Court Opinion

ID: 6479127
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:50:20.053065+00
Date Added: 2024-06-11T15:54:05.564733
License: Public Domain

GERBER, Judge,
dissenting.
I respectfully part company with the majority on the conclusion that the broad lan*333guage of A.R.S. section 43-102(A)(3), regarding federal “accounting methods,” intends to incorporate the special rules found in 26 U.S.C. section 441(f)(2) for the purpose of determining eligibility for deductions provided by Arizona law.
A.R.S. section 43-102(A)(3) expresses the legislature’s intent to graft onto state tax law a broad range of federal Internal Revenue Code provisions relating to taxable corporate income. The result intended is that federal taxable income of a corporation be the identical sum reported to this state’s revenue service. A.R.S. section 43-1101(1) and (2) effect this intention by defining a corporation’s “Arizona gross income” as its “federal taxable income for the taxable year.”
The operative language of section 43-102 expresses an intention to adopt only those federal tax provisions that yield a corporation’s bottom-line federal taxable income. Given the precise language of subsections 43-102(A)(2) and (3), and the limited way A.R.S. section 43-1101(1) and (2) effectuate their objective, I can’t find in A.R.S. section 43-102(A)(3) a legislative intention to incorporate 26 U.S.C. section 441(f) for any purpose other than determining a corporation’s federal taxable income.
Arizona’s incorporation of section 441(f)(1) by way of A.R.S. section 43-1101(1) already encompasses section 441(f)(2) to the extent appropriate to its language, because section 441(f)(2) will affect the income or deductions to be included in the calculation of federal taxable income for the taxable year when applied in the federal taxing scheme as Congress intended. A.R.S. section 43-102(A)(3) does not reveal any legislative intent to incorporate 26 U.S.C. section 441(f)(2) for any additional purpose beyond the one that section 43-102(A)(2) states expressly.
As to the majority’s reliance on case law, Weyerhaeuser depends on Illinois Income Tax Act section 1-102 whose broad language shows an intent to adopt both sections (1) and (2) of 26 U.S.C. section 441(f). Arizona has no such broad statute. As to Eastman Kodak, that case assumes what this court’s majority seeks to prove, namely that a state legislature meant to adopt the provisions of section 441(f)(2). A legislative decision to adopt section 441(f)(1) hardly shows intent to adopt section 441(f)(2). Adoption of one does not entail the other. For these reasons, I cannot conclude that “accounting methods” incorporates section 441(f)(2). Therefore, I would reverse the tax court on the 52-53 week issue.