Arizona Small Business Income Tax Booklet

Small Business Income Tax Booklet
Arizona Booklet:  Individual Income Tax Credits
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Arizona
Booklet

Small Business
Income Tax

This booklet contains:
	

Form 140-SBI

	

Form 204-SBI -

	

Form 140ES-SBI -

	

Form 301-SBI -

	

Form 309-SBI -

Small Business Income Tax Return

Extension Payment For Tax Year 2021
Small Business Income Tax Returns Only

Individual Estimated Income Tax Payment
Small Business Income Tax Return
Nonrefundable Individual Tax Credits and Recapture
for Forms 140-SBI, 140PY-SBI, 140NR-SBI or 140X-SBI
Credit for Taxes Paid to Another State or Country
For Forms 140-SBI, 140NR-SBI and 140PY-SBI



REPLACE WITH CONFORMITY NOTICE PAGE

Individual Income Tax - Highlights
Due Date for Calendar Year Filer
Your 2023 individual income tax return is due by midnight
on April 15, 2024. If you file under a valid extension, your
extended due date to file your income tax return is
October 15, 2024.

2023 Arizona Standard Deduction Amounts
Adjusted
The 2023 Arizona standard deduction amounts are:





$ 13,850 for a single taxpayer or a married taxpayer
filing a separate return;
$ 27,700 for a married couple filing a joint return; and
$ 20,800 for individuals filing a head of household
return.

Change to Standard Deduction Increase for
Charitable Contributions
For taxpayers who do not itemized deductions on their 2023
Arizona income tax return and elect to take the standard
deduction, the allowable Standard Deduction Increase was
modified. For tax year 2023, the allowable portion of your
charitable contributions used to compute your Standard
Deduction Increased was increased from 27% to 31% of the
qualified charitable contributions made during the tax year.
Taxpayers must complete page 3 of their personal income
tax form to claim the Standard Deduction Increase. (Arizona
Form 140, Form 140PY or Form 140NR).

2023 New Tax Rate of 2.5% for All Income
Levels and Filing Status
The Optional Tax Table and the X and Y Tax Table are now
obsolete.

2023
Credit for Contributions to Private School
Tuition Organizations (Form 323)
The allowable current year credit for contributions to private
school tuition organizations was adjusted for inflation
purposes. For 2022, the maximum current year credit is:
•
•

$655 for single and head of household taxpayers.
$1,308 for married taxpayers filing a joint return.

Credit for Contributions Made to Certified
School Tuition Organizations (Form 348)
The allowable current year credit for contributions to a
certified school tuition organization was adjusted for
inflation purposes. For 2022, the maximum current year
credit is:
•
•

$652 for single and head of household taxpayers.
$1,301 for married taxpayers filing a joint return.

New Individual and Corporate Nonrefundable
Tax Credits
Credit for Motion Picture Production Costs
(Form 334)
For taxable years beginning from and after December 31, 2022,
a tax credit is allowed against production costs paid by a
motion picture production company in this state that are
subject to taxation by this state and that are directly
attributable to a motion picture production. The tax credit
may be claimed on either the individual’s personal income
tax return (Form 140, 140NR, or 140PY) or the Small
Business Income tax return, if filing. (Form 140-SBI,
140NR-SBI, or 140PY-SBI)
For more information, see Credit Form 334 and instructions.

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Small Business Income Tax - Highlights

2023

Due date for Calendar Year Filers

New Individual Tax Credits

Your 2023 Small Business Income tax return is due by
midnight on April 15, 2024. If you file under a valid
extension, your extended due date to file your income tax
return is October 15, 2024.

Credit for Motion Picture Production Costs
(Form 334)
For taxable years beginning from and after December 31, 2022,
a tax credit is allowed against production costs paid by a
motion picture production company in this state that are
subject to taxation by this state and that are directly
attributable to a motion picture production. The tax credit
may be claimed on either the individual’s personal income
tax return (Form 140, 140NR, or 140PY) or the Small
Business Income tax return, if filing. (Form 140-SBI,
140NR-SBI, or 140PY-SBI)

2023 Arizona Small Business Income (SBI) Tax
The tax rate applicable to small business taxable income
reported on Forms 140-SBI, 140PY-SBI or Form 140NR-SBI
was reduced from 3.0% in 2022 to 2.5% for 2023.

For more information, see Credit Form 334 and instructions.

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2023 Small Business Income Tax Return (Residents)
For information or help, call one of the numbers listed:
Phoenix
(602) 255-3381
From area codes 520 and 928, toll-free
(800) 352-4090
Tax forms, instructions, and other tax information
If you need tax forms, instructions, and other tax information,
go to the department’s website at www.azdor.gov.
Income Tax Procedures and Rulings
These instructions may refer to the department’s income tax
procedures and rulings for more information. To view or print
these, go to our website select the About tab on the home page
and select Legal Research from the drop-down menu and then
click on Procedures or Rulings from the drop-down menu.
Using the Category box, select the tax type and then scroll down
to find the Document ID or use the Search Keyword function to
locate the document.
Publications
To view or print the department’s publications, go to our
website select the About tab on the home page and select Legal
Research from the drop-down menu and then click on
Publications from the drop-down menu.

Leave the Paper Behind - e-file!

•
•
•
•

Quicker Refunds
Accurate
Proof of Acceptance
Free **
No more paper, math errors, or mailing delays when you e-file!
Get your refund quicker with direct deposit.
E-file today and pay by April 15, 2024 to avoid penalties and
interest.
E-file through an authorized IRS/DOR e-file provider or by
using your personal computer and the Internet.
Visit our website at www.azdor.gov for a listing of approved
e-file providers and on-line filing sources.
** For free e-file requirements, check out our website at
www.azdor.gov.
AVOID PROCESSING DELAYS: Are you mailing your
Arizona Small Business income tax return? If you are mailing
your return to the department, you must include Form 140-SBI
with your Form 140, when filed. See the mailing instructions
for Form 140 for assembly order (form sequence) information.
NOTE: If you made any 2023 estimated tax payments for the
140-SBI tax return and are not electing to report small
business income on the 140-SBI return for tax year 2023, you
must file a zero “0” 2023 140-SBI return to claim any
overpayment from the 2023 estimated taxes. The overpayment
shown on Form 140-SBI tax return will be applied against any
tax liability (TAX DUE) shown on the personal income tax
return (Form 140). After netting the two returns, the
department will either issue a refund or bill the taxpayer for
any remaining tax due, if applicable.

Arizona Form
140-SBI

If you do not file a zero 140-SBI return to claim only the
overpayment from estimated taxes, the processing of the SBI
overpayment may be delayed along with any application to your
personal income tax liability shown on the return.

How do I file a zero “0” 140-SBI tax return?
1. Complete all information on lines 1, 2 and 3.
2. Select your filing status in box 95.
3. On the following lines, enter “0”.
• Line 10, Total Small Business Income
• Line 28, Subtotal
• Line 53, Arizona Small Business Taxable Income
• Line 54, Small Business Income Tax
• Line 56, Subtotal of Tax
• Line 58, Balance of Tax
4. Amounts must be entered on the following lines:
• Line 59c – Estimated Tax Payments
Enter the total amount of estimated tax payments made on
Form 140ES-SBI or through AZTaxes.gov during 2023 tax year
on line 59c (box 59a).
• Line 64 - Overpayment
• Line 66 - Balance of Overpayment
• Line 69, Refund
5. Sign and date the return. If you paid someone to prepare
your tax return, that person must also sign and date the
return.
6. Include Form 140-SBI return with your timely filed personal
income tax return.
If form is not complete or calculation lines are left blank.
processing your return may be delayed.

