This document provides instructions for completing Arizona's 1999 Part-Year Resident Personal Income Tax Form 140PY. It addresses who must file, filing dates and penalties, how to determine residency status, how to report income if the taxpayer died, and how to complete various parts of the form. Key details include: - Part-year residents must report all income earned while an Arizona resident plus any Arizona source income for the part of the year as a nonresident. - The filing deadline is April 17, 2000. Late filing or payment will result in penalties. - Residency is based on domicile and intent - if you move out of Arizona, you may still be considered a resident for tax purposes that year

1. Arizona Form
1999 Part-Year Resident Personal Income Tax 140PY
Are You Subject to Tax in Arizona? Do You Have to File if You Are in The Military?
As a part-year resident, you are subject to tax on all of the You must file if you meet the Arizona filing requirements.
following.
If you are an Arizona resident, you must report all of your
1. Any income you earned in 1999 while an Arizona income, no matter where stationed. You must include your
resident. This includes any interest or dividends military pay. If you were an Arizona resident when you
received from sources outside Arizona. entered the service, you remain an Arizona resident, no
matter where stationed, until you establish a new domicile.
2. Any income you earned from an Arizona source in 1999
before moving to (or after leaving) the state. If you are not an Arizona resident, but stationed in Arizona,
the following applies to you.
NOTE: If you also have Arizona source income and deductions
•
for the portion of the year you were an Arizona nonresident, file You are not subject to Arizona income tax on your
Arizona Form 140PY for the entire taxable year. military pay.
•
Do You Have to File? You must report any other income you earn in Arizona.
Use Form 140NR, Nonresident Personal Income Tax
Arizona Filing Requirements
Return, to report this income.
These rules apply to all Arizona taxpayers.
You must file if AND your OR your Arizona To find out more, see Arizona Department of Revenue
you are: gross income adjusted gross brochure, Pub 704, Taxpayers in the Military.
is at least: income is at least:
If You Included Your Child's Unearned
• Single $15,000 $5,500
Income on Your Federal Return, Does
• Married filing $15,000 $11,000
Your Child Have to File an Arizona
jointly
Return?
• Married filing $15,000 $5,500
separately In this case, the child should not file an Arizona return. The
• Head of $15,000 $5,500 parent must include that same income in his or her Arizona
household taxable income.
If you are a part-year resident, you must report all
Residency Status
income for the part of the year you were an Arizona
resident, plus any income from Arizona sources for the
If you are not sure if you are an Arizona resident for state
part of the year you were an Arizona nonresident.
income tax purposes, you should get Arizona Department of
To see if you have to file, figure your gross income the
Revenue Income Tax Procedure ITP 92-1.
same as you would figure your gross income for federal
Residents
income tax purposes. Then you should exclude income
Arizona law does not tax.
You are a resident of Arizona if your domicile is in Arizona.
You can find your Arizona adjusted gross income on Domicile is the place where you have your permanent home.
line 20 of Arizona Form 140PY. It is where you intend to return if you are living or working
temporarily in another state or country. If you leave Arizona
NOTE: You must file a state return even if your employer
for a temporary period, you are still an Arizona resident
withheld all or part of the tax. Even if you do not have to
while gone. A resident is subject to tax on all income no
file, you must still file a return to get a refund of any Arizona
matter where the resident earns the income.
income tax withheld.
If you are a full year resident, you must file Form 140, Form
Do You Have to File if You Are an
140A, or Form 140EZ.
American Indian?
Part-Year Residents
You must file if you meet the Arizona filing requirements
unless all the following apply to you. If you are a part-year resident, you must file Form 140PY,
• Part-Year Resident Personal Income Tax Return.
You are an enrolled member of an Indian tribe.
• You live on the reservation established for that tribe. You are a part-year resident if you did either of the following
• during 1999.
You earned all of your income on that reservation.
• You moved into Arizona with the intent of becoming a
To find out more, see Arizona Department of Revenue
resident.
Income Tax Ruling ITR 96-4.
• You moved out of Arizona with the intent of giving up
Do You Have to File if You Are a Non-
your Arizona residency.
Indian or Non-Enrolled Indian Married to
an American Indian? Nonresidents
You must file if you meet the Arizona filing requirements. If you are a nonresident, you must file Form 140NR,
For details on how to figure what income to report, see Nonresident Personal Income Tax Return.
Arizona Department of Revenue Income Tax Ruling ITR 96-4.

2. Form 140PY
What if a Taxpayer Died? are filing under a federal extension, you do not have to attach
a copy of your federal extension to your return, but make sure
If a taxpayer died before filing a return for 1999, the taxpayer's
that you check either box D or F on page 1 of the return.
spouse or personal representative may have to file and sign a return
When Should You File if You Are a
for that taxpayer. If the deceased taxpayer did not have to file a
Nonresident Alien?
return but had tax withheld, a return must be filed to get a refund.
The person who files the return should use the form the You must file your Arizona tax return by April 17, even
taxpayer would have used. If the department mailed the though your federal income tax return is due on June 15. If
taxpayer a booklet, do not use the label. The person who you want to file your Arizona return when you file your
files the return should print the word quot;deceasedquot; after the federal return, you may ask for an extension. See Form 204
decedent's name in the address section of the form. Also for extension filing details.
enter the date of death after the decedent's name.
If you are a fiscal year filer, your return is due on the 15th
If your spouse died in 1999 and you did not remarry in 1999, day of the fourth month following the close of your fiscal year.
or if your spouse died in 2000 before filing a return for 1999,
What if You File or Pay Late?
you may file a joint return. If your spouse died in 1999, the
joint return should show your spouse's 1999 income before If you file or pay late, the department can charge you interest
death, and your income for all of 1999. If your spouse died and penalties on the amount you owe. If the U.S. Post Office
in 2000, before filing the 1999 return, the joint return should postmarks your 1999 calendar year return by April 17, 2000,
show all of your income and all of your spouse's income for your return will not be late. You may also use certain private
1999. Print quot;Filing as surviving spousequot; in the area where delivery services designated by the IRS to meet the “timely
you sign the return. If someone else is the personal mailing as timely filed” rule.
representative, he or she must also sign the return.
