Arizona Department of Revenue News

A summary of rulings issued by the Arizona Department of Revenue with links to the full rulings.

6/29/07	LPT 07-1:  Procedures for Affixing Arizona Tax Stamps to Cigarette Packages for Retail Sale- The Arizona Department of Revenue issued this procedure to provide cigarette distributors and retailers with an explanation of the general principles and considerations that the Department uses in ensuring that tobacco taxes have been paid on cigarettes offered for sale in the state through proper affixation of Arizona tax stamps.
4/03/07	CTR 07-1: Gain From Short-Term Investments- The Arizona Department of Revenue issued Corporate Tax Ruling 07-1 to explain that a taxpayer that invests its working capital in short-term instruments may only include the net gain from the investment of these short-term securities in the sales factor of the Arizona income tax apportionment formula.  The Department based this ruling upon the same holding by the Arizona Court of Appeals in Walgreen Arizona Drug Co. v. Arizona Department of Revenue, 209 Ariz. 71, 97 P.3d 896 (Ariz. App. 2004).
12/19/06	TPR 06-2:  Direct-Cost Exemption From Prime Contracting Transaction Privilege Tax Classification for Architectural and Engineering Services- The Arizona Department of Revenue issued TPR 06-2 to clarify the scope of the direct-cost exemption from the prime contracting transaction privilege tax classification enacted by SB 1293 in 2004.  In this ruling, the Department explained that qualified direct costs "are actual costs directly expended for architectural or engineering services, including direct labor costs, direct material costs, and third-party architectural or engineering subcontracted costs."  Because the direct costs exemption of A.R.S. § 42-5075(J) provides for an exemption from income and not a deduction of costs, the Department ruled that, to qualify for the exemption for any tax period, the taxpayer must "attribute any income received from the contract to the contract’s outstanding qualified direct costs that have not already been used to offset or exempt gross proceeds or income."
9/14/06	TPR 06-1:  Transaction Privilege Taxation of Transient Lodging Businesses- The Arizona Department of Revenue issued Transaction Privilege Tax Ruling to replace TPR 92-3 that was rescinded on 11/6/03.  Pursuant to this ruling, the Department has issued a Matrix to clarify when revenue is taxable to a hotel or motel (or other transient lodging facility) and the appropriate business classification for such revenue.  The ruling also contains numerous examples to provide taxpayer guidance.
4/20/06	CTR 06-1:  Interest income, expenses and gains from U.S. Government obligations- The Arizona Department of Revenue issued Corporate Tax Ruling 06-1 to explain that interest income received from the U.S. Government obligations listed in Part I of the Appendix to the ruling is exempt from Arizona income tax.  Interest or other related expenses incurred to purchase or carry tax-exempt obligations cannot be deducted.  Any gain recognized for federal income tax purposes on the sale of United States bonds and notes or other tax-exempt obligations is subject to Arizona income tax.  Interest income received from repurchase agreements involving United States government obligations is subject to Arizona income tax.  Interest income received from the obligations listed in Part II of the Appendix to the ruling is subject to Arizona income tax.
4/17/06	ITR 06-01:  Interest income, expenses and gains from U.S. Government obligations (SUPERCEDES ITR 02-1)- The Arizona Department of Revenue issued Income Tax Ruling 06-1 to explain that interest income received from the U.S. Government obligations listed in Part I of the Appendix to the ruling is exempt from Arizona income tax.  Interest or other related expenses incurred to purchase or carry tax-exempt obligations cannot be deducted.  Any gain recognized for federal income tax purposes on the sale of United States bonds and notes or other tax-exempt obligations is subject to Arizona income tax.  Interest income received from repurchase agreements involving United States government obligations is subject to Arizona income tax.  Interest income received from the obligations listed in Part II of the Appendix to the ruling is subject to Arizona income tax.
9/6/05	ITR 05-2:  Claiming dependent on State but not Federal Income Tax Return- The Arizona Department of Revenue issued Income Tax Ruling 05-2 to explain that when a taxpayer does not claim the dependent exemption for a student on its federal return in order to allow that student to claim a federal education credit on the student’s federal return, Arizona will still allow that taxpayer to claim the dependent exemption on the Arizona return.
01/11/05	GTR 05-1:   Alternative Methods of Signing for Tax Return Preparers- A return preparer may sign an original return, an amended return, or an extension filing request by rubber stamp, mechanical device, or computer software program.  The ruling applies only to return preparers as defined by A.R.S. § 42-1101.01 and does not alter the signature requirements for any other type of document currently required to be manually signed (such as a Power of Attorney).  The ruling also does not alter the requirement that tax returns or requests for filing extensions be signed by the person (e.g. the taxpayer) making the return.