Who Can Use Form 140-SBI?

Beginning with tax year 2021, full-year resident individuals
may elect to report their small business income on Arizona
Form 140-SBI, Small Business Income, for the small business
income amount included in their federal adjusted gross income.
An individual’s small business income is reported on federal
Schedules B, C, D, E, F and Form 4797 (for amounts not
included on Schedule D).
Additional information and guidance can be found in the
department’s Publication 712, Summary of Arizona Small
Business Income and Taxation.

How do I elect to report Small Business
Income on Arizona Form 140-SBI?

Taxpayers make the election by simply completing
Form 140-SBI reporting their small business income and
including the completed form with their Arizona Form 140,
Resident Personal Income Tax Return, when filed. If you do not
timely file Form 140-SBI with your Form 140, your election
will be denied and the subtraction on your Form 140 will be
disallowed.

Arizona Form 140-SBI

What if You Cannot File on Time?

If you are electing to report your small business income on
Form 140-SBI, be sure to check the box on line 13 (13S) on
Form 140. If you are not making the election, do not check
box 13S or enter an amount on line 13 on Form 140.

You may request an automatic 6-month extension if you know
you will not be able to file on time. If you request an extension
to file your 2023 calendar year tax return, your due date is
October 15, 2024 to timely file your 2023 tax return.

NOTE: You must include Form 140-SBI with your Form 140,
when filed. If you do not include Form 140-SBI with your
Form 140, processing of you return may be delayed or your
subtraction on line Form 140, line 13, may be denied. See the
Mailing instruction (Form 140) for the correct address when
mailing both Form 140 and Form 140-SBI

If you file Form 204 requesting an extension for your
Form 140, it will also apply to Form 140-SBI. Do not file a
separate extension request for Form 140-SBI.
Only use Form 204-SBI to make an extension payment for
Form 140-SBI.

What if a Taxpayer Died?

NOTE: An extension does not extend the time to pay your
income tax. See the instructions for Arizona Form 204.

If a taxpayer died before filing a return for 2023, the taxpayer's
spouse or personal representative may have to file and sign a
return for that taxpayer. A personal representative can be an
executor, administrator, or anyone who is in charge of the
deceased taxpayer’s property.

To get a filing extension, you can either
•

The person who files the return should use the form the taxpayer
would have used. The person who files the return should print
the word "deceased" after the decedent's name and enter the
date of death after the decedent's name.

Claiming a Refund for a Deceased Taxpayer
If you are claiming a refund on Form 140-SBI for a deceased
taxpayer, you must complete Arizona Form 131-SBI, Claim for
Refund on Behalf of Deceased Taxpayer.

•

If you are claiming a refund on Form 140 for a deceased
taxpayer, you must also complete Arizona Form 131, Claim for
Refund on Behalf of Deceased Taxpayer. Place Form 131-SBI
behind the last page of Form 140-SBI. Place Form 131 behind
the last page of Form 140. See the form sequence at the end of
the instructions for completing Form 140.

Apply for a state extension (Arizona Form 204). To apply
for a state extension, file Form 204 by April 15, 2024. See
Form 204 for details. You do not have to include a copy of
the extension with your return when you file, but make sure
that you check box 82F (above your name) on page 1 of
the return. If you must make an extension payment for
your small business income tax return, use Arizona
Form 204-SBI, or visit www.AZTaxes.gov to make an
electronic payment.
Use your federal extension (federal Form 4868). File your
Arizona return by the same due date. You do not have to
include a copy of your federal extension with your return,
but make sure that you check box 82F (above your name)
on page 1 of the return.

When Should You File if You Are a Nonresident
Alien?
As a Nonresident Alien, do not file Form 140 or Form 140-SBI.
Use Form 140NR, Nonresident Personal Income Tax Return, to
report your Arizona sourced income and Form 140NR-SBI if
you elect to report your Arizona sourced small business income
on the Small Business Income Tax Return.
See the
instructions for Form 140NR for your filing due dates.

What are the Filing Dates and Penalties?
NOTE: If the due date for an income tax or related payment
falls on a weekend and/or legal holiday, the filing or payment
is considered timely if filed or paid on the next business day and
that business day is a day other than Saturday, Sunday or a
legal holiday.

What if You File or Pay Late?
Late Payment Penalty

If you pay your small business income tax liability late, we will
charge you interest and penalties on the amount you owe. If the
U.S. Post Office postmarks your 2023 calendar year return by
April 15, 2024, your return will not be late. You may also use
certain private delivery services designated by the Internal
Revenue Service (IRS) to meet the “timely mailing as timely
filed” rule. For more information, see “Mailing Your Return”
at the end of these instructions.

When Should You File?
NOTE: Your small business income tax return (Form 140-SBI)
must be timely filed (including extension). If you do not file
Form 140-SBI timely, your election will be denied and the
subtraction on your Form 140 will be disallowed.
Your small business tax return’s due date is the same as the due
date for your Form 140. Your 2023 calendar year small
business tax return is due no later than midnight, April 15, 2024.
File your return as soon as you can after January 1, 2024, but
no later than April 15, 2024 to timely file your 2023 tax
return.

Late Filing Penalty

You must file Form 140-SBI timely along with your Form 140
by the original due date (including valid extensions). If you file
Form 140-SBI late, your small business election will be denied
and the return rejected. In addition, the subtraction on
Form 140 return will be disallowed. In this case, no late filing
penalty will be assessed on your small business income tax
return. However, the late filing penalty may still be assessed on
your Form 140 return if it was filed late.

If you are a fiscal year filer, your return is due on the 15th day
of the fourth month following the close of your fiscal tax year.

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Arizona Form 140-SBI
If you amend your federal return changing amounts
originally reported on federal Schedules B, C, D, E, F and
Form 4797 for any year, you must also file an Arizona
Form 140X-SBI and 140X for that year.

If you file your Form 140 late, we will charge you a late filing
penalty on your Form 140. This penalty is 4½% (.045) of the
tax required to be shown on the return for each month or
fraction of a month the return is late. This penalty cannot exceed
25% (.25) of the tax found to be remaining due.

If the IRS makes a change to your federal taxable income for
any year, you must report that change to Arizona. You must file
Form 140X-SBI and 140X within 90 days of the final
determination of the IRS. You may use one of the following
two options to report this change.

Late Payment Penalty
If you pay your tax late, we will charge you a late payment
penalty. This penalty is ½ of 1% (.005) of the amount shown as
tax for each month or fraction of a month for which the failure
continues. We charge this penalty from the original due date of
the return until the date you pay the tax. This penalty cannot
exceed a total of 10% (.10) of the unpaid tax.

