A.R.S. 43-1122 provides a specific list of subtractions for corporations in adjusting federal taxable income to Arizona taxable income. A.R.S. 43-1101.4 defines federal taxable income as taxable income of a corporation computed pursuant to the Internal Revenue Code. The starting point for the Arizona corporate income tax computation is the corporation's federal taxable income. A.R.S. 43-1122 provides subtractions from federal taxable income to arrive at Arizona taxable income for corporations.
Subtractions are allowable only when specifically authorized by statute.
Therefore, wage expenses which are not allowed as a deduction on the federal return as a result of a taxpayer claiming the targeted jobs credit may not be subtracted to arrive at Arizona taxable income. Arizona did not adopt the provisions of the federal Revenue Reconciliation Act of 1993 for purposes of computing federal taxable income of corporations. Under the Internal Revenue Code as defined in A.R.S. 43-104.13, the targeted jobs credit was not allowed on wages paid or incurred to an individual who began work for the employer after June 30, 1992. Wage expenses which were not allowed as a deduction in the computation of federal taxable income as a result of claiming the I.R.C. 51 targeted jobs credit may not be claimed as a subtraction in arriving at Arizona taxable income. The purpose of a tax ruling is to provide interpretive guidance to the general public and to department personnel.