by Daniel Stefanski | Feb 26, 2024 | News
By Daniel Stefanski |
Arizona’s Attorney General is taking the Internal Revenue Service to court.
Last week, Democrat Attorney General Kris Mayes issued a press release to announce that “the State of Arizona has sued the IRS to prevent it from taxing the state-issued Arizona Families Tax Rebate.”
Mayes’ lawsuit was filed in the U.S. District Court of Arizona.
The legal issue at hand stems from the Arizona Legislature’s May 2023 passage of a “General Welfare Income Tax Rebate to offer financial relief to eligible taxpayers.” Few – if anyone – in the state expected this rebate to be taxable by the federal government, but that all changed earlier this year when a notice came from the IRS. The Arizona Attorney General’s Office confirmed that “the IRS did not confirm its decision in writing until late last week.”
In a statement that accompanied the release, Mayes said, “This lawsuit is about standing up for Arizona taxpayers. The federal government’s decision to tax these rebates is unfair and unlawful – and I will do everything I can to ensure the tax relief provided to Arizonans by their state government remains in the pockets of Arizona taxpayers, as intended.”
Mayes had previously sent a letter to the IRS Commissioner over the issue, arguing that “the full Tax Rebate should be excludable from federal tax under the general welfare exclusion,” and that “at a minimum, the Tax Rebate should be excluded from federal tax to the extent it does not exceed state taxes that were actually paid and that were not deducted from federal income.”
According to the State Attorney General’s Office, the legal challenge makes the following allegations:
- Unlawful Taxation: The IRS’s decision to tax the rebates lacks legal basis and contradicts prior IRS guidance and precedents.
- Arbitrary and Discriminatory: The decision by the IRS is arbitrary, capricious, and unfairly targets Arizona taxpayers.
- Economic Impact and Violation of Taxpayers’ Rights: Taxing these rebates affects not only the individual taxpayers but also the broader economic well-being of Arizona, reducing the disposable income of taxpayers and state sales tax revenue.
Mayes’ public involvement in the matter over the IRS taxing these rebates appears to have followed that of Arizona Senate President Warren Petersen, who, in January, shared that he was “working diligently to come to a resolution that will protect the more than 700,000 recipients from having to give the federal government a portion of [the rebate] this tax season.”
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
by Daniel Stefanski | Feb 1, 2024 | News
By Daniel Stefanski |
Arizona’s Attorney General is standing with the state’s Senate President to protect the financial interests of families.
Last week, Attorney General Kris Mayes sent a letter to the IRS Commissioner, requesting the agency “reconsider its decision to tax the 2023 Arizona Families Tax Rebate.”
In a statement that accompanied her announcement, Mayes said, “The IRS should act promptly to reverse this decision and provide clear guidance to Arizona taxpayers as tax season nears. If they do not, my office is prepared to examine all legal avenues to ensure these dollars stay in the pockets of Arizona taxpayers.”
The news from the state Attorney General’s Office follows communication from Arizona Senate President Warren Petersen over this matter. Earlier this month, Petersen issued a press release to share that he was “working diligently to come to a resolution that will protect the more than 700,000 recipients from having to give the federal government a portion of [the rebate] this tax season.”
Petersen also thanked Mayes’ office for “reaching out to us on this matter,” though he cautioned that “litigation likely isn’t the best approach.”
In her letter to the IRS Commissioner, Mayes argued that “the full Tax Rebate should be excludable from federal tax under the general welfare exclusion,” and that “at a minimum, the Tax Rebate should be excluded from federal tax to the extent it does not exceed state taxes that were actually paid and that were not deducted from federal income.”
The state’s top cop pointed to past IRS guidance and states where the agency “determined to be excludable from federal tax in February 2023,” such as Alaska, California, Colorado, Delaware, Idaho, and Indiana. She added that different guidance from the IRS established other exclusions that benefited four states – Georgia, Massachusetts, South Carolina, and Virginia. In closing, Mayes wrote that “it would…be fundamentally arbitrary and inequitable to preclude Arizona and its taxpayers from relying on that guidance, particularly given the materially similar (and less restrictive) state programs that the IRS found to be nontaxable in whole or in part last year.”
Mayes asked for the IRS to reply to her letter “by return letter or through amended published guidance no later than February 6.”
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
by Daniel Stefanski | Jan 24, 2024 | News
By Daniel Stefanski |
Arizona’s Republican Senate President is standing with families over a recent decision from the Internal Revenue Service (IRS).