Late Filing Penalty
Are Any Other Returns Required?
If you file late, the department can charge you a late filing penalty.
You may also have to file fiduciary income tax or estate tax This penalty is 5 percent of the tax found to be remaining due for
returns. For details about filing a fiduciary income tax return, each month or fraction of a month the return is late. This penalty
call the department at (602) 255-3381. For details about filing cannot exceed 25 percent of the tax found to be remaining due.
an estate tax return, call the department at (602) 542-4643.
Late Payment Penalty
Claiming a Refund For a Deceased Taxpayer
If you pay your tax late, the department can charge you a late
If you are claiming a refund, you must complete Form 131, payment penalty. This penalty is 10 percent of the tax not
Claim for Refund on Behalf of Deceased Taxpayer. Attach paid on time.
this form to the front of the return.
If you file your return under an extension, you must pay 90
percent of the tax shown on your return by the return's original
What Are the Filing Dates and Penalties?
due date. If you do not pay this amount, the department can
When Should You File? charge you a penalty. The department can also charge you this
penalty if you do not attach a copy of the Arizona extension to
April 15, 2000 falls on a Saturday. Therefore, your 1999
your return when you file. This penalty is one-half of one percent
calendar year tax return is due no later than midnight, April
(.005) of the tax not paid for each 30 day period or fraction of a
17, 2000. File your return as soon as you can after January 1,
30 day period. The department charges this penalty from the
but no later than April 17, 2000.
original due date of the return until the date you pay the tax. This
If you are a fiscal year filer, your return is due on the 15th penalty cannot exceed 25 percent of the unpaid tax.
day of the fourth month following the close of your fiscal year.
NOTE: If you are subject to two or more of the above
What If You Cannot File On Time? penalties, the total cannot exceed 25 percent.
You may request an extension if you know you will not be Interest
able to file on time.
The department charges interest on any tax not paid by the due
NOTE: An extension does not extend the time to pay your income date. The department will charge you interest even if you have an
tax. For details, see the instructions for Arizona Form 204. extension. If you have an extension, the department will charge
you interest from the original due date until the date you pay the
To get a filing extension, you can either:
tax. The Arizona rate of interest is the same as the federal rate.
1. Apply for a state extension (Form 204). To apply for a
When Should You Amend a Return?
state extension, file Arizona Form 204 by April 17. See
Form 204 for details. You must attach a copy of the If you need to make changes to your return once you have filed,
Arizona extension to the front of your return when you you should file Form 140X, Individual Amended Return. Do not
file. If you must make a payment, use Arizona Form 204. file a new return for the year you are correcting. Generally, you
have four years to amend a return to claim a refund.
2. You may use your federal extension (federal Form 4868 or
2688). File your Arizona return by the same due date. If you
2

3. Form 140PY
•
If the Internal Revenue Service makes a change to your Make sure you include your home telephone number. If
federal taxable income for any year, you must file a Form your daytime number is not the same as your home
140X for that year. In this case, you must amend your number, make sure you include a daytime number.
Arizona return within 90 days of the change. Attach a
• If filing a fiscal year return, fill in the period covered in
complete copy of the federal notice to your Form 140X.
the space provided at the top of the form.
If you amend your federal return for any year, you must file
Entering Your Name, Address, and Social
an Arizona Form 140X for that year. You must file the form
Security Number
140X within 90 days of amending your federal return.
Do You Need to Make Estimated Payments Lines 1, 2, and 3 -
in 2000? Print or type your name, address, and SSN in the space
provided. If you are a nonresident of the United States or a
You must make Arizona estimated income tax payments
resident alien who does not have an SSN use the
during 2000 if either of the following apply.
identification number (ITIN) the IRS issued to you.
1. You reasonably expect your Arizona gross income will
If you are filing a joint return, enter your SSNs in the same
exceed $75,000 in 2000.
order as your first names. If your name appears first on the
2. Your Arizona gross income in 1999 was greater than
return, make sure your SSN is the first number listed. Put your
$75,000.
last names in the same order as your first names and SSNs.
As a part-year resident, your Arizona gross income is that
For a deceased taxpayer, see page 2 of these instructions.
part of your federal adjusted gross income that you must
Use your current home address. The department will send
report to Arizona.
your refund or correspond with you at that address.
Make sure you use ordinary business care and prudence
when you project your income for 2000. NOTE: Make sure your SSN is correct.
NOTE: Arizona's community property laws may have an effect Make sure that every return, statement, or document that you
on whether you have to make estimated payments. For details, file with the department has your SSN. Make sure that all
see Arizona Department of Revenue Income Tax Ruling ITR 92-1. SSNs are clear and correct. You may be subject to a penalty
if you fail to include your SSN. It may take longer to process
What if You Make Your Estimated your return if SSNs are missing, incorrect, or unclear.
Payments Late?
Identification Numbers for Paid Preparers
The department will charge you a penalty if you fail to make
If you pay someone else to prepare your return, that person
any required payments. The department will charge you a
must also include an identification number where requested.
penalty if you make any of your required payments late. The
department will also charge you interest on any late or A paid preparer may use any of the following.
underpaid estimated tax payment.
• his or her SSN
For details, see Arizona Form 221.
• his or her PTIN
Can You Make Estimated Payments if You
• the federal employer identification number for the business
do Not Have to?
A paid preparer who fails to include the proper numbers may
If you do not have to make Arizona estimated income tax also be subject to a penalty.
payments, you may still choose to make them.
Determining Your Filing Status
For details, see Arizona Forms 140ES and 221.
The filing status that you use on your Arizona return may be
Line-by-Line Instructions
different from that used on your federal return.
Tips for Preparing Your Return: Use this section to determine your filing status. Check the
• correct box (4 through 7) on the front of Form 140PY.
Make sure that you write your social security number on
your return. Line 4 Box - Married Filing a Joint Return
• Complete your return using black ink.
You may use this filing status if married as of December 31,
• You must round dollar amounts to the nearest whole 1999. It does not matter whether or not you were living with
dollar. If 50 cents or more, round up to the next dollar. your spouse. You may elect to file a joint return, even if you
If less than 50 cents, round down. and your spouse filed separate federal returns.
