43-1096

43-1096. Credit for income taxes paid by
nonresident; definitions

A. Subject to the following conditions, nonresidents shall be allowed a credit
against taxes imposed by this title for net income taxes imposed by and paid to the state
or country of residence on income taxable under this title:

1. The credit shall be allowed only if the state or country of residence either
does not tax income of residents of this state derived from sources within that state or
country or allows residents of this state a credit against taxes imposed by that state or
country on the income for taxes paid or payable under this title.

2. The credit shall not be allowed for taxes paid to a state or country which
allows its residents a credit against the taxes imposed by that state or country for
income taxes paid or payable under this title irrespective of whether its residents are
allowed a credit against the taxes imposed by this title for income taxes paid to that
state or country.

3. The credit shall be allowed only for the proportion of the taxes paid to the
state or country of residence as the income taxable under this title and also subject to
tax in the state or country of residence bears to the entire income on which the taxes
paid to the state or country of residence are imposed.

4. The credit shall not exceed the proportion of the tax payable under this title
as the income taxable under this title and also subject to tax in the state or country of
residence bears to the entire income taxable under this title.

B. For the purposes of this section, net income taxes imposed by another country
include taxes that qualify for a credit under sections 901 and 903 of the internal
revenue code and the regulations under those sections.

C. For the purposes of this section:

1. "Entire income on which the taxes paid to the state or country of residence are
imposed" means the other state's or country's adjusted gross income computed under the
equivalent of section 43-1001, but does not include any exemption allowable under the
equivalent of section 43-1023.

2. "Entire income taxable under this title" means Arizona adjusted gross income
computed under section 43-1094 but does not include any exemption allowed under section
43-1023.

3. "Income taxable under this title and also subject to tax in the state or country
of residence" means the portion of income that is included in entire income taxable under
this title that is also included in the entire income on which the taxes paid to the
state or country of residence are imposed. The taxpayer shall increase or reduce the
portion of income that is included in the entire income taxable under this title by any
related additions under section 43-1021 and by any related subtractions under section
43-1022. The taxpayer shall increase or reduce the portion of income that is included in
the entire income on which taxes paid to the state or country of residence are imposed by
any related additions and subtractions under the other state's equivalent of sections
43-1021 and 43-1022, as applicable.

4. "Tax payable under this title" means the income tax imposed by this state on the
taxpayer's taxable income computed under section 43-1095 minus all of the following:

(a) The reduction amount received under section 16-954, subsection A.

(b) Any tax credit amount claimed under section 16-954, subsection B.

(c) Any tax credit amount claimed for the taxable year under article 5 of this
chapter but not including the credit amount allowed under this section.