meanwhile, taxpayers across the state are already receiving their W-2 forms.

“Don’t file your taxes until we resolve this,” state Sen. John Kavanagh told KTAR News 92.3 FM’s The Mike Broomhead Show on Friday.

What is in the new Arizona GOP tax conformity bill?

The new GOP plan, HB 2785, was filed Thursday. It includes full income tax conformity and matches the state tax forms already issued. Republicans said it would provide $440 million in tax relief for the 2025 tax year but lacks the child tax credits or dependent care deductions from a bill Hobbs vetoed earlier this month.

“If we do nothing, ironically, the actual solution will be closer to what the Republicans want than what the governor wants, because the governor’s own Department of Revenue has set up the forms and the files pretty much for full conformity,” Kavanagh explained.

The District 3 senator said the original Republican plan included full tax conformity plus some alterations, while Hobbs only wanted half conformity in her proposal, which she calls the Middle Class Tax Cuts Package.

“There will probably be some compromise because we have divided government. She can veto whatever we do. We can’t override her veto,” Kavanagh said. “So you’ll probably see some movement toward a compromise.”

Kavanagh said Republicans want to protect tax cuts for businesses.

Additionally, GOP lawmakers said they won’t approve any plan that would force many Arizonans who file early to amend their returns.

On Jan. 16, Hobbs vetoed a proposal Republicans said would have delivered $1.1 billion in tax cuts over the next three years.

She said it lacked priorities she included in her plan, which calls for a $6,000 deduction for seniors and increases the standard deductions on state tax forms. It also includes deductions for tipped income, overtime pay and interest on loans for new American-made vehicles.

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