tax laws; interpretation; application; hearing, the official text

REFERENCE TITLE: tax laws; interpretation; application; hearing

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SB 1221

Introduced by

Senator
Mesnard

AN
ACT

amending section 42-2078, Arizona
Revised Statutes; relating to taxpayer protection.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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

Section 1. Section 42-2078, Arizona Revised
Statutes, is amended to read:

START_STATUTE42-2078. New interpretation or application of law; notice; hearing;
affirmative defense; definition

A. Unless expressly authorized by law, the
department shall not apply any newly enacted law retroactively or in a manner
that will penalize a taxpayer for complying with prior law.

B. If a proposed new interpretation
or application of any provision of this title or title 43 will adversely affect
taxpayers prospectively, the department shall, or an affected taxpayer may,
notify the chairpersons of the senate finance committee and the house of
representatives ways and means committee, or their successor committees, before
the new interpretation or application is adopted. If The
chairpersons of the senate finance committee and the house of representatives
ways and means committee, or their successor committees, hold a hearing on the
proposed new interpretation's or application's impact on taxpayers, the
department shall provide testimony regarding the reasons that the
interpretation or application is necessary.

[B.] C. If
the department adopts a new interpretation or application of any provision of
this title or title 43 or determines that any of those provisions applies to a
new or additional category or type of taxpayer, and the change in
interpretation or application is not due to a change in the law:

1. The change in interpretation or application
applies prospectively unless it is favorable to taxpayers.

2. The department shall not assess any tax, penalty
or interest retroactively based on the change in interpretation or application.

3. The change is an affirmative defense in any
administrative or judicial action for retroactive assessment of tax, interest
and penalties to taxable periods before the new interpretation or application
was adopted.

[C.] D. Tax
liabilities, penalties and interest paid before a new interpretation or
application of chapter 5 of this title by the department shall not be refunded
unless the taxpayer requesting the refund provides evidence satisfactory to the
department that the amounts will be refunded to the person who paid an added
charge to cover the tax.

[D.] E. For
the purposes of this section, "new interpretation or application"
includes policies and procedures adopted by administrative rule, a tax ruling, a tax procedure or
instructions to a tax return.END_STATUTE