10/14/04	GTR 04-2:   Penalty Abatement Reasonable Cause (SUPERSEDES AND RESCINDS GTR 94-4)- For purposes of abating the penalties imposed under A.R.S. § 42-1125, “reasonable cause” means that the taxpayer exercised ordinary business care and prudence but was nevertheless unable to file the return, furnish the requested information, or provide for payment of a tax liability within the prescribed time.  For purposes of the transaction privilege, use, severance, telecommunication services and county excise taxes, “reasonable cause” is additionally defined by statute as a reasonable basis for the taxpayer to believe that the tax did not apply to the business activity or storage, use or consumption of taxpayer's tangible personal property in Arizona.  In addition to the reasonable cause basis for abating penalties, A.R.S. § 42-2052 specifically provides for the abatement of penalties imposed on an amount assessed as a deficiency if due to erroneous written advice of the Department or erroneous tax forms or rulings.   The Ruling also goes into detail with regard to reasonable cause determinations related to: mathematical errors, illness, unavoidable absence, death, forms/payments to another agency, incorrect advice, reliance on third parties, absence of records, financial difficulties, and recent changes in law.
7/22/04	GTR 04-1:   Deadline for suit to collect taxes- The Arizona Department of Revenue issued General Tax Ruling 04-1 to explain that Arizona taxes determined to be due become final for purposes of determining the six-year period in which the Department must file suit or levy to collect unpaid taxes, on the date which: (1) The tax return was due, including extensions or the date the return was filed, whichever is later; (2) An amended return was due or filed, whichever is later, for any additional amount of tax shown as due on the amended return; (3) A closing agreement authorized by A.R.S. § 42-1113 is entered into between the taxpayer and the department; or (4) A proposed deficiency assessment becomes final.
7/21/04	ETR 04-1:  Deadline for suit to collect estate tax- The Arizona Department of Revenue issued Estate Tax Ruling 04-1 to explain that Arizona estate tax determined to be due become final for purposes of determining the six-year period in which the Department must file suit or levy to collect unpaid taxes, and where the tax is paid in installments for purposes of A.R.S. § 42-4004, on the date the Department receives from the estate a copy of the final federal estate tax closing letter issued by the Internal Revenue Service which is issued after the final federal installment payment has been made.
7/12/04	CTR 04-1:  Reverse acquisition of consolidated group- The Arizona Department of Revenue issued Corporate Tax Ruling 04-1 to discuss how the reverse acquisition of a federal consolidated group that has elected the Arizona consolidated filing method under A.R.S. § 43-947 affects the Arizona filing method for that group in years subsequent to the acquisition.  The ruling explains that a reverse acquisition, as discussed in Treasury Reg. § 1.1502-75(d)(3)(i), is one in which the first corporation acquires all of the assets of the second corporation in exchange for more than fifty percent of the shares of the first corporation.  The Department ruled that, while in form, the first corporation is the acquiring corporation, in substance the second corporation is the “true acquiring corporation.”  Thus, when a consolidated group is acquired (the true acquiring corporation) in a reverse acquisition and has filed an Arizona consolidated income tax return, the new group is subject to the same filing requirements.  When a consolidated group acquires a corporation or group and the acquired group (the true acquiring corporation) has not elected to file an Arizona consolidated income tax return, the new group must make an Arizona consolidated filing election if it desires to file an Arizona consolidated return.
7/7/04	TPR 04-1:  Taxation of mobile telecommunications services- The Arizona Department of Revenue issued Transaction Privilege Tax Ruling 04-1 to explain the taxation of mobile telecommunication service as a result of HB 2542 (Laws 2001, Ch. 202) that added tax provisions compliant with the federal Mobile Telecommunications Sourcing Act (“MTSA”).  The MTSA establishes a uniform method of sourcing mobile telephone telecommunications services for tax purposes by assigning all associated taxes to one location called the customer’s place of primary use, which is the end-uer's residential street address or primary business street address.
6/21/04	FTR 04-1:   Composite fiduciary returns- The Arizona Department of Revenue issued Fiduciary Tax Ruling 04-1 to explain that A.R.S. § 43-304 does not directly address the issue of whether a trustee of more than one qualified funeral trust (“QFT”) is able to file a composite fiduciary Arizona income tax return rather than a separate fiduciary income tax return for each trust when the trustee files a composite federal income tax return for the QFTs.  The ruling concludes that the authority of the Department to allow and accept such composite returns is implied and acceptable provided certain reporting conditions are met.
