Bill requiring notice of tax hikes passes Arizona Legislature

Audio By Carbonatix

(The Center Square) - The Arizona Legislature is waiting for Gov. Katie Hobbs to sign a bill designed to notify taxpayers before their taxes go up.

Senate Bill 1221, which passed recently along party lines in the state House and Senate, requires the Arizona Department of Revenue to inform the Senate Finance Committee and the House Ways and Means Committee of new interpretations of tax law that will adversely affect taxpayers.

State Sen. J.D. Mesnard, the Chandler Republican who introduced the bill, told The Center Square on Tuesday that since he has been a senator, “every couple of years,” the Arizona Department of Revenue issues new interpretations of state tax laws.

When this happens, he said, Arizona residents reach out to him, saying they owe taxes on something that previously wasn't taxed.

For these situations, Mesnard said, it would be “better for policymakers to be looped in on the front end” rather “than the back end” so they can engage with the Department of Revenue on its new interpretation.

It is always “frustrating to be in a reactive environment rather than a proactive one," Mesnard said.

"Taxpayers should not wake up one day and discover a state agency has quietly changed the rules in a way that costs them money," he said.

"If the Department of Revenue wants to adopt a new interpretation of tax law that negatively impacts Arizona families, job creators or small businesses, there ought to be transparency, public scrutiny and accountability first,” the senator added.

Mesnard said a bill similar to SB 1221, which he introduced in 2025, passed the Legislature but was vetoed by Hobbs.

Despite what happened last year, the state senator said he is hopeful Hobbs will sign this year's bill.

Mesnard's legislation does not give legislative tax committees any power to influence the Department of Revenue’s new interpretations.

But it does allow the committees' chairs to decide whether to hold a hearing. If the hearing is held, the Department of Revenue would need to testify and explain its new interpretation.

Holding the committee hearings before new tax interpretations are implemented is an effort to provide transparency for Arizona taxpayers who may be affected, Mesnard said.

He noted the tax committees in the Arizona Legislature have a good working relationship with the Department of Revenue.

Mesnard said this bill is not a criticism of the Department of Revenue.

The department is “going to interpret statute as best [it] can,” he added.