Late last week, the Arizona State Senate Republican Caucus announced that President Warren Petersen “is working diligently to come to a resolution that will protect the more than 700,000 recipients from having to give the federal government a portion of [the 2023 Arizona Families Tax Rebate] this tax season.”
According to the Senate Republicans, the IRS recently made the decision to collect federal income taxes on the rebate, which was passed in the 2023 Arizona budget compromise between legislative Republicans and Democrat Governor Katie Hobbs. The caucus noted that “more than a dozen other states have passed similar legislation, in which the IRS concluded those funds were not considered taxable income.”
On February 10, 2023, the IRS released a determination that taxpayers in many of the states that issued special payments in 2022 would “not need to report these payments on their 2022 tax returns.”
In a statement that accompanied his news release, Petersen said, “It makes zero sense that the IRS is choosing to hurt Arizona families by taxing a tax rebate. I’m thankful for the help from Senator Sinema’s office in working to get this matter front and center with the IRS and U.S. Treasury. With tax season less than two weeks away, time is of the essence. While litigation likely isn’t the best approach, I appreciate the Attorney General’s office reaching out to us on this matter.”
The Senate President was critical of Governor Hobbs’ perceived inaction to protect families in this matter, saying, “I am, however, incredibly disappointed our Governor is again nowhere to be found on an issue that could ultimately cost our citizens tens of millions of dollars. I’m calling on her to not turn a blind eye on this issue, as she did with gas prices last spring, and to work with us on solving this problem for Arizona families.”
Petersen’s sharp rebuke follows a back-and-forth between the Governor’s Office and legislative Republicans this past fall, after Hobbs championed “the deployment of the Arizona Families Tax Rebate.” Hobbs said, “I made a promise that when I took office, I would take every opportunity I had to make it easier for Arizonans to provide for their families and lower the cost of living.”
Hobbs’ actions surrounding the issuance of rebates to Arizona families earned a Cease and Desist letter from attorneys for Petersen and House Speaker Ben Toma. The letter highlighted an agreement in the FY 2024 budget that “[n]o letter relating to the Arizona families tax rebate issued under this section shall…reference the governor’s office.” According to the letter, the Arizona Department of Revenue had “distributed, apparently to all individuals who are eligible for the Families Tax Rebate, a letter that advises them to ‘visit the Arizona Department of Revenue’s online claim portal….’ The advertised URL, however, not only explicitly references the Governor but directs users to the Governor’s own website. Further, clicking the designated link on the homepage brings the user not to the Department’s portal, but rather to another webpage in the azgovernor.gov domain that features a video of self-congratulatory bloviations form the Governor.”
Republican Senator Jake Hoffman shredded the action from the Governor’s Office, stating, “The sad reality exposed by this situation is that Katie Hobbs doesn’t care about anyone other than herself. She tried to play fast and loose with the law, as she so often does, and forced Director Woods to violate it.”
Another Senate Republican, T.J. Shope, said, “I know the Governor wanted no part of this tax rebate but thankfully, the Arizona Senate and House caucuses, led by the Arizona Freedom Caucus, stood strong and demanded it be part of the State Budget. When we stick together, we can provide positive things for Arizona’s families.”
President Petersen will try to make contact with liaisons from the IRS and U.S. Treasury Department in an attempt to reverse the decision from the federal government in the days before the new tax season commences.
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
by AZ Free Enterprise Club | Nov 19, 2023 | Opinion
By the Arizona Free Enterprise Club |
If you look up “failure” in the dictionary, it’s probably only a matter of time until you start seeing images of Katie Hobbs’ time as Governor of Arizona. Hobbs kicked off her reign back in January and immediately got off to a rocky start. After being in office for just over a month, Hobbs had her inauguration fund called into question, had her pick to lead the Arizona Democratic Party rejected, and was booed at the 16th Hole of the Waste Management Phoenix Open.
If that wasn’t enough, Hobbs’ nominations for agency directors have been a complete disaster. Her pick to lead the Department of Health Services, Dr. Theresa Cullen, was rejected for her COVID imperialism. Her nominee for Housing Director was rejected due to a history of plagiarism. And she was forced to withdraw her nominee for Arizona Registrar of Contractors, former Democratic State Senator Martín Quezada, over his alliance with antisemitic extremism. It’s no wonder why Hobbs was listed as one of the least popular governors in the nation.
That’s probably why Hobbs is willing to do anything she can to get some good publicity, but her latest stunt was another misfire…and broke the law…
>>> CONTINUE READING >>>
by Corinne Murdock | Nov 3, 2023 | News
By Corinne Murdock |
Gov. Katie Hobbs is now taking credit for the family tax rebate she opposed initially — and had a state agency break the law in doing so, according to legislative leaders.