4/15/04	PTR 02-1:  Enterprise Zone income tax credits- The Arizona Department of Revenue issued Arizona Partnership Tax Ruling 02-5 to provide extensive clarification and guidance for taxpayers claiming the Enterprise Zone income tax credit.  The ruling clarifies the limitation on the maximum of 200 new qualified employment positions each year, the 35 percent residency requirement, carryover of unused credits due to certification, amended returns and disqualification.  Definitions and examples are given for short periods, continuous employment, the 1750-hour requirement, and permanent employment.  The ruling provides examples and the treatment of credits, carryovers and second and third year credits for employee, business, or zone designation changes or relocation and if a business is sold or reorganized.  The ruling further defines retail sales, the criteria to meet the 10 percent retail exception, qualifications of type of retail activity described in A.R.S. § 43-1074(A)(1), (2) or (3) or A.R.S. § 43-1161(A)(1), (2) or (3), disqualification and carryover of unused credits.
4/15/04	CTR 02-5:  Enterprise Zone income tax credits- The Arizona Department of Revenue issued Arizona Corporate Tax Ruling 02-5 to provide extensive clarification and guidance for taxpayers claiming the Enterprise Zone income tax credit.  The ruling clarifies the limitation on the maximum of 200 new qualified employment positions each year, the 35 percent residency requirement, carryover of unused credits due to certification, amended returns and disqualification.  CTR 02-5 gives guidance if the taxpayer converts from either a C corporation to an S Corporation or vice versa, and the treatments of credits passed through to its shareholders or partner.  Definitions and examples are given for short periods, continuous employment, the 1750 hour requirement, and permanent employment.  The ruling provides examples and the treatment of credits, carryovers and second and third year credits for employee, business, or zone designation changes or relocation and if a business is sold or reorganized.  The ruling further defines retail sales, the criteria to meet the 10 percent retail exception, qualifications of type of retail activity described in A.R.S. § 43-1074(A)(1), (2) or (3) or A.R.S. § 43-1161(A)(1), (2) or (3), disqualification and carryover of unused credits.  If a taxpayer is part of a combined or consolidated group operating at the same location or files a combined or consolidated Arizona income tax return, the ruling clarifies they are considered to be a single taxpayer and all limitations are applied to the entire group and not each corporation.
3/2/04	TPR 94-12:   Nexus- Rescinded Arizona Transaction Privilege Tax Ruling 94-12 as a result of the court decision Arizona Dep't of Revenue v. Care Computer Systems, Inc., 197 Ariz. 414, 4 P.3d 469 (App 2000) regarding the taxation of business activity with a substantial nexus within the state of Arizona.
2/9/04	TPR 01-1:  Landscape maintenance- Rescinded Arizona Transaction Privilege Tax Ruling 01-1 regarding the taxation of activities performed by lawn, garden and tree maintenance business services which are now clear as a result of changes to Arizona Revenue Statute §42-5075 relating to prime contractor.
12/4/03	TPR 03-4:  Motor carrier exemption from leasing classification- Supersedes Arizona Transaction Privilege Tax Ruling 95-10 regarding the tax deduction for leasing motor vehicles to persons engaged in business under the transporting classification when the motor carrier fee has been paid.  Clarification is provided for the meaning of motor vehicles, combination, and weight as it relates to exemption.  The ruling also discusses the exemption on sales of vehicle and vehicle parts to lessors and the documentation that is required.
12/4/03	TPR 03-3:  Motor carrier exemption from leasing classification- Supersedes Arizona Transaction Privilege Tax Ruling 95-9 regarding the tax deduction for lessors of one way rental trucks that are subject to the motor carrier fee as part of an identifiable one way fleet that is registered on an allocated basis.  Clarification is provided for the meaning of motor vehicles, combination, and weight as it relates to exemption.  The ruling also discusses the exemption on sales of vehicle and vehicle parts to lessors and the documentation that is required.
12/4/03	TPR 03-2:  Motor carrier exemption from leasing classification- Supersedes Arizona Transaction Privilege Tax Ruling 95-8 regarding the tax deduction for lessors of motor vehicles that are subject to the motor carrier fee.  Clarification is provided for the meaning of motor vehicles, combination, and weight as it relates to exemption.  The ruling also discusses the exemption on sales of vehicle and vehicle parts to lessors and the documentation that is required.
11/6/03	TPR 92-3:  Services- Rescinded Arizona Transaction Privilege Tax Ruling 92-3 regarding retail sales tax base and services rendered in addition to selling tangible personal property.
5/22/03	TPR 03-7:  Long-term auto leasing- Arizona Transaction Privilege Tax Ruling 03-7 discusses the imposition of transaction privilege tax on the business of leasing automobiles on a long-term basis.  It explains the tax base, taxable reimbursements from lessee, taxable termination charges, tax ramifications of selling a vehicle and assigning the lease to another party and taxable amount if a lessee exercises an option to purchase.
5/22/03	TPR 03-5:  Sales to public libraries- Arizona Transaction Privilege Tax Ruling 03-5 discusses the exemption for sales of materials to publicly funded libraries for use by the public.  Gross income from sales to a publicly funded library of printed and photographic materials and electronic and digital media materials for use by the public is exempt from transaction privilege tax.  To qualify for exemption, the tangible personal property must both constitute a qualifying "material" and be directed toward "use by the public.”