Option 1

You may file Forms 140X-SBI and 140X for that year. If you
choose this option, you must amend and mail your Arizona
returns within 90 days of the final determination of the IRS.
Include a complete copy of the federal notice with your
Forms 140X-SBI and 140X.

Underpayment of Estimated Tax Penalty
If an individual who fails to make the required small business
income estimated tax payments is subject to penalty on any
estimated tax payment that is late or underpaid. See Form 221-SBI
for more information.

Option 2
You may file a copy of the final federal notice with the
department within 90 days of the final determination of the IRS.

Extension Underpayment Penalty

If you choose this option, you must include a statement in which
you must:
1. Request that the department recompute your tax on
Forms 140-SBI and 140; and
2. Indicate if you agree or disagree with the federal notice.

If you file your return under an extension, you must pay 90%
(.90) of the tax shown on your return by the return's original due
date. If you do not pay this amount, we will charge you a
penalty. This penalty is ½ of 1% (.005) of the tax not paid for
each 30-day period or a fraction of a 30-day period. We charge
this penalty from the original due date of the return until the
date you pay the tax. This penalty cannot exceed 25% (.25) of
the unpaid tax. If we charge you the extension underpayment
penalty, we will not charge you the late payment penalty under
Arizona Revised Statutes (A.R.S.) § 42-1125(D).

If you do not agree with the federal notice, you must also
include any documents that show why you do not agree. If you
choose Option 2, mail the federal notice and any other
documents to:
Individual Income Audit
Arizona Department of Revenue
PO Box 29084
Phoenix, AZ 85038-9084

NOTE: If you are subject to two or more of the above penalties,
the total cannot exceed 25%.

Interest

Do You Need to Make Arizona Estimated
Payments For the Small Business Tax
Return in 2024?

We charge interest on any tax not paid by the due date. We will
charge you interest even if you have an extension. If you have
an extension, we will charge you interest from the original due
date until the date you pay the tax. The Arizona interest rate is
the same as the federal rate.

NOTE: If you will be filing a zero “0” tax return for tax year
2024 only reporting an overpayment of any 2024
estimated/extension payments made you are not required to
make estimated small business tax payments for tax year 2024.

When Should You Amend a Return?
If you need to make changes to your small business tax return
after you have filed, do not file a new return using Form 140-SBI.
You must file Arizona Form 140X-SBI, Small Business
Amended Income Tax Return. File your amended return after
your original return has processed. Generally, you have four
years to amend a return to claim a refund.

Taxpayers are required to make small business income
estimated tax payments if the small business income liability
will exceed $1,000 (small business income tax less allowable
tax credits). Taxpayers must pay 90% of current or 100% of
last year’s tax liability. The 100% of last year exception only
applies if a taxpayer filed a small business income tax return in
the prior year.

If either of the following applies, file Form 140X-SBI.

•
•

You are changing any amount originally reported on
Form 140-SBI or latest amended return.
You are rescinding your election to report small business
on Form 140-SBI.

See Form 140ES-SBI, page 2 to determine if you are required
to make estimated tax payments in 2024.
Use the worksheet for Arizona Form 140ES-SBI to figure how
much your payments should be. For more information about
making estimated payments, see the department’s publication,
Pub. 012, Arizona Individual Estimated Income Tax Payments.

If you amend your small business income tax return, you are
required to amend your Form 140, using Form 140X. For more
information, see the instructions for Form 140X.
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Arizona Form 140-SBI

What if You Make Your Estimated Payments Late?

Identification Numbers for Paid Preparers

We will charge you a penalty if you are late or if you fail to
make any required payments. See Arizona Form 221-SBI.

If you pay someone else to prepare your return, that person must
also include an identification number where requested. A paid
preparer may use any of the following:
• his or her PTIN;
• his or her SSN; or
• the EIN for the business.

Can You Make Estimated Payments Even if You
Do Not Have To?
If you do not have to make Arizona estimated income tax
payments, you may still choose to make them. For details, see
Arizona Form 140ES-SBI.

A paid preparer who fails to include the proper identification
number may also be subject to a penalty.

Line-by-Line Instructions

Box 3a - Injured Spouse Protection of Joint
Overpayment

Tips for Preparing Your Return
•

You must complete your federal return before you can start
your Arizona small business income tax return.

•

Make sure that you enter your Social Security Number
(SSN) on your return that you entered on your Form 140.
Complete your return using black ink. If you are married
filing a joint return, make sure that you enter your spouse’s
SSN entered on Form 140.
You must round dollar amounts to the nearest whole
dollar. If 50 cents or more, round up to the next dollar. If
less than 50 cents, round down. Do not enter cents.
If you are mailing your return, see mailing instructions for
Form 140 for the assembly order.
Make sure you include your daytime telephone number.
If filing a fiscal year return, fill in the period covered.

•

•

•
•
•

Check box 3a only if you and your spouse are filing a joint
return and you or your spouse qualify as an injured spouse and
are requesting protection from application of any joint
overpayment against the other spouse’s delinquencies or debts
for back child support, court fees, and fees to counties, cities or
educational institutions. The taxpayer (spouse) requesting
injured spouse protection must have made estimated
payments on Form 140-SBI.
NOTE: You cannot use Form 203 to request protection from
offset for past-due federal taxes. You must contact the IRS.
You must complete Arizona Form 203, Request for Injured
Spouse Protection from Application of Joint Overpayment
Against Spouse’s Delinquencies and Debts, and include that
form with your tax return when filed. For more information,
see the instructions for Form 203.

Entering Your Name, Address, and SSN

Determining Your Filing Status – Line 95
(Boxes 95a through 95d)

Lines 1, 2, and 3
NOTE: Make sure you enter your SSN on the appropriate line
and your SSN is correct. If you are filing a joint return, also
make sure you enter your SSNs in the same order every year.

The filing status that you use on your Arizona small business
income tax return (Form 140-SBI) must be the same filing
status used on your Form 140. For information on determining
your filing status, see the instructions for Forms 140.
• Check box 95a if you are married and filing a joint return.
• Check box 95b if you are married and filing a separate
return.
• Check box 95c if you are filing as Head of Household.
• Check box 95d if you are filing as single.

Enter your name, address, and SSN in the space provided as
reported on Form 140. If you are filing a joint return, enter
your SSNs in the same order as your first names. If your
name appears first on the return, make sure your SSN is the
first number listed.
If you are married filing separately, enter your name and SSN
on the first line 1. Enter your spouse’s name and SSN on the
second line 1.

For more information on filing a joint tax return with your partyear resident or nonresident spouse, see the department’s
ruling, ITR 14-1, Filing a Joint Tax Return When a Resident
Spouse is Married to a Part-Year Resident or Nonresident.

Make sure that you enter your SSN on your return. Make sure
that all SSNs are clear and correct. You may be subject to a
penalty if you fail to include your SSN. It will take longer to
process your return if SSNs are missing, incorrect, incomplete
or unclear.

Totaling Your Income
Lines 4 through 9
You must complete your federal return (Schedules B, C, D, E,
F and Form 4797) before you enter an amount on lines 4
through 9. You must complete a 2023 federal return to
determine your federal adjusted gross income, even if you are
not filing a federal return.
Arizona uses federal Schedules B, C, D, E, F and Form 4797 as
a starting point to determine your Arizona small business
taxable income and the adjustment taken on Form 140, line 13.

