Instructions For Form 165 - Arizona Partnership Income Tax Return

Arizona Form 165

allowable pursuant to IRC § 167(a) for the taxable year

Line B5 - Agricultural Crops Charitable Contribution

calculated as if the taxpayer had elected not to claim bonus

Enter the amount of the allowable subtraction for qualified

depreciation for eligible properties for federal purposes.

crop contributions made during the taxable year to one or

For assets placed in service in taxable years beginning from

more Arizona tax exempt charitable organizations for use in

and after December 31, 2012 through December 31, 2013, the

Arizona. Refer to Arizona Individual Income Tax Procedure

amount of the subtraction for these assets depends on the

ITP 12-1 for information on how to determine if the

method used to compute the depreciation for assets. See the

contribution qualifies for the subtraction.

department’s income tax procedure, ITP 14-3, for more

Line B6 - Other Subtractions from Partnership Income

information. Note: Do not include the adjustment for the

2013 Arizona bonus depreciation on line B1. Line B1 is for

Enter the following "other subtractions" from partnership

the current year depreciation. Report this adjustment

income; include a schedule listing each item separately.

separately on line B6. See the specific instructions for line

A. Excess of Partner's Share of Partnership Income or

B6 (F).

Loss

For assets placed in service in taxable years beginning from

Make this adjustment if the partnership is a partner in another

and after December 31, 2013, enter the total amount of

partnership. Enter the excess of the partner's share of the

depreciation allowable pursuant to IRC § 167(a) for the

income or losses included under IRC § 702(a)(8) over the

taxable year calculated as if the bonus depreciation is 10% of

income included under A.R.S. §§ 43-1401 through 43-1413.

the amount of federal bonus depreciation pursuant to IRC

§ 168(k). See the department’s income tax procedure, ITP 14-

B. Mine Exploration Expenses

3, for more information.

Arizona no longer has special mine exploration expense

Add all amounts together and enter the total on line B1.

provisions for partnerships. Arizona now conforms to the

federal treatment of mine exploration expenses. However, if

Line B2 - Basis Adjustment for Property Sold or

the partnership deferred exploration expenses under Arizona's

Otherwise Disposed of During the Taxable Year

former provisions, the partnership may subtract such deferred

With respect to property that is sold or otherwise disposed of

expenses. The partnership claims the subtraction on a ratable

during the taxable year by a taxpayer who has complied with

basis as the units of produced ores or minerals discovered or

the requirement to add back all depreciation with respect to that

explored as a result of such expenditures are sold. Enter the

property on tax returns for all taxable years beginning from and

amount of such deferred exploration expenses.

after December 31, 1999, enter the amount of depreciation that

C. Interest on Federally Taxable Arizona Obligations

has been allowed pursuant to IRC § 167(a) to the extent that

Evidenced by Bonds

the amount has not already reduced Arizona taxable income in

the current or prior years. The effect of this is to allow a

Enter the amount of interest income received on obligations

subtraction for the difference in basis for any asset for which

of the State of Arizona, or any of its political subdivisions,

bonus depreciation has been claimed on the federal return.

evidenced by bonds, that is included on the federal

Line B3 - Interest from U.S. Government Obligations

Form 1065, Schedule K. Omit interest income received on

obligations of the State of Arizona, or any of its political

Enter the interest income received from U.S. obligations

subdivisions, exempt from federal taxation and not included

included on the federal Form 1065, Schedule K, exempt from

in the partnership's federal distributive income.

state income taxes under federal law.

D. Wood Stoves, Wood Fireplaces or Gas-Fired Fireplaces

NOTE: Not all obligations associated with the federal

Enter the amount allowed by A.R.S. § 43-1027 for the cost of

government are obligations of the federal government.

converting an existing wood fireplace to a qualified wood

Obligations

the

Government

National

Mortgage

stove, wood fireplace, or gas-fired fireplace on property

Association (GNMA) or the Federal National Mortgage

located in Arizona.

Association (FNMA) are not obligations of the U.S.

government and, therefore, are taxable to Arizona.

E. Expenses Related to Certain Federal Tax Credits

Line B4 - Difference in Adjusted Basis of Property

Enter the amount of wages or salaries paid or incurred by the

taxpayer for the taxable year not deducted in the computation

Enter the amount by which the adjusted basis of property

of Arizona gross income if the taxpayer received certain

described in this paragraph, computed according to Arizona

federal tax credits. The specific federal tax credits are the

law, exceeds the adjusted basis of such property computed

work opportunity credit, the empowerment zone employment

according to the Internal Revenue Code. Basis computed

credit, the credit for employer-paid social security taxes on

according to Arizona law means according to Title 43 of the

employee cash tips, and the Indian employment credit.

Arizona Revised Statutes, effective January 1, 1979, and the

Income Tax Act of 1954, as amended.

This adjustment

F. 2013 Arizona Depreciation Adjustment for Assets

applies to all property held for the production of income sold

Placed in Service in Taxable Year 2013

or otherwise disposed of during the taxable year.

This

For an asset placed in service during taxable year 2013,

adjustment does not apply to depreciable property used in a

Arizona law allows a taxpayer that claimed bonus

trade or business.

Instructions For Form 165 - Arizona Partnership Income Tax Return - 2014 Page 5

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