• When asked to provide your own schedule, attach a separate You may use this filing status if your spouse died during
sheet with your name and social security number at the top. 1999 and you did not remarry in 1999. See page 2 of these
Attach your own schedules to the back of your return. instructions for details.
• You must complete your federal return before you can
start your Arizona return.
3

4. Form 140PY
Line 9 Box - Blind
If you are a part-year resident married to an Arizona full year
resident, you may file a joint return using the 140PY. For
Write quot;1quot; in box 9 if you or your spouse are totally or legally
more information, see Arizona Department of Revenue blind. Write quot;2quot; in box 9 if both you and your spouse are
Income Tax Ruling ITR 95-2. totally or legally blind. To qualify as legally blind, you must
attach a physician's letter stating one of the following.
Line 5 Box - Head of Household
1. Your vision is 20/200 or poorer with corrective lenses.
You may file as head of household on your Arizona return,
2. Your field of vision is 20 degrees or less.
only if one of the following applies.
• Line 10 Box - Dependents
You qualify to file as head of household on your federal
return.
You must complete Part A, lines A1 through A3, on page 2 of
• You qualify to file as a qualifying widow or widower on your return before you can total your dependent exemptions.
your federal return. You may claim only the following as a dependent.
Line 6 Box - Married Filing Separately • A person that qualifies as your dependent on your
federal return.
You may use this filing status if married as of December 31,
• A person who is age 65 or over (related to you or not)
1999, and you elect to file a separate Arizona return. You
that does not qualify as your dependent on your federal
may elect to file a separate return, even if you and your
return, but one of the following applies.
spouse filed a joint federal return.
1. In 1999, you paid more than one-fourth of the cost of
If you are filing a separate return, check the line 6 box and keeping this person in an Arizona nursing care institution,
enter your spouse's name in the space provided. Also enter an Arizona residential care institution, or an Arizona
your spouse's SSN in the space provided. assisted living facility. Your cost must be more than $800.
2. In 1999, you paid more than $800 for either Arizona
If you are filing a separate return and your spouse is an Arizona
home health care or other medical costs for the person.
resident, you must figure how much income to report using
community property laws. Under these laws, a separate return
Completing Line(s) A1
must reflect one-half of the community income taxable to Arizona
plus any separate income taxable to Arizona. For details, see NOTE: If a person who qualifies as your dependent is also
Arizona Department of Revenue Income Tax Ruling, ITR 93-20. a qualifying parent or ancestor, you may claim that person
as a dependent on line A2, or you may claim that person as
NOTE: If you can treat community income as separate a qualifying parent or ancestor on line A5. You may not
income on your federal return, you may also treat that claim that same person on both line A2 and line A5. Do not
community income as separate on your Arizona return. See list the same person on line A1 that you listed on line A4.
Arizona Department of Revenue Ruling ITR 93-22.
Enter the following on line(s) A1.
Line 7 Box - Single 1. The dependent's name.
2. The dependent's social security number.
Use this filing status if you were single on December 31,
1999. You are single if any of the following apply to you. 3. The dependent's relationship to you.
• You have never been married. 4. The number of months the dependent lived in your home
during 1999.
• You are legally separated under a decree of divorce or
You may lose the exemption if you do not furnish this
of separate maintenance.
information.
• You were widowed before January 1, 1999, and you did
Line A2 - Total Dependents
not remarry in 1999, and you do not qualify to file as a
qualifying widow or widower with dependent children Enter the total number of persons listed on line(s) A1. Enter
on your federal return. the same number onto the front of the return in box 10.
Line A3 - Persons You Cannot Take as
Exemptions
Dependents on Your Federal Return
Write the number of exemptions you are claiming in boxes 8,
Enter the names of any dependents age 65 or over listed on
9, 10, and 11. Do not put a checkmark. You may lose the
line(s) A1 that you cannot take as a dependent on your
exemption if you put a checkmark in these boxes. You may federal return.
lose the dependent exemption if you do not complete Part A,
Line 11 Box - Qualifying Parents and
lines A1 through A3 on page 2. You may lose the exemption
Ancestors
for qualifying parents or ancestors if you do not complete
Part A, lines A4 and A5, on page 2.
NOTE: Starting with 1999, Arizona residents may now
claim a $10,000 (prior to prorating) exemption for each
Line 8 Box - Age 65 and Over
qualifying parent and ancestor.
Write quot;1quot; in box 8 if you or your spouse were 65 or older in
A qualifying parent or ancestor may be any one of the
1999. Write quot;2quot; in box 8 if both you and your spouse were
following.
65 or older in 1999.
4

5. Form 140PY
• Your parent, or your parent’s ancestor. Determining Arizona Income
• If married filing a joint return, your spouse’s parent or
Now complete Parts B, C, and D on page 2 of the return.
an ancestor of your spouse’s parent.
Use Part B to determine what portion of your total income is
You may claim this exemption if all of the following apply.
taxable by Arizona.
1. The parent or ancestor lived in your principal residence
for the entire taxable year. NOTE: If you are unable to determine the proper line to use,
please contact one of the help numbers listed on the back cover.
2. You paid more than one-half of the support and
maintenance costs of the parent or ancestor during the
FEDERAL Column
taxable year.
3. The parent or ancestor was 65 years old or older during 1999. Enter the actual amounts shown on your 1999 federal income
tax return in the FEDERAL column. Complete lines B7
4. The parent or ancestor required assistance with activities
of daily living, like getting in and out of bed, or chairs, through B20. Line B20 should equal the federal adjusted
walking around, going outdoors, using the toilet, gross income shown on your 1999 federal return Form 1040,
bathing, shaving, brushing teeth, combing hair, dressing, Form 1040A, or Form 1040EZ.
medicating or feeding.
ARIZONA Column
You must complete Part A, lines A4 and A5, on page 2 of
your return before you can total your exemptions for
Enter that portion of your federal income received while you
qualifying parents and ancestors.
were an Arizona resident in the Arizona column. For
NOTE: If a person who is a qualifying parent or ancestor example, if you became an Arizona resident on June 30, enter
also qualifies as your dependent, you may claim that person all income you received from that day to December 31, 1999.
as a dependent on line A2, or you may claim that person as
NOTE: If you also have Arizona source income for the
a qualifying parent or ancestor on line A5. You may not
claim that same person on both line A2 and line A5. Do not portion of the taxable year you were an Arizona
list the same person on line A4 that you listed on line A1. nonresident, also include that source income on the
appropriate line in the Arizona column.