Use your current home address or PO Box. The department will
mail your refund to or correspond with you at that address.
For a deceased taxpayer, see page 2 of these instructions.

Foreign Addresses
If you have a foreign address, enter the information in the
following order: city, province or state, and country. Follow
the country’s practice for entering the postal code. Do not
abbreviate the country name.
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Arizona Form 140-SBI
Line 8 – Federal Schedule F

NOTE: You must complete lines 4 through 10 on Form 140-SBI
to determine the amount to enter on line 13 (Form 140).

Enter the amount of profit or loss from farming that is reported
on federal Schedule F and included in federal adjusted gross
income.

Line 4 – Federal Schedule B
Enter the amount of your interest and ordinary dividends
income reported on your federal Schedule B and included in
federal adjusted gross income.

Line 9 – Federal Form 4797
Enter the amounts reported on federal Form 4797 that are not
reported on federal Schedule D. These amounts are reported on
federal Schedule 1. Enter only those amounts reported on
federal Schedule 1 and included in federal adjusted gross
income.

Line 5a – Federal Schedule C
Enter the amount of your profit or loss from business reported
on your federal Schedule C and included in federal adjusted
gross income.

Line 10 - Total Small Business Income

Line 5b

Add lines 4, 5a, 6, 7a, 8 and 9. Enter the total.

Enter your NAICS code shown on your Federal Schedule C. If
you have more than one Schedule C, enter the NAICS code
from Schedule C with highest gross receipts.

Total amount entered on line 10 is also reported on Form 140,
line 13.

Additions to Income

Line 6 – Federal Schedule D

Line 11 - Fiduciary Adjustment

Enter the portion of net capital gains or losses that are included
in federal schedule D and federal adjusted gross income (FAGI)
that are from the sale of an ownership interest in a non-publicly
traded entity or the disposition of capital assets used in
connection with a trade or business activity (including goodwill
and going concern value). All other capital gains or losses that
were included in FAGI should be reported on Form 140.

A fiduciary uses Arizona Form 141AZ Schedule K-1 to report
to you your share of the fiduciary adjustment from the trust or
estate.

Line 7a – Federal Schedule E

Line 3 of Form 141AZ Schedule K-1 shows your share of the
fiduciary adjustment from the estate or trust. If the amount
reported on line 3 of your Form 141AZ Schedule K-1 is a
positive number, enter that amount on line 11.

Enter the amount of supplemental income and loss reported on
your federal Schedule E and included in federal adjusted gross
income.

NOTE: If the amount reported on line 3 of your Form 141AZ
Schedule K-1 is a negative number, enter that amount on
line 34.

NOTE: The amount entered on line 7a should equal the sum
of lines 7b through 7f.

Line 12 - Non-Arizona Municipal Interest
Enter the amount of interest income from non-Arizona
municipal bonds that you did not include as small business
income on your federal Schedule B.

Line 7b – Rental Real Estate, Royalties
Enter the total amount of income or loss from rental real estate
and royalties reported on your federal Schedule E, Part I and
included in federal adjusted gross income.

You may exclude any expenses incurred to purchase or carry
the obligation. Reduce the interest income by the amount of
those expenses that you could not deduct on your federal return.

Line 7c – Income or Loss from Partnerships and S
Corporations

If you received tax exempt interest from municipal bonds, keep
a schedule listing the payors and the amount received from each
payor for your records. You should also keep supporting
documents for amounts received from Arizona municipal bonds
that are exempt from Arizona income tax. These may be items
such as bank statements, brokerage statements, etc.

Enter the total amount of partnership and S Corporations
income or loss reported on your federal Schedule E, Part II and
included in federal adjusted gross income.
Line 7d – Income or Loss from Estates and Trusts
Enter the total amount of estate and trusts income or loss
reported on your federal Schedule E, Part III and included in
federal adjusted gross income.

Line 13 - Partnership Income Adjustment
Complete line 13 if you received an Arizona Form 165
Schedule K-1 and line 3 shows a difference between federal and
state distributable income.

Line 7e – Income or Loss from Real Estate Mortgage
Investment Conduits (REMICs)

If the difference reported on line 3 of your Form 165
Schedule K-1 is a positive number, enter that difference as an
addition on line 13.

Enter the total amount of REMIC income or loss reported on
your federal Schedule E, Part IV and included in federal
adjusted gross income.

NOTE: If the difference reported on line 3 of your Form 165
Schedule K-1 is a negative number, enter the difference on 37.

Line 7f – Income or Loss from Farm Rental
Enter the total amount of farm rental income or loss from
federal form 4835 that is reported on your federal Schedule E,
Part V and included in federal adjusted gross income.
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Arizona Form 140-SBI
Line 14 - Total Federal Depreciation

•

Enter the total amount of depreciation deducted on your federal
return. If you make an entry here, you should also take a
subtraction on line 37. To figure how much you should subtract,
see the instructions for line 37.

•

Line 15 - Net Capital (Loss) from Exchange of One
Kind of Legal Tender for Another Kind of Legal
Tender

•

•

NOTE: Only claim the addition on this return if the net capital
loss to which the addition relates to the Arizona Small Business
Income Tax Return.

You computed your tax for that prior year under Arizona's
claim of right provisions.
A net operating loss or capital loss was established due to
the repayment made in the prior year.
You are entitled to take that net operating loss or capital
loss carryover into account when computing your 2023
Arizona taxable income.
The amount of the loss carryover included in your federal
income is more than the amount allowed to be taken into
account for Arizona purposes.

Include the amount by which the loss carryover included in
your federal adjusted gross income is more than the amount
allowed for the taxable year under Arizona law.

To determine if you are required to make this addition to
income, you must net all gains and (losses) from all exchanges
of one kind of legal tender for another kind of legal tender,
including amounts shown on Form 165 Schedule K-1,
Form 120S Schedule K-1, and Form 141AZ Schedule K-1.

Line 18 – Agricultural Water Conservation Expenses
Related to the Tax Credit claimed on Arizona
Form 312
If you claiming a credit on Arizona Form 312 on Form 301-SBI,
enter the amount expenses related to the tax credit claimed. See
Credit Form 312 for more information.

Enter the amount of any net capital (loss) included in line 6 for
the taxable year that is derived from the exchange of one kind
of legal tender for another kind of legal tender.

Line 19 – Addition to S Corporation Income Due to
Claiming Pass-Through Credit on Form 312

NOTE: If the amount from all sources results in a net capital
gain from the exchange of one kind of tender for another kind
of tender, enter that amount on line 36.

Shareholders of an S Corporation who claim a credit passed
through from an S corporation on Form 301-SBI must make an
addition to income for the amount of expenses disallowed by
reason of claiming the credit. An S Corporation that passes the
credit through to its shareholders must notify each shareholder
of their pro rata share of the adjustment. You must include an
amount on this line when claiming the Agricultural Water
Conservation System Credit (Form 312). See Credit Form 312
for more information.