5/13/03	TPR 03-1:  Motor vehicle sales to non-residents- Arizona Transaction Privilege Tax Ruling 03-1 discusses the exemption under A.R.S. § 42-5061(A)(28) for the sale of motor vehicles to nonresidents of Arizona whose state of residence does not allow a credit for Arizona tax at the time of registration in the nonresident’s state.  It clarifies the criteria and factors to qualify for exemption, tax liability, burden of proof, and prescribed forms and procedures for keeping records prescribed by the Department.
12/02/02	TPR 99-5:  Tanning Facilities- Rescinds Arizona Transaction Privilege Tax Ruling 99-5 regarding the taxability of tanning facilities under the personal property rental classification as a result of the recent Arizona Court of Appeals’ decision in Energy Squared, Inc. v. Arizona Dep't of Revenue, 2002 AZ App. 1 CA-TX 02-0004, 56 P.3d 686.
12/02/02	PTP 02-1:  Subtraction for energy efficient residences- The Arizona Department of Revenue issued Arizona Partnership Tax Procedure 02-1 to provide guidance for taxpayers claiming a subtraction on their Arizona partnership income tax returns for energy efficient residences. An eligible taxpayer may claim a subtraction equal to 5% of the sales price excluding commissions, taxes, interest, points, and other brokerage and finance charges but not to exceed $5,000. The seller must keep detailed records proving the eligibility of the residence and make them available upon the Department’s request.
12/02/02	ITP 02-1:  Subtraction for energy efficient residences- The Arizona Department of Revenue issued Individual Income Tax Procedure 02-1 to provide guidance for taxpayers claiming a subtraction on their Arizona individual income tax returns for energy efficient residences. An eligible taxpayer may claim a subtraction equal to 5% of the sales price excluding commissions, taxes, interest, points, and other brokerage and finance charges but not to exceed $5,000. The seller must keep detailed records proving the eligibility of the residence and make them available upon the Department’s request.
10-21-02	ITR 02-5:  Income tax treatment of stock options- The Arizona Department of Revenue issued Individual Income Tax Ruling 02-5 to address individual tax treatment of stock options when there is a change in residency. The Department of Revenue ruled that: (1) Incentive Stock Options that are exercised while a non-resident of Arizona and subsequently sold for ordinary income and/or capital gain as a resident of Arizona are subject to Arizona income tax. If Incentive Stock Options are exercised while a resident of Arizona and subsequently sold in a disqualifying disposition while a non-resident, any income (compensation) is subject to Arizona income tax to the extent that services were performed between the grant date and exercise date. Any resulting capital gain from a disqualifying or qualifying disposition by a non-resident is not subject to Arizona income tax unless the stock has acquired business situs within Arizona; (2) Employee Stock Purchase Plans, that are exercised while a non-resident and subsequently sold for capital gain or ordinary income (compensation) after becoming a resident of Arizona, are subject to Arizona income tax. Any income (compensation) from Employee Stock Purchase Plans that are exercised while an Arizona resident but subsequently sold as a non-resident is subject to Arizona income tax to the extent services were performed between the grant date and the exercise date. Any resulting capital gain by a non-resident are not subject to Arizona income tax; (3) Non-statutory Stock Options (which include all stock options other than Incentive Stock Options and Employee Stock Purchase Plans), that are exercised after an individual becomes an Arizona resident, is subject to Arizona income tax because the income is recognized while the individual is an Arizona resident. For individuals who move out of Arizona and exercise non-statutory stock options, income (compensation) is recognized to the extent services were performed between the grant date and the exercise date.
9/5/02	GTR 02-1:  Meaning of "controlled subsidiary"- The Arizona Department of Revenue issued Arizona General Tax Ruling 02-1 to define “controlled subsidiary” for purposes of A.R.S. § 42-2003(A)(1) as meaning more than fifty percent (50%) ownership. A.R.S. § 42-2003(A)(1) authorizes the disclosure of confidential information pursuant to a written authorization by a principal corporate officer of a parent corporation with regard to a controlled subsidiary. This ruling sets forth the Department’s interpretation relevant to the execution of Arizona corporate disclosure and representation forms available at www.revenue.state.az.us.
8/12/02	CTR 02-4:  Foreign currency gains- The Arizona Department of Revenue issued Arizona Corporate Tax Ruling 02-4 stating that under Arizona Revenue Statutes §§ 43-1131 to 43-1150, a gain or loss on foreign currency transactions is considered business income if that gain or loss is derived from normal business transactions. For example, cash regularly deposited in foreign bank accounts and accounts receivable or hedging contracts to mitigate the effects of currency fluctuations are considered business income and not passive investments. The Department's ruling was based upon its interpretation of the business income definition of UDITPA set forth