Completing Line(s) A4
The Tax Reform Act of 1986 limits the amount of losses that
Enter the following on line(s) A4.
you may deduct from passive activities. A passive activity is
1. The name of the qualifying parent or ancestor. one that involves the conduct of any trade or business in
which the taxpayer does not materially participate.
2. The social security number of the qualifying parent or
ancestor. As a part-year resident, your Arizona gross income may include
3. The qualifying parent’s or ancestor’s relationship to you, some of these losses. For the part of the year you were an Arizona
or your spouse if filing a joint return. resident, you may consider any passive losses that arose while an
Arizona resident. For the part of the year you were an Arizona
4. The number of months the qualifying parent or ancestor
nonresident, you may consider only those passive losses that arose
lived in your home during 1999.
from Arizona sources. Your 1999 Arizona gross income can
You may lose the exemption if you do not furnish this information.
include only losses you used on your 1999 federal return.
Line A5 - Total Qualifying Parents or The following line-by-line instructions apply to the
Ancestors ARIZONA column.
Enter the total number of persons listed on line(s) A4. Enter
Line B6 - Dates of Arizona Residency
the same number onto the front of the return in box 11.
If you became an Arizona resident during 1999, enter the date
Reporting Your Residency Status
that you became an Arizona resident. If you gave up your
Arizona residency during 1999, do both of the following.
Check the appropriate box.
Line 12 Box - Part-Year Resident Other 1. Enter the date you became an Arizona resident.
Than Active Duty Military 2. Enter the date you gave up your Arizona residency.
Check box 12 if you were an Arizona resident for part of
Line B7 - Wages, Salaries, Tips, etc.
1999, and were not an active duty military member.
Enter all amounts received while an Arizona resident.
Line 13 Box - Part-Year Resident Active
Military Also enter all amounts received from Arizona employment
during the part of the year you were an Arizona nonresident.
Check box 13 if you were an active duty military member
who either began or gave up Arizona residency during 1999. NOTE: Do not include active duty military pay for the part
of the year you were a nonresident.
5

6. Form 140PY
Line B8 - Interest Line B15 - Other Income Reported on Your
Federal Return
Enter all amounts received while an Arizona resident.
Enter other income shown on your federal return that you
You must also enter any interest income derived from
received while an Arizona resident. Other income may
Arizona sources during the part of the year you were an
include pensions, social security, unemployment, and lottery
Arizona nonresident. Interest income from Arizona sources is
winnings. Attach a schedule listing these other items.
interest income that has acquired an Arizona business situs.
Also enter any other income derived from Arizona sources
If you received tax exempt interest from municipal bonds, attach
during the part of the year you were an Arizona nonresident.
a schedule listing the payors and the amount received from each
Line B16 - Total Income
payor. You may also want to attach supporting documents for
amounts received from Arizona municipal bonds that are exempt
Add lines B7 through B15 and enter the total.
from Arizona income tax. These may be items such as bank
statements, brokerage statements, etc. Be sure you add the Line B17 - Total IRA Deduction
amount you received while an Arizona resident from non-
Enter amount actually paid while an Arizona resident for
Arizona municipal bonds to your income on line C24.
your IRA and/or your spouse's IRA.
Line B9 - Dividends
Line B18 - Other Federal Adjustments
Enter all amounts received while an Arizona resident.
If any of the following are included in adjustments shown on your
You must also enter any dividends derived from Arizona federal return, make an entry on this line as explained below.
sources during the part of the year you were an Arizona
1. Keogh Retirement Plan and self-employed SEP deduction:
nonresident. Dividend income from Arizona sources is
Enter amount actually paid while an Arizona resident.
dividend income that has acquired an Arizona business situs.
2. Penalty on early withdrawal of savings: Multiply the
Line B10 - Arizona Income Tax Refunds federal deduction by the ratio of your Arizona interest to
your federal interest.
Enter the amount of Arizona income tax refunds received in
1999 that you included in your federal adjusted gross income. 3. Alimony actually paid while an Arizona resident.
Line B11 - Alimony Received 4. Moving expenses: Enter the amount of moving expenses
included in your federal adjusted gross income that you
Enter amounts received while an Arizona resident. accrued and paid during the part of the year you were an
Arizona resident.
Line B12 - Business Income or (Loss)
If your federal return shows other adjustments to income,
Enter any business or farm income or (loss) incurred while
attach your own schedule to show your calculation.
you were an Arizona resident.
Line B19 - Total Adjustments
Also enter income or (loss) derived from Arizona businesses
during the part of the year you were an Arizona nonresident. Add lines B17 and B18 and enter the total.
Line B13 - Gains or (Losses) Line B21 - Arizona Income
Enter any gain or (loss) on property sold while an Arizona Complete line B21 as instructed on the form.
resident if you included the amount as income on your 1999
Line B22 - Arizona Percentage
federal return.
Divide line B21 by line B20, and enter the result on line
Also enter gains or (losses) on sales of Arizona property
B22. (Do not enter more than 100 percent.) This is the
during the part of the year you were an Arizona nonresident.
Arizona percentage of your total income.
Line B14 - Rents, etc.
Example:
Enter income received from rents, royalties, partnerships,
estates, trusts, small business corporations, etc., while an
Arizona Federal Arizona percentage
Arizona resident.
Gross Adjusted
Income from Gross
Also enter rents or royalties earned on Arizona properties
line B21 Income from
during the part of the year you were an Arizona nonresident.
line B20
Enter any income or (loss) derived from Arizona sources
from partnerships, small business corporations, etc., during
the part of the year you were an Arizona nonresident. $ 7,500 $ 30,000 $7,500/30,000= 25%
6

7. Form 140PY
1. Your share of the estate's or trust's deductions allowed
Determining Additions to Income
under the Internal Revenue Code.