For the purposes of this paragraph:
"Legal tender" means a medium of exchange, including specie
that is authorized by the United States Constitution or Congress
for the payment of debts, public charges, taxes and dues.
"Specie" means coins having precious metal content.
Line 16 – Claim of Right Adjustment for Small
Business Amounts Repaid in 2023

Line 20 - Depreciation or Amortization Related to the
Tax Credits Claimed on Arizona Forms 315 and 325

NOTE: For lines 16, 17 and 23; if the income required to be
paid back under the claim of right is the type of income that
would be included in lines 4 through 9 if the income was
reported in 2023, make this adjustment here. All other claim of
right adjustments should be made on 140 return, page 5.

If you claimed these tax credits, you must adjust your depreciation
or amortization computed under the internal revenue code with
respect to property for which a credit was taken under either section
43-1081.01 (Form 325) or for pollution control equipment for
which a credit was taken on before taxable year 2022 (Form 315)
that exceeds the amount of depreciation or amortization computed
pursuant to the internal revenue code on the Arizona adjusted basis
of the property.

You must make an entry here if all of the following apply:
• During 2023, you were required to repay amounts held
under a claim of right.
• The amount required to be repaid during 2023 was more
than $3,000.
• You took a deduction for the amount repaid on your 2023
federal income tax return.

Line 21 - Basis Adjustment for Property Claimed as a
Credit on Form 338 that is Sold or Disposed of During
the Tax Year
If you claim this credit for an investment in a qualified small
business, you must adjust your basis in the investment by the
amount of the credit claimed. You must report this difference
in basis on the Arizona return that you file for the taxable year
in which you sell or otherwise dispose of the investment. If you
sold or otherwise disposed of the investment during the taxable
year, include the amount by which the adjusted basis
computed under the IRC with respect to that property
exceeds the adjusted basis of the property computed under
A.R.S. § 43-1074.02.

If the above apply, include the amount deducted on your federal
income tax return. For more information on the Arizona claim
of right provisions, see the department’s procedure, ITP 16-1,
Procedure for Individuals Who Restore Substantial Amounts
Held under a Claim of Right.
Line 17 – Claim of Right Adjustment for Small
Business Amounts Repaid in Prior Years
You must make an entry here if all of the following apply:
• During a year prior to 2023, you were required to repay
small business income amounts held under a claim of right.
6

Arizona Form 140-SBI
Line 27 – Credit for Motion Picture Production Costs
(Form 334)
If you are claiming a credit on Form 334, Credit for Motion
Picture Production Costs, you must make an adjustment
(addition) to your Arizona gross income for the amount of any
motion picture production costs that was deducted pursuant to
the Internal Revenue Code (IRC) for which a tax credit is
claimed on Form 334.

Line 22 - Basis Adjustment for Property Claimed as a
Credit on Forms 315 and 325 that is Sold or Disposed
of During the Tax Year
You must make an adjustment for the amount by which the
adjusted basis computed under the internal revenue code with
respect to property for which a credit was claimed under section
43-1081 (Form 315) or 43-1081.01 (Form 325) for which a credit
was taken before taxable year 2022 and that is sold or otherwise
disposed of during the taxable year exceeds the adjusted basis of
the property computed under section 43-1081 (Credit 315) or
43-1081.01 (Credit 325).

If you received a pass-through credit from a partnership, LLC or
S Corporation, you must also add-back your pro-rated expenses
shown on your Form 334-P, Line 4b and/or Form 334-S,
line 4b, provided by the pass-through entity.

Line 23 - Adjustment for Net Operating Loss due to
Claim of Right

Line 28 - Subtotal
Add lines 10 through 27. Enter the total

You must add-back the adjustment for any net operating loss
previously claimed that is related to the amount of your claim
of right reported.

Subtractions from Income
Lines 29 through 32

Line 24 – Americans with Disabilities Act – Access
Expenditures

NOTE: For lines 29-32; only include capital gains or (losses)
on these lines if the capital gain or (loss) was included in
line 6.

If a subtraction is taken on line 50, for the full amount of eligible
business access expenditures paid or incurred during the taxable
year to comply with the Americans with Disabilities Act of
1990 or A.R.S Title 41, chapter 9, article 8; you must make an
addition to Arizona gross income for any amount that is
included in the computation of federal adjusted gross income
for the current year, plus any federally amortized amounts.

NOTE: If you enter an amount on line 29, you must complete
lines 30 and 31. If you are taking a subtraction on line 33 for
any net long-term capital gain from assets acquired after
December 31, 2011, you must also complete line 32. If you do
not complete lines 29 through 32, you cannot take the
subtraction on line 33.

Line 25 - Entity-Level Income Tax Payment

You may subtract 25% (.25) of any net long-term capital gain
included in your federal Schedule D from small business
income and included in line 6 that is derived from an investment
in an asset acquired after December 31, 2011.

If you are claiming the income tax credit on Form 355, Credit
for Entity-Level Income Tax Paid on Your Behalf from a
Partnership and/or an S Corporation, you must add the amount
deducted by the partnership and/or S Corporation for the
amount of Arizona income tax paid on your behalf in 2023.

Complete the Worksheet for Net Long-Term Capital Gain
Subtraction for Assets Acquired after December 31, 2011, at the
end of these instructions to determine the allowable subtraction.
Keep the worksheet for your records.

Enter the total amount of tax paid shown on:

•
•

Arizona Form 165, Schedule K-1, Part 5, lines 10 and 11.
Arizona Form 120S, Schedule K-1, Part 5, lines 9 and 10.

NOTE: If you do not have any net capital gain or (loss) to
report, enter zero, “0” on lines 29-32.

NOTE: Enter the tax amount actually paid by the Partnership
or S Corporation in 2023. Tax amounts paid in 2024 for tax
year 2023 will be added-back on your 2024 tax return. These
payments include any 4th QTR estimated taxes paid in January
2024 and any 2024 tax payments made with the Entity’s tax
return on your behalf.

Line 29 - Total Net Capital Gain or (Loss)
Enter the amount included in line 6.
Line 30 - Total Net Short-Term Capital Gain or (Loss)
Enter the total amount of net short-term capital gain or (loss)
included in line 6

Line 26 - Sole Proprietorship loss of an AZ Nonprofit
Medical Marijuana Dispensary included in Schedule C.

NOTE: If you are not required to report dividend distributions
and/or short-term capital gains from mutual funds on federal
Form Schedule D, do not include the short-term capital gain
distributed by the mutual fund on line 30.

If you are registered as an Arizona sole proprietorship with the
Arizona Department of Health Services to operate in this state
as a nonprofit medical marijuana dispensary, you are required
to add the amount of the loss from the dispensary that is
included in the computation of your federal adjusted gross
income. Include the amount of the loss.

Line 31 - Total Net Long-Term Capital Gain or (Loss)
Enter the total amount of net long-term capital gain or (loss)
reported included in line 6.
If your net long-term capital gain (loss) is limited to an amount
reported on Form 1099-DIV and you were not required to
complete federal Schedule D, enter the amount shown on
Form 1099-DIV on line 31.

NOTE: If the Arizona nonprofit medical marijuana dispensary
is registered with the Arizona Department of Health Services as
anything other than a sole proprietorship, this addition does not
apply.
7

Arizona Form 140-SBI
Line 32 - Net Long-Term Capital Gain from Assets
Acquired After December 31, 2011

NOTE: If the amount reported on line 3 of your Arizona
Form 141AZ Schedule K-1 is a positive number, enter that
amount on line 11.

