WASHINGTON, D.C. — Today, U.S. Representatives David Schweikert (AZ-01), Juan Ciscomani (AZ-06), and Greg Stanton (AZ-04) sent a letter to IRS Commissioner Daniel Werfel urging the agency to reconsider its decision to subject the Arizona Families Tax Rebate Program to federal income taxation. Last year, more than 700,000 Arizona taxpayers were made eligible to receive a one-time tax rebate as the state continues to recover from historic inflation levels that placed severe financial strain on families across the state.

“The country is poorer now than it was three years ago, and Arizonans are no different, facing the brunt of financial pressure with supermarket prices now nearly 25% higher than in January 2020, for example. State officials acted in good faith with the reasonably available information to provide more than 700,000 households with much-needed relief from price increases on everyday goods and services. 

“We urge the IRS to reconsider its determination and provide expedited relief to compliant Arizonan taxpayers who have already filed their 2023 tax returns,” wrote the Arizona representatives.

The Congressmen also noted that tax rebates enacted by 21 states were determined to be tax exempt in guidance issued by the IRS in February 2023. Arizona’s tax rebate wasn’t signed into law for another three months, yet the IRS dragged out its decision to make the rebate taxable well past the period when state payments were issued.

“In December 2023, the IRS relayed its decision orally through a video meeting, providing no written explanation until February 15, 2024, eighteen days after the start of tax season, and only in response to a letter from the Arizona Attorney General challenging the decision. 

“In addition to failing to specify the factual and legal basis for the twenty-one states’ rebates and payments that were deemed nontaxable in 2022, and despite several of these programs being far less targeted at individual needs than the Arizona Tax Rebate, the inconsistent rationale left the state with no timely redress and no choice but to compel upon Arizona taxpayers an estimated $20.8 million in extra federal taxes. The inconsistency and delay in communication have resulted in undue financial strain on Arizonans.”

Read the full letter here.