Line C23 - Early Withdrawal of Arizona, 2. Your share of the excess deductions and loss carryovers
County, City, or School Retirement System allowed under the Internal Revenue Code as deductions
Contributions to the beneficiary on termination of an estate or trust.
If you meet all the following, you must enter an amount here. You must add the above deductions and loss carryovers to
Arizona gross income only to the extent you included these
1. You left your job with the State of Arizona or an
items in computing your Arizona taxable income.
Arizona county, city, or school district for reasons other
than retirement. D. Medical Savings Account (MSA) Distributions
2. When you left, you took out the contributions you had For information on Arizona's MSA provisions, see the
made to the retirement system while employed. department's MSA brochure, Pub 542.
3. You deducted these contributions on your Arizona
You must add amounts received from an MSA here if any of
income tax returns that you filed for prior years.
the following apply.
4. You did not include these contributions in your federal
1 - You Withdrew Funds From Your MSA For Other
adjusted gross income this year.
Than Qualified Expenses
If you meet all these tests, you must report as income those
If you had an MSA during the part of the year you were an
contributions previously deducted on your prior years'
Arizona resident, you must make an entry here if all of the
Arizona tax returns.
following apply.
For more information, see Arizona Department of Revenue
1. You withdrew money from your MSA during 1999,
Income Tax Ruling ITR 93-7.
while either a resident or a nonresident.
NOTE: Any interest earned on your retirement contributions
2. You did not use the amount withdrawn to pay qualified
while they were in the system should be reported on line B8 in
medical expenses.
both the FEDERAL and ARIZONA income columns.
3. You did not have to include the withdrawal as income
Line C24 - Other Additions to Income on your federal income tax return.
Use line C24 if any of the special circumstances below Enter the amount withdrawn.
applies. Attach your own schedule to the back of your return,
If you had an MSA during the part of the year you were an
explaining any amounts entered on line C24.
Arizona nonresident, you must make an entry here if all of
Items A, B, C, and D that follow must be added to income on the following apply.
line C24 of your return.
1. You had Arizona source income while an Arizona
A. Non-Arizona Municipal Interest nonresident.
2. Your MSA qualified as an MSA under Arizona law.
Enter interest income earned from non-Arizona municipal
bonds while an Arizona resident. 3. If you were an employee, your high deductible health
coverage was provided by your Arizona employer. If
NOTE: You may reduce this addition by any interest or other
you were self employed, your high deductible health
related expenses incurred to purchase or carry the obligation.
coverage was provided by your Arizona business.
As a part-year resident, you may reduce the addition by the
amount of those expenses attributable to income subject to 4. You withdrew money from your MSA during 1999,
Arizona tax. You may reduce the addition by those expenses while either a resident or a nonresident.
that you could not deduct on your federal return.
5. You did not use the amount withdrawn to pay qualified
B. Ordinary Income Portion of Lump Sum medical expenses.
Distribution Excluded on Your Federal Return
6. You did not have to include the withdrawal as income
on your federal income tax return.
Arizona law does not provide for 5 or 10 year averaging. Enter
the amount of the distributions received while an Arizona Enter the amount withdrawn.
resident and treated as ordinary income on your federal return. If
2 - Deceased Account Holder Where The Named
you chose to treat the capital gain portion of the distributions as
Beneficiary is Not the Decedent's Surviving Spouse
ordinary income, you must also include that amount on line C24.
You must make an entry here if all of the following apply.
For more information, see Arizona Department of Revenue
Income Tax Ruling, ITR 93-5. 1. The account holder died during the part of the year you
were an Arizona resident.
C. Trust or Estate Deductions
2. The decedent's MSA qualified as an MSA under
You must add the following estate or trust deductions to your
Arizona law.
Arizona gross income.
7

8. Form 140PY
3. You are the named beneficiary of the decedent's MSA. Follow the worksheet below to figure the adjustment.
Pension Adjustment Worksheet
4. You are not the decedent's surviving spouse.
Follow these steps to figure the adjustment:
5. You did not have to include the value of the MSA as
Worksheet (Keep for your records.)
income on your federal income tax return.
1. Your contribution to annuity. 1.
In this case, the MSA ceases to be an MSA. Enter the fair 2. Pension amount received in prior
market value of the MSA as of the date of death, less the amount years. 2.
of MSA funds used within one year of the date of death, to pay 3. Remainder of cost (line 1 minus
the decedent's qualified medical expenses. You can reduce the line 2 but not less than zero). 3.
fair market value by only those expenses paid from the MSA. If 4. Pension amount received this year. 4.
you pay additional medical expenses for the decedent from the 5. Amount from line 3. 5.
MSA after you file, you may file an amended return to further 6. Subtract line 5 from line 4 (but
reduce the fair market value of the MSA. not less than zero). 6.
7. Enter the pension amount taxable
3 - Decedent's Final Return And No Named MSA
on your federal return. 7.
Beneficiary
8. Subtract line 7 from line 6. 8.
Make an entry here if all of the following apply.
If line 8 is more than zero, enter the amount on line 8 as
1. The account holder died during the part of the year in an addition to income. Enter the addition on line C24.
which he or she was an Arizona resident. If line 7 is more than line 6, enter the difference as a
subtraction from income. Enter the subtraction on line D36.
2. There is no named MSA beneficiary.
F. Partnership Income
3. This is the decedent's final return.
Depending on your situation, you may either add (line C24)
4. The value of the MSA did not have to be included on or subtract (line D36) this amount.
the decedent's final federal income tax return.
Use this adjustment if your Arizona Form 165 Schedule K-1
In this case, the MSA ceases to be an MSA. Enter the fair market shows a difference between federal and state distributable income.
value of the MSA as of the date of death. This rule applies in all If the difference reported on your Arizona Form 165,
cases in which there is no named beneficiary, even if the Schedule K-1, is a positive number, enter that portion of the
surviving spouse ultimately obtains the right to the MSA assets. difference that is allocable to partnership income taxable by
Arizona as an addition. Enter the addition on line C24.
NOTE: The following are not withdrawals. Do not enter
any of the following: If the difference reported on your Arizona Form 165,
• Schedule K-1, is a negative number, enter that portion of the
Amounts from the MSA used to pay qualified medical
difference that is allocable to partnership income taxable by
expenses
Arizona as a subtraction. Enter the subtraction on line D36.