NOTE: Only include net long-term capital gains on this line if
it can be verified that the small business income asset was
acquired after December 31, 2011. If the date of acquisition
cannot be determined, the asset is considered to have been
acquired before January 1, 2012. For purposes of this line, an
asset acquired by gift or inheritance is considered acquired on
the date it was acquired by the gift-giver or the deceased
individual.

Line 35 - Net Capital Gain from Investment in an
Arizona Qualified Small Business
To take the subtraction for a net capital gain from investment in
an Arizona qualified small business, you must net all gains and
(losses) from investments in Arizona qualified small businesses
including amounts shown on Forms 165 Schedule K-1
120S Schedule K-1, and/or 141AZ, Schedule K-1.

If you completed the worksheet at the end of these instructions,
enter the amount from line 5 of the worksheet.

You may subtract the amount of any net capital gain included
in federal adjusted gross income (Schedule D) for the taxable
year derived from investment in a qualified small business as
determined by the Arizona Commerce Authority (ACA)
pursuant to A.R.S. § 41-1518.

If you did not complete the worksheet and you have no net longterm capital gain from assets acquired after December 31, 2011,
enter zero, “0”.
Line 33 - Net Long-Term Capital Gain Subtraction From
Income for Assets Acquired After December 31, 2011.

To qualify for this subtraction, your investment in the qualified
small business must have been made after the ACA certified the
company as a qualified small business and before the
company’s certification expiration date. An investment made
prior to certification or after the expiration of certification does
not qualify for this subtraction. See the ACA’s website, Small
Business Incentives: Angel Investment, for a list of certified
businesses and their certification dates.

Multiply the amount on line 32 by 25% and enter the result.
CAUTION: If you take a subtraction for the net capital gain
derived from investment in a qualified business (line 35) or the net
capital gain from the exchange of one kind of legal tender for
another kind of legal tender (line 36 ), that includes any long-term
capital gain from an investment made after December 31, 2011,
you cannot include that portion in your computation of the
allowable subtraction on line 33 for any net long-term capital gain
from assets acquired after December 31, 2011, and included in
line 6. For more information, see the worksheet at the end of these
instructions.

On line 35, enter the amount of the allowable subtraction.
Line 36 - Net Capital Gain from the Exchange of One
Kind of Legal Tender for Another Kind of Legal
Tender
To take this subtraction you must net all gains and (losses) from
all exchanges of kind of legal tender for another kind of legal
tender including amounts shown on Forms 165 Schedule K-1,
120S Schedule K-1, and/or 141AZ, Schedule K-1.

NOTE: 1099-DIV: If Form 1099-DIV did not include the
acquisition date of each asset sold within the fund, you cannot
verify that the long-term capital gain was from an asset
acquired by the Fund was after December 31, 2011, for the
purpose of the allowable subtraction on line 33. In this case,
you may want to contact the Fund Administrator and request to
obtain the acquisition date of each asset sold within the fund.
If the Administrator does not provide you with the specific
date(s), then those assets cannot be included on line 32.

Enter the amount of any net capital gain included in line 6 for
the taxable year that is derived from the exchange of one kind
of legal tender for another kind of legal tender.
NOTE: If the amount from all sources results in a net capital
(loss) from the exchange of one kind of tender for another kind
of tender, enter that amount on line 15.

1099-B: Form 1099-B generally includes your purchase date
of the fund including acquisition dates of assets included in
your portion of the fund when reporting short-term or long-term
capital gains or (losses). In this case, you would know the
specific date the asset was acquired and those assets may be
included on line 32.

For the purposes of this subtraction:

Line 34 – Fiduciary Adjustment (Negative) from
Arizona Form 141AZ K-1

Line 37 - Recalculated Arizona Depreciation

"Legal tender" means a medium of exchange, including specie
that is authorized by the United States Constitution or Congress for
the payment of debts, public charges, taxes and dues.
"Specie" means coins having precious metal content.
NOTE: For more information and examples of how to
calculate Arizona bonus depreciation, see the department’s
procedure, ITP 16-2, Procedure for Individuals who Claim
Federal and/or Arizona Bonus Depreciation.

A fiduciary uses Form 141AZ Schedule K-1 to report to you
your share of the fiduciary adjustment from the trust or estate.
Line 3 of Form 141AZ Schedule K-1 shows your share of the
fiduciary adjustment from the estate or trust. If the amount
reported on line 3 of your Arizona Form 141AZ Schedule K-1
is a negative number, enter the amount on line 34.

For assets placed in service in taxable years beginning
before December 31, 2012, enter the total amount of
depreciation allowable pursuant to IRC § 167(a) for the taxable
8

Arizona Form 140-SBI
year, calculated as if you had elected not to claim bonus
depreciation for eligible properties for federal purposes.

any amount received from an IRA that invests in U.S.
Government obligations. These amounts are not interest
income. For details, see the department’s rulings, ITR 96-2,
Pension Plan Distributions Derived from Investment in U.S.
Government Obligations; and ITR 96-3, Distributions
Comprised of Income Earned by the IRA.

For assets placed in service during taxable years beginning
from and after December 31, 2012 through December
31, 2013, the amount of the subtraction for these assets depends
on the method used to compute the depreciation for these assets.

Line 40 - Net Operating Loss Adjustment For Losses
incurred in 2008 or 2009

For assets placed in service in taxable years beginning from
and after December 31, 2013 through December 31, 2015,
enter the total amount of depreciation allowable pursuant to
IRC § 167(a) for the taxable year, calculated as if the bonus
depreciation is 10% (.10) of the amount of federal bonus
depreciation pursuant to IRC § 168(k).

Arizona did not adopt the special federal net operating loss rules
for losses incurred during 2008 or 2009. For Arizona purposes,
you must deduct a net operating loss as if the loss was computed
under IRC §172 in effect prior to the enactment of those special
rules. If you made an election to deduct your 2008 or 2009
federal net operating loss under IRC § 172(b)(1)(H), you may
have to enter an amount here. Figure how much of the net
operating loss carry forward would have been allowed as a
deduction on your 2023 federal income tax return, if the
election described in IRC § 172(b)(1)(H) had not been made in
the year of the loss. Enter the amount that exceeds the actual
net operating loss carry forward that was deducted in arriving
at federal adjusted gross income.

For assets placed in service in taxable years beginning from
and after December 31, 2015 through December 31, 2016,
enter the total amount of depreciation allowable pursuant to
IRC § 167(a) for the taxable year, calculated as if the bonus
depreciation is 55% (.55) of the amount of federal bonus
depreciation pursuant to IRC § 168(k).
For assets placed in service in taxable years beginning from
and after December 31, 2016, enter the total amount of
depreciation allowable pursuant to IRC § 167(a) for the taxable
year, calculated as if the bonus depreciation had been the full
amount (100%) of federal bonus depreciation pursuant to
IRC § 168(k).

NOTE: This subtraction applies to only those individuals who
made an election under the special federal net operating loss
rules for 2008 and 2009. Under the special rules for 2008 and
2009, you could have elected to carry the net operating loss
back for 3, 4 or 5 years, instead of the normal 2 years. This
election would have been allowed under IRC § 172(b)(1)(H) as
amended by the American Recovery and Reinvestment Act of
2009 or the Worker, Homeownership, and Business Assistance
Act of 2009.

Add all of the amounts together and enter the total on line 37.
Line 38 – Partnership Income Adjustment)
Use this adjustment if you received an Arizona Form 165
Schedule K-1, line 3 that shows a difference between federal
and state distributable income.

Line 41 - Agricultural Crops Given to Arizona
Charitable Organizations

If the difference reported on line 3 of your Arizona Form 165
Schedule K-1 is a negative number, enter that difference on
line 38. Do not include a minus sign or use parentheses.

Arizona law allows a subtraction for qualified crop gifts made
during 2023 to one or more charitable organizations. To take
this subtraction, all of the following must apply:
• You must be engaged in the business of farming or
processing agricultural crops.
• The crop must be grown in Arizona.
• You made your gift to a charitable organization located in
Arizona that is exempt from Arizona income tax.

NOTE: If the difference reported on line 3, of your Arizona
Form 165 Schedule K-1, is a positive number, enter that
amount on line 13.
Line 39 - Interest on U.S. Obligations
Enter the amount of interest income from U.S. Government
obligations included as income on your federal return. U.S.
Government obligations include obligations such as savings
bonds and treasury bills. You cannot deduct any interest or
other related expenses incurred to purchase or carry the
obligations. If such expenses are included in your Arizona gross
income, you must reduce the subtraction by such expenses.

The subtraction is the larger of the wholesale market price or
the most recent sale price for the contributed crop. The amount
of the subtraction cannot include any amount deducted pursuant
to IRC § 170 with respect to crop contribution that exceeds the
cost of producing the contributed crop.
To determine if your crop gift qualifies for this subtraction, see
the department’s procedure, ITP 12-1, Establishing an Income
Tax Subtraction for Agricultural Crops Contributed to
Charitable Organizations.
Line 42 – Installment Sale Income from Another State
Taxed by the Other State in a Prior Year
You may subtract income from an installment sale if both of
the following apply:

If you are itemizing deductions on your Arizona return, you
must exclude such expenses from the amount deducted.
NOTE: Do not subtract interest earned on Fannie Mae (FNMA)
or Ginnie Mae (GNMA) bonds since this interest is taxable by
Arizona. For details, see the department's ruling, ITR 06-1,
Obligations of the United States Government, Federal
Agencies, and United States Territories.
Do not subtract any amount received from a qualified pension plan
that invests in U.S. Government obligations. Do not subtract

•
9

The income from the sale is included in Arizona Small
Business Gross Income (line 10) in 2023.

Arizona Form 140-SBI
•

total amount of ordinary and necessary expenses reported on
Arizona Schedule DFE, Disallowed Federal Expense
Schedule for Marijuana Establishments, line 16. Include this
schedule with your tax return, when filed.
Do not include Cost of Goods Sold or any other expenses
already allowed to be deducted on your federal return in the
total amount of expenses reported on this line.

You paid income tax to another state on that income in a
prior tax year.

Include the amount of such income that you included in your
Arizona Small Business gross income for 2023.
Do not include any amount that is subject to tax by both Arizona
and another state in 2023. In this case, you may be eligible for
a tax credit. See Arizona Form 309-SBI for details.
Line 43 – Basis Adjustment for Property Sold or
Otherwise Disposed on During the Tax Year
For small business property that is sold or otherwise disposed
of during the taxable year by a taxpayer who has complied with
the requirement to add back all depreciation for that property
on tax returns for all taxable years beginning from and after
December 31, 1999, include the amount of depreciation that has
been allowed pursuant to IRC § 167(a) to the extent that the
amount has not already reduced Arizona taxable income in the
current or prior years. (Note: The practical effect of this is to
allow a subtraction for the difference in basis for any asset for
which bonus depreciation has been claimed on the federal
return.)
Line 44 – Claim of Right Adjustment for Amounts
Repaid in Prior Years
You may subtract the income required to be paid back under the
claim of right that is included in lines 4 through 9 if the income
were reported in 2023.
Line 45 - Sole Proprietorship Income of an Arizona
Nonprofit Medical Marijuana Dispensary Included in
Federal Adjusted Gross Income

•

NOTE: If the Arizona nonprofit medical marijuana dispensary
is registered with the Arizona Department of Health Services as
anything other than a sole proprietorship, this subtraction does
not apply.

If you received any of the above federal tax credits for 2023,
include the portion of wages or salaries you paid or incurred
during the taxable year equal to the amount of those federal tax
credits you received.

If you are registered as an Arizona sole proprietorship with the
Arizona Department of Health Services to operate in this state
as a nonprofit medical marijuana dispensary, you may subtract
the amount of the income from the dispensary that is included
in the computation of your federal adjusted gross income.

Line 49 - Exploration Expenses Deferred before
January 1, 1990

NOTE: Sole Proprietors and disregarded LLCs must contact
the Arizona Department of Health Services (ADHS) to make
the election to operate on a for-profit basis.
Line 47 - S Corporation Shareholders – Marijuana
Establishment, Testing Facilities and Dual Licensees
that Elected to Operate on a For-profit Basis
Enter the amount of your pro-rata share of ordinary and
necessary expenses related to the sales of recreational use
products as shown on your Form 120S Schedule K-1, line 7.
Line 48 – Amount of Wages or Salaries Paid or
Incurred During the Tax Year and Used to Claim
Certain Federal Tax Credits
You may subtract some expenses that you cannot deduct on
your federal return when you claim certain federal tax credits.
These federal tax credits include the following:
•
•
•

the Federal Work Opportunity Credit;
the Empowerment Zone Employment Credit;
the credit for employer-paid social security taxes on
employee cash tips; and
the Indian Employment Credit.

Call one of the numbers on page 1 of these instructions if you
deferred exploration expenses determined under IRC § 617 in a
taxable year ending before January 1, 1990, and you have not
previously taken a subtraction for those expenses.
Line 50 – Americans with Disabilities Act – Access
Expenditures
A subtraction is allowed for eligible business access
expenditures paid or incurred during the taxable year to comply
with the requirements of the Americans with Disabilities Act of
1990 or A.R.S. Title 41, chapter 9, article 8 by retrofitting
developed real property that was originally placed in
service at least ten years before the current taxable year.
(A.R.S. §§ 43-1022 and 43-1024)

In addition, a sole proprietorship of an Arizona dual licensee
that has not elected to operate on a for-profit basis may
subtract the portion of income included in federal adjusted gross
income that is from the medical marijuana portion of the
business.
NOTE: A dual licensee that elects to operate on a for-profit
basis does not qualify for a subtraction for the medical
marijuana portion of their business.

Line

46 - Sole Proprietorship – Marijuana
Establishment, Testing Facilities and Dual Licensees
that Elected to Operate on a for-profit Basis
A sole proprietorship that takes the allowable subtraction for
the income of an Arizona Nonprofit Medical Marijuana
Dispensary (NMMD) under item “L”, cannot take this
allowable subtraction.
A Sole Proprietorship or disregarded LLC that operates a
marijuana establishment, marijuana testing facility, or dual
licensee that elects to operate on a for-profit basis, enter the

“Eligible business access expenditures” include reasonable and
necessary amounts paid or incurred to do any of the following:
• Remove any barriers that prevent a business from being
accessible to or usable by individuals with disabilities.
• Provide qualified interpreters or other methods of making
audio materials available to hearing-impaired individuals.

10

Arizona Form 140-SBI
•
•
•

Line 54 - Small Business Income Tax
Multiply line 53 by 2.5% (.025) and enter the result.
Line 55 - Tax From Recapture of Credits From Arizona
Form 301-SBI
Enter the amount of tax due from recapture of the credits from
Arizona Form 301-SBI, Part 2, line 24.

Provide qualified readers, taped texts, and other effective
methods of making visually delivered materials available
to individuals with visual impairments.
Acquire or modify equipment or devices for individuals
with disabilities.
Provide other similar services, modifications, materials, or
equipment.

Line 56 – Subtotal of Tax

NOTE: A taxpayer who has been cited for noncompliance with
the Americans with Disabilities Act of 1990 or A.R.S. Title 41,
chapter 9, article 8 by either federal or state enforcement
officials is ineligible for a subtraction under this section for any
expenditure required to cure the cited violation.

Add lines 54 and 55. Enter the total.
Line 57 - Nonrefundable Credits from Arizona
Form 301-SBI
Complete line 57 if you claim any of the following credits. Also
make sure that you complete and include Form 301-SBI and the
appropriate credit form or forms with your return.

Line 51 – Virtual Currency and Non-Fungible Tokens
To the extent not already excluded from Arizona gross income
under the internal revenue code, the value of virtual currency
and non-fungible tokens the taxpayer received pursuant to an
airdrop at the time of the airdrop. This paragraph may not be
interpreted as providing a subtraction for any appreciation in
value that occurs from holding the virtual currency after the
initial receipt of the airdrop.

Credit for Increased Research Activities - Individuals
You may qualify for this credit if you incurred qualified
research expenses for research conducted in Arizona. Use
Form 308-I to figure this credit. Be sure to include only the
nonrefundable portion on Form 140-SBI, line 57.
Credit for Taxes Paid to Another State or Country You
may qualify for this credit if you paid tax to Arizona and another
state or country on the same income. Use Form 309-SBI to
figure your credit.

For the purpose of this subtraction, A.R.S. § 43-1028 defines
the following:
•
•

•

•

Airdrop as the receipt of virtual currency through a means
of distribution of virtual currency to the distributed ledger
addresses of multiple taxpayers.
Non-fungible tokens (NFT) as a non-fungible
cryptographic asset on a blockchain that possesses unique
identifiers or other metadata that distinguishes the asset
from another token or asset in a manner that makes the
asset irreplaceable and non-exchangeable for a similar
token or asset.

Agricultural Water Conservation System Credit You
may qualify for this credit if you incurred expenses to purchase
and install an agricultural water conservation system in
Arizona. Use Form 312 to figure this credit.
Pollution Control Credit This credit was repealed for
individual taxpayers for tax years beginning from and after
December 31, 2021. All credits that were properly established
can be carried forward for the respective five year carry forward
period. Use Form 315 to figure this credit.

Virtual currency as a digital representation of value that
functions as a medium of exchange, a unit of account and
a store of value other than a representation of the U.S.
dollar or a foreign currency.

Agricultural Pollution Control Equipment Credit You
may qualify for this credit if you are involved in commercial
agriculture and incurred expenses to purchase tangible personal
property that is primarily used in your trade or business to
control or prevent pollution. Use Form 325 to figure this credit.
Credit for Donation of School Site You may qualify for
this credit if you donated real property and improvements to a
school district or a charter school for use as a school or as a site
for the construction of a school. Use Form 331 to figure this
credit.
Credit for Employing National Guard Members You
may qualify for this credit if you are an employer who has an
employee that is a member of the Arizona National Guard if the
employee is placed on active duty. Use Form 333 to figure this
credit.

Foreign currency as the coin and paper money of a
country other than the United States that is designated as
legal tender, circulates and is customarily used and
accepted as a medium of exchange in the country of
issuance.

Line 52 - Gas Fees or Non-Fungible Token Basis
The amount allowed as a subtraction by section 43-1028 for gas
fees not already included in the taxpayer's virtual currency or
non-fungible token basis.
For the purpose of this subtraction, A.R.S. § 43-1028 defines
the following:
Gas Fees as a fee paid to the operator of a virtual network
for the use of the network to facilitate the purchase, sale or
exchange of virtual currency or an NFT.
Line 53 - Arizona Small Business Taxable Income
Subtract lines 33 through 52 from line 28. If less than zero,
enter “0”.
•

Credit for Business Contributions by an S
Corporation to School Tuition Organizations Individual S corporations that make qualifying contributions
of $5,000 or more may pass-through the credit to its individual
shareholders on a pro rata basis. See Form 335-I for more
information.
11

Arizona Form 140-SBI
Line 58 - Balance of Tax
Subtract line 57 from line 56. If line 57 is greater than line 56,
enter "0".
Line 59 – (Boxes 59a and 59b and Line 59c) 2023
Estimated Tax Payments and Claim of Right
Box 59a: Enter the amount of 2023 small business income
estimated tax payments made for tax year 2023.
Box 59b: If you completed an Arizona Claim of RightIndividual tax form, enter the amount from line 8.
If you completed more than one claim of right form for the
current taxable year, add all amounts on line 8 and enter the
total in box 59b.

Credit for Solar Energy Devices - Commercial and
Industrial Applications The credit for installed solar energy
devices for commercial, industrial, or other nonresidential
applications located in Arizona has expired. All credits that
were properly established can be carried forward for the
respective five year carry forward period. Use Form 336 to
figure this credit.
Credit for Investment in Qualified Small Businesses
You may qualify for this credit if you made an investment in a
qualified small business. Use Form 338 to figure this credit.
Credit for Business Contributions by an S Corporation
to School Tuition Organizations for Displaced
Students or Students with Disabilities – Individual
S corporations that make qualifying contributions of $5,000 or
more may pass-through the credit to its individual shareholders
on a pro rata basis. See Form 341-I for more information.

NOTE: For more information on Arizona's claim of right
provisions, see the department’s procedure, ITP 16-1,
Procedure for Individuals Who Restore Substantial Amounts
Held Under a Claim of Right.

Renewable Energy Production Tax Credit You may
qualify for this credit if you produced electricity using a
qualified energy resource. Use Form 343 to figure this credit.
Credit for New Employment You may qualify for this credit
if your business had a net increase in qualified employment
positions. Use Form 345 to figure this credit.
Additional Credit for Increased Research Activities
for Basic Research Payments You may qualify for this
credit for qualified basic research payments for research
conducted in Arizona. Approval by the Department of Revenue
is required prior to claiming this credit. Use Form 346 to figure
this credit.
Healthy Forest Production Tax Credit You may qualify
for this tax credit if you meet all of the qualifications or receive
a pass-through credit from a partnership or S Corporation. All
credits that were properly established can be carried forward for
the respective five year carry forward period. Use Form 353 to