Multistate: Arizona and Vermont Adopt Conformity Legislation

Arizona and Vermont have recently updated their connection to the Internal Revenue Code. Arizona Senate Bill 1752, signed April 14, 2021, adopts the Internal Revenue Code in effect as of March 11, 2021 for tax years beginning from and after December 31, 2020. For tax years beginning from and after December 31, 2019 through December 31, 2020, the IRC means the Code as in effect on January 1, 2020 including those federal provisions in the COVID-19 relief bills (e.g., CARES Act, CAA, ARPA) that were effective in 2020. The recently adopted bill did not add any new non-conformity additions or subtractions, but did keep in place previous non-conformity adjustments, for example, bonus depreciation.

Vermont’s conformity bill, House Bill 315, was enacted on April 17, 2021 when it became law without signature of the governor.  The section of the bill that adopted the IRC as of December 31, 2020 is applicable to taxable years beginning on and after January 1, 2020. Another section of the bill, and one of the reasons the governor declined to sign the bill, decoupled from the federal treatment of forgiven Paycheck Protection Program loans and made them subject to tax by disallowing the exclusion of such loans from gross income for taxable years beginning on or after January 1, 2021. The bill did, however, specify that it does not affect the deduction of expenses paid with forgiven PPP loan amounts. Please stay tuned to TWIST for additional conformity updates.