• A qualified return of excess contributions
G. Net Operating Losses
• A qualified rollover
Arizona does not have specific Arizona net operating loss provisions
• The fair market value of an MSA received by a
for individual taxpayers. Arizona conforms to the federal net
surviving spouse who was the deceased account
operating loss provisions, including the carryback provisions.
holder's named beneficiary
As a part-year resident, Arizona recognizes that portion of
For more information about the above items, see the the federal net operating loss which is attributable to income
department's MSA brochure, Pub 542. taxed by Arizona as the Arizona net operating loss.
E. Pension Adjustments As a part-year Arizona resident, include in Arizona gross income
the amount of federal net operating loss carryforward or carryback
Depending on your situation, you may either add (line C24)
attributable to Arizona unless any of the following apply.
or subtract (line D36) this amount.
1. The net operating loss attributable to Arizona included
Use this adjustment if both of the following apply.
in your federal adjusted gross income has already been
1. Arizona taxed your pension for years before 1979. deducted for Arizona purposes.
2. You reported that pension on your federal return using 2. The net operating loss included in your federal adjusted
the percentage exclusion method. gross income was incurred from non-Arizona sources
while a nonresident.
Do not use this adjustment if either of the following apply.
3. You took a separate subtraction for the net operating
1. You reported your pension income as fully taxable on
loss included in your federal adjusted gross income on
your federal return.
an amended return filed for a prior tax year under the
2. You reported your pension income on your federal special net operating loss transition rule.
return under the quot;three-year-rulequot;. For information on deducting a net operating loss carryback, see
Arizona Department of Revenue Income Tax Procedure ITP 99-1.
8

9. Form 140PY
H. Agricultural Water Conservation Expenses 5. The amount of the loss carryover included in your
Arizona gross income is more than the amount allowed
If you take this credit, you cannot deduct any expenses for which
to be taken into account for Arizona purposes.
you claim the credit. If you take this credit, enter the amount of
Enter the amount by which the loss carryover included in
such expenses that you deducted on your federal return.
your Arizona gross income is more than the amount allowed
I. Items Previously Deducted for Arizona Purposes
for the taxable year under Arizona law.
Arizona statutes prohibit a taxpayer from deducting items
L. Addition to S Corporation Income Due to Credits
more than once. However, under the operation of former
Claimed
Arizona law (1989 and prior), you could deduct certain items
Shareholders of an S corporation who claim a credit passed
in greater amounts for Arizona purposes than federal purposes.
through from an S corporation must make an addition to
Investment interest and passive activity losses were such items.
income for the amount of expenses disallowed by reason of
In some cases, you could have deducted such amounts in their
claiming the credit.
entirety on the Arizona return. For federal purposes, the
deduction for these items was limited, with the unused portions
An S corporation that passes the following credits through to
being carried forward and deducted in future years. Your
its shareholders must notify each shareholder of his or her
Arizona return may include these previously deducted items
pro rata share of the adjustment. You must enter an amount
because of the difference between the federal and former
on this line when claiming any of the following credits.
Arizona treatment. If your Arizona taxable income includes
•
items previously deducted for Arizona purposes, you must add Agricultural water conservation credit
•
such amounts to your Arizona gross income. Defense contracting credit
• Environmental technology facility credit
J. Claim of Right Adjustment for Amounts Repaid
• Pollution control credit
in 1999
• Recycling equipment credit
•
You must make an entry here if all of the following apply. Credit for solar hot water heater plumbing stub outs and
electric vehicle recharge outlets
1. During 1999, you were required to repay amounts held
• Credit for employment of TANF recipients
under a claim of right.
• Credit for agricultural pollution control equipment
2. The amount required to be repaid was subject to
M. Solar Hot Water Heating Plumbing Stub Out And
Arizona income tax in the year included in income.
Electric Vehicle Recharge Outlet Expenses
3. The amount required to be repaid during 1999 was more
If you take a credit for installing solar hot water heating plumbing
than $3,000.
stub outs or electric vehicle recharge outlets in a dwelling
4. You took a deduction for the amount repaid on your you constructed, you cannot deduct any expenses for which
1999 federal income tax return. you claim the credit. If you take this credit, enter the amount
of such expenses that you deducted on your federal return.
5. The deduction taken on your federal income tax return is
reflected in your Arizona taxable income. N. Wage Expense for Employers of TANF Recipients
If the above apply, enter the amount deducted on your If you take a credit for employing TANF recipients, you
federal income tax return which is reflected in your Arizona cannot deduct any wage expense for which you claim the
taxable income. credit. If you take this credit, enter the amount of such
expenses that you deducted on your federal return.
For more information on the Arizona claim of right
provisions, see Arizona Department of Revenue Individual O. Other Adjustments
Income Tax Procedure ITP 95-1.
Other special adjustments may be necessary. You may need to
K. Claim of Right Adjustment for Amounts Repaid make an addition for depreciation or amortization. You may also
in Prior Taxable Years need to make an addition if you claimed certain tax credits.
Call one of the numbers listed on the back cover if any of the
You must make an entry here if all of the following apply.
following apply.
1. During a year prior to 1999 you were required to repay
• You are a qualified defense contractor that elected to
income held under a claim of right.
amortize under Arizona Revised Statutes section 43-1024.
2. You computed your tax for that prior year under
• You sold or disposed of property that was held for the
Arizona's claim of right provisions.
production of income and your basis was computed
3. A net operating loss or capital loss was established due under the Arizona Income Tax Act of 1954.
to the repayment made in the prior year.
• You are still depreciating or amortizing a child care
4. You are entitled to take that net operating loss or capital facility for which you claimed a state credit.
loss carryover into account when computing your 1999
• You claimed the environmental technology facility credit.
Arizona taxable income.
9

10. Form 140PY
• You claimed the pollution control credit. obligations included on line B8 in the ARIZONA column. U.S.
