Arizona Eyes ‘Tax-Free’ Status: New Bill Seeks to Ban Local Crypto Taxes

Arizona lawmakers are weighing a brand new try to carve out a extra permissive tax setting for digital belongings, as a trio of proposals introduced by State Senator Wendy Rogers pushes to restrict how cryptocurrencies and blockchain infrastructure will be taxed on the state and native stage.

The effort facilities on two payments and a constitutional decision prefiled with the Arizona Senate late final week.

One proposal, SB 1044, would amend state statutes to exempt digital forex from taxation, whereas one other, SB 1045, would bar counties, cities, and cities from imposing taxes or charges on folks or corporations that function blockchain nodes.

A 3rd measure, SCR 1003, would amend Arizona’s structure to explicitly exclude digital forex from property tax. If enacted, the node-related invoice might take impact by means of the state legislature alone.

Arizona Pushes Crypto Tax Boundaries, however Voters Hold the Final Say

The broader tax exemption proposals, nevertheless, would require voter approval throughout Arizona’s subsequent basic election in November 2026.

Under present regulation, Arizona isn’t a tax-free state. Residents pay a flat private revenue tax price of two.5%, along with a state gross sales tax referred to as the Transaction Privilege Tax, which begins at 5.6% and rises above 8.5% on common as soon as native charges are included.

Property taxes are additionally collected, although they’re typically decrease than in lots of different states.

Cryptocurrency is treated as property for federal tax functions, which means gross sales, trades, or funds set off capital beneficial properties or losses.

Arizona largely follows that framework however has adopted a number of crypto-specific guidelines. Since December 2022, the state has exempted crypto airdrops from state revenue tax by treating them as presents on the time they’re obtained, regardless that federal taxes nonetheless apply.

*Source: Arizona Form 165 Schedule K-1(NR)*

Arizona additionally permits transaction charges, or gasoline charges, to be deducted when calculating beneficial properties or losses and permits state businesses to settle for cryptocurrency funds by means of accepted service suppliers.

Rogers’ newest proposals would go additional by making an attempt to take away digital forex from the state’s tax base completely and by shielding blockchain node operators from native authorities levies.

Arizona already stands out as one of many few states with a regulation permitting the federal government to declare possession of digital belongings deemed deserted after three years, a measure tied to earlier efforts to set up a state-level digital asset reserve.

The senator was additionally a co-sponsor of a Bitcoin reserve invoice vetoed in May by Governor Katie Hobbs.

In June, the Arizona Senate later passed a revised Bitcoin reserve bill because it cleared the chamber in a slim 16–14 vote after approving a movement to rethink the measure.

From State Experiments to Capitol Hill, Crypto Tax Rules Are Back in Play

The Arizona push comes as debates over crypto taxation intensify nationwide. A handful of states, together with Florida, Texas, Wyoming, and Nevada, don’t impose private revenue taxes, successfully making most crypto beneficial properties tax-free on the state stage.

Others have taken extra focused approaches. Missouri, in August, eliminated state revenue tax on capital beneficial properties, whereas Ohio lawmakers have advanced a proposal to exempt small crypto transactions below $200, although that invoice has stalled.

At the federal stage, Congress is making ready to revisit crypto tax coverage after practically a decade of counting on Internal Revenue Service steerage issued in 2014.

In December, Representative Max Miller said a draft bill to modernize digital asset taxation might transfer earlier than the August 2026 recess.

More not too long ago, bipartisan House lawmakers released a discussion draft that would exempt small stablecoin funds from capital beneficial properties tax and permit a five-year deferral on staking and mining rewards.

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