Hobbs championed the tax rebate on Tuesday with several surprise links crediting herself for the Arizona Families Tax Rebate Program, including an Arizona Department of Revenue (ADOR) application page for the program displaying her headshot. In a video and press release, Hobbs indicated that she played a major role in passing and had always fully supported the initiative.
“I made a promise that when I took office, I would take every opportunity I had to make it easier for Arizonans to provide for their families,” said Hobbs. “I’m so pleased to be able to deliver this relief.”
However, the webpage and promotional material in concert with Hobbs’ announcement runs afoul of the law on the rebate.
“[N]o letter relating to the Arizona families tax rebate issued under this section shall be sent from the governor’s office, be sent on the governor’s letterhead, or reference the governor’s office,” read SB 1734.
Sen. President Warren Petersen (R-LD14) and House Speaker Ben Toma (R-LD27) issued a cease and desist letter to ADOR over Hobbs’ announcement. The letter declared that the application page that Hobbs directed Arizonans to use was an impermissible detour and an illegal expenditure of public funds.
“While any violation of a controlling statute is troubling in its own right, the Department’s letter compounds an institutional insult with injury to Arizona taxpayers by unlawfully expending significant sums of public money to disseminate what is, in part, a political message,” stated the letter.
The budget did include a somewhat prophetic provision concerning Hobbs: a worry that the governor would subvert policy for political gain.
“Animating this provision was the Legislature’s concern that Governor Katie Hobbs would subvert a commonsense policy measure into a self-serving political stunt on the taxpayers’ dime,” stated the cease and desist letter. “[T]he Department impermissibly misdirected rebate recipients on a detour through the Governor’s curated, self-promotional online platform. This is clear violation of Arizona law.”
State Sen. Jake Hoffman (R-LD15), chairman of the Arizona Freedom Caucus, lamented that ADOR would be on the hook for Hobbs’ public relations display.
“The sad reality exposed by this situation is that Katie Hobbs doesn’t care about anyone other than herself. She tried to play fast and loose with the law, as she so often does, and forced Director Woods to violate it,” said Hoffman. “Thanks to Hobbs, he is now personally liable for $2M+ in illegally spent funds, a 20 percent penalty, court costs, and attorneys’ fees. And with a statute of limitations of 5 years, Katie has given Director Woods the gift of many sleepless nights for years to come.”
Hoffman advised other government agencies to take heed of ADOR’s alleged mistake by resisting pressure from the governor to act and by keeping receipts for everything the governor and her office may request.
Concerning Hobbs taking credit for the program, State Sen. President Pro Tempore T.J. Shope (R-LD16) indicated in a response post that she wanted “no part” of it. Shope said credit was due to the Arizona Freedom Caucus.
“I know the Governor wanted no part of this tax rebate but thankfully, the @AZSenateGOP & @AZHouseGOP caucuses, led by the @AZFreedomCaucus, stood strong and demanded it be part of the State Budget,” said Shope.
State Rep. Austin Smith responded that no House or Senate Democrats contributed to the tax rebate package initiated by the Arizona Freedom Caucus.
Hobbs’ spokesman, Christian Slater, told Capitol Media Services that the governor had supported the tax rebate by signing the budget, despite her initial opposition to the program.
The Sen. Republican Caucus similarly criticized Hobbs for failing to ascribe credit to those who came up with and fought for the rebate.
“You’re a little late to the party,” said the caucus. “Glad you love Republican policies as much as we do. They really do make our state a better place to live, work, and play.”
Sam Stone, “Breaking Battle” radio show host and former Phoenix City Council candidate, called Hobbs’ 180 on the program “pathetic.”
The Arizona Families Tax Rebate Program entitles Arizona taxpayers with dependent children a single payment of up to $750. Approximately 750,000 Arizona families may be eligible.
The rebate metes out to $250 per dependent under the age of 17 and $100 per dependent over the age of 17 as claimed on 2021 returns. A taxpayer can’t claim more than three dependents, regardless of age.
Eligible taxpayers are those who: filed a full-year resident personal income tax return for the 2021 tax year; claimed at least one dependent tax credit for the 2021 tax return; filed the 2021 tax year Arizona personal income tax return as the only taxpayer on a single, married filing separate, or Head of Household return, or as the primary or first-listed taxpayer if filed jointly; and had at least $1 in Arizona personal income tax liability in tax year 2021, 2020, or 2019.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
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