Government obligations include obligations such as U.S. savings
• You claimed the recycling equipment credit.
bonds and treasury bills. You cannot deduct any interest or other
• related expenses incurred to purchase or carry the obligations. If
You claimed the credit for agricultural pollution control
such expenses are included in your Arizona gross income, you
equipment.
must reduce the subtraction by such expenses. If you are
• You elected to amortize the basis of a pollution control itemizing deductions on your Arizona return, you must exclude
device or the cost of a child care facility under Arizona such expenses from the amount deducted.
law in effect before 1990. You are still deducting
NOTE: Do not subtract interest earned on FNMA or GNMA
amortization or depreciation for that device or facility
bonds since this interest is taxable by Arizona. For more
on your federal income tax return.
information, see the department's Guidelines for Exempt
Line C25 - Total Additions Securities, G91-4.
Add lines C23 and C24. Enter the total on line C25 and on Do not subtract any amount received from a qualified pension
the front of your return on line 16. plan that invests in U.S. Government obligations. Do not
subtract any amount received from an IRA that invests in U.S.
Determining Subtractions From Income Government obligations. These amounts are not interest
income. For more information, see Arizona Department of
You may only subtract those items for which statutory
Revenue Income Tax Rulings ITR 96-2 and ITR 96-3.
authority exists. Without such authority you cannot take a
subtraction. If you have any questions concerning Line D33 - Arizona Lottery Winnings
subtractions from income, call one of the help numbers listed
You may subtract all winnings received in 1999 related to an
on the back cover.
Arizona lottery prize won before March 22, 1983. You may
NOTE: You may not subtract any amount which is allocable subtract up to $5,000 of winnings received in 1999 for
to income excluded from your Arizona taxable income. Arizona lottery prizes won after March 21, 1983. Only
subtract those Arizona lottery winnings that you included on
Line D26 - Exemption: Age 65 or Over line B15 in the ARIZONA column and reported on your
federal income tax return.
Multiply the number in box 8 on the front of your return by
$2,100 and enter the result. If you subtract Arizona lottery winnings here, you may have
to adjust the amount of gambling losses claimed as an
Line D27 - Exemption: Blind
itemized deduction.
Multiply the number in box 9 on the front of your return by
Line D34 - Social Security Benefits or
$1,500 and enter the result.
Railroad Retirement Benefits
Line D28 - Exemption: Dependents Arizona does not tax social security benefits received under Title
II of the Social Security Act. Arizona does not tax railroad
Multiply the number in box 10 on the front of your return by
retirement benefits received from the Railroad Retirement Board
$2,300 and enter the result.
under the Railroad Retirement Act. If you included such social
Line D29 – Exemption: Qualifying Parents security or railroad retirement benefits on your federal return
and Ancestors as income and also included this amount in the Arizona
column on line B15, subtract this income on line D34.
Multiply the number in box 11 on the front of your return by
$10,000 and enter the result. Subtract only the amount you reported as income on your
federal return and included on line B15 in the Arizona column.
Line D30 - Total
See Arizona Department of Revenue Income Tax Ruling ITR
Add lines D26 through D29 and enter the total.
96-1 for more information about railroad retirement benefits.
Line D31 - Prorated Exemptions Line D35 - Alternative Fuel Vehicles and
Refueling Equipment
Multiply the amount on line D30 by the Arizona percentage
from line B22 and enter the result. Starting with the 1999 taxable year, the alternative fuel subtraction
is repealed. Therefore, you may not take a subtraction for
Active Duty Military Personnel Only: If you were an
alternative fuel vehicles purchased or converted during 1999. You
active duty military member who either began or gave up
may not take a subtraction for refueling equipment purchased
Arizona residency during 1999, do not prorate these
during 1999. However, if you were entitled to a subtraction
exemptions. You are allowed 100 percent deductions for the
for refueling equipment or vehicles purchased or converted
age 65, the blind, and the dependents exemptions. Enter the
during 1997 or 1998, you may still take one-third of the
amount on line D30 (Total) on this line.
subtraction from those years which is allocable to 1999.
Line D32 - Interest on U.S. Obligations To figure your subtraction complete Part I of Form 313.
Enter the amount from Form 313, Part I, line 5, here.
Enter the amount of interest income from U.S. Government
10

11. Form 140PY
Line D36 - Other Subtractions 1. You have an MSA that qualifies as an MSA under
Arizona law, but not federal law.
Use line D36 if any of the following special circumstances
2. Either you or your employer made deposits into that
apply. Attach your own schedule to the back of your return,
MSA during the tax year.
explaining any amounts entered here.
3. You had to include the deposits in income on your
A. Exclusion for U.S. Government, Arizona State, or
federal income tax return.
Local Government Pensions
Enter the amount of the MSA deposits that you had to
If you receive pension income from any of the sources listed
include in your federal adjusted gross income.
below, subtract the amount you received or $2,500,
whichever is less. Include only the amount you reported as
D. Employer Contributions Made to Employee MSAs
income on your federal return and included on line B15 in
the ARIZONA column. If both you and your spouse receive If you are an employer, you may subtract the amount
such pension income, each spouse may subtract the amount contributed to your employees' MSAs that are established
received or $2,500, whichever is less. under Arizona law. You can subtract these contributions only
to the extent not deductible for federal income tax purposes.
Public pensions from the following sources qualify
Enter these contributions here.
for this subtraction:
E. Agricultural Crops Given to Arizona Charitable
• The United States Government Service Retirement and
Organizations
Disability Fund
• The United States Foreign Service Retirement and Arizona law allows a subtraction for qualified crop gifts made
Disability System during 1999 to one or more charitable organizations. To take this
• Retired or retainer pay of the uniformed services of the subtraction, you must be engaged in the business of farming or
United States processing agricultural crops. The crop must be grown in
• Any other retirement system or plan established by Arizona. You must make your gift to a charitable organization
federal law located in Arizona which is exempt from Arizona tax.
The subtraction is the greater of 80 percent of the wholesale
NOTE: This applies only to those retirement plans authorized
market price or 80 percent of the most recent sale price for
and enacted into the U.S. Code. This does not apply to a
the given crop.
retirement plan that is only regulated by federal law (i.e., plans
which must meet certain federal criteria to be qualified plans). To determine if your crop contribution qualifies for this
subtraction, see Arizona Department of Revenue Procedure
• The Arizona State Retirement System
ITP 93-2.
• The Arizona State Retirement Plan
• The Corrections Officer Retirement Plan F. Certain Wages of American Indians
• The Public Safety Personnel Retirement System
Enrolled members of American Indian tribes may subtract
• The Elected Officials' Retirement Plan
wages earned while living and working on their tribe's
• A retirement plan established for employees of a county,
reservation. You can subtract only those amounts that you
city, or town in Arizona
included on line B7, ARIZONA column. The federal
• An optional retirement program established by the
government must recognize these tribes.
Arizona Board of Regents under Arizona Revised Statutes
• An optional retirement plan established by an Arizona For more information, see Arizona Department of Revenue
community college district. Income Tax Ruling, ITR 96-4.
G. Combat Pay
NOTE: Public retirement pensions from states other than
Arizona do not qualify for this subtraction. Members of the U.S. armed forces may subtract pay received
for serving in a combat zone or an area given the treatment
B. Previously Reported Gain on Decedent's
of a combat zone. Enter only that amount of pay reported on
Installment Sale
your 1999 federal return that you also included on line B7 in
Prior Arizona law required acceleration of any unrecognized the ARIZONA column.
installment sale gain upon the death of a taxpayer. However,
H. Federally Taxable Arizona Municipal Interest
this acceleration could have been avoided by the posting of a
Enter the amount of any interest income received on
bond. If acceleration was required, your federal adjusted
obligations of the State of Arizona, or any political subdivisions
gross income may include installment sale amounts already
of Arizona, that you included in your Arizona gross income.
recognized on a decedent's final Arizona return. Deduct that
Enter only that amount of Arizona municipal interest income that
portion of the gain included on line B13, ARIZONA column.
you included on line B8 in the ARIZONA column. Do not enter
C. Deposits Made Into Your MSA any Arizona municipal interest that is exempt from federal
taxation and not included in your federal adjusted gross income.
If you have an MSA, you may be able to subtract deposits
made into that MSA. Make an entry here if all of the
following apply.
11

12. Form 140PY
I. Adoption Expenses 4. A net operating loss or capital loss was established due
to the repayment made in the prior year.
You may take this subtraction only in the year the final
5. You are entitled to take that net operating loss or capital
adoption order is granted.
loss carryover into account when computing your 1999
Enter the lesser of the total of the following adoption Arizona taxable income.
expenses or $3,000.
6. The amount of the loss carryover allowed to be taken
When figuring your subtraction, you may include expenses into account for Arizona purposes is more than the
incurred in prior years. amount included in your Arizona gross income.
The following expenses are qualified adoption expenses. Enter the amount by which the loss carryover allowed for the
taxable year under Arizona law is more than the amount
1. Nonreimbursed medical and hospital costs.
included in your Arizona gross income.
2. Adoption counseling.
L. Certain Expenses Not Allowed for Federal Purposes
3. Legal and agency fees.
You may subtract some expenses that you cannot deduct on
your federal return when you claim certain federal tax
4. Other nonrecurring costs of adoption.
credits. These federal tax credits are:
If filing separately, you may take the entire subtraction, or
• the federal work opportunity credit
you may divide the subtraction with your spouse. However,
• the empowerment zone employment credit
the total subtraction taken by both you and your spouse
• the credit for employer-paid social security taxes on
cannot exceed $3,000.
employee cash tips
J. Qualified Wood Stove, Wood Fireplace, or Gas • the Indian employment credit
Fired Fireplace
If you received any of the above federal tax credits for 1999,
NOTE: Arizona law no longer provides a subtraction for enter the portion of wages or salaries attributable to income
purchasing a qualified wood stove, qualified wood fireplace, subject to Arizona tax that you paid or incurred during the
or gas fired fireplace. taxable year that is equal to the amount of those federal tax
credits you received.
Arizona law still provides a subtraction for converting an
M. Qualified State Tuition Program Distributions
existing fireplace to a qualified wood stove, qualified wood
fireplace, or gas fired fireplace and non-optional equipment If you are a beneficiary of a qualified state tuition program,
directly related to its operation. You may subtract up to $500 you may subtract some of the amount distributed from the
of the costs incurred for converting an existing fireplace to a program for qualified education expenses. Enter the
qualified wood stove, qualified wood fireplace, or gas fired amount of the distribution included in your federal adjusted
fireplace on your property located in Arizona. When you gross income that you included as income in the Arizona
figure your subtraction, do not include taxes, interest, or column. A qualified state tuition program is a program that
other finance charges. meets the requirements of I.R.C. § 529.
A qualified wood stove or a qualified wood fireplace is a N. Installment Sale Income From Another State
residential wood heater that was manufactured on or after July 1, Taxed by the Other State in a Prior Taxable Year
1990, or sold at retail on or after July 1, 1992. The residential
NOTE: Changes made to Arizona law may allow you to
wood heater must also meet the U.S. Environmental Protection
subtract installment sale income from a sale in another state if
Agency's July 1990 particulate emissions standards.
that income has been properly subjected to tax in that other
A qualified gas fired fireplace is any device that burns state in a prior year. This change applies retroactively to 1991.
natural or liquefied petroleum gas as its fuel through a burner If this law change affects you, you may file an amended return to
system that is permanently installed in the fireplace. The claim a refund for any year open under the statute of limitations.
conversion of an existing wood burning fireplace to For more information, call one of the telephone numbers listed
noncombustible gas logs that are permanently installed in the on the back cover.
fireplace also qualifies as a gas fired fireplace.
You may now subtract any income from an installment sale that
K. Claim of Right Adjustment for Amounts Repaid has been properly subjected to tax in another state in a prior
in Prior Taxable Years. tax year. Enter the amount of such income that you included
in your Arizona gross income in the current taxable year.
You must make an entry here if all of the following apply.
O. Other Adjustments
1. During a year prior to 1999 you were required to repay
income held under a claim of right. Other special adjustments may be necessary. Call one of the
numbers listed on the back cover if any of the following
2. The amount required to be repaid was subject to
apply.
Arizona income tax in the year included in income.
• You are a qualified defense contractor that elected to
3. You computed your tax for that prior year under
amortize under Arizona Revised Statutes section 43-1024.
Arizona's claim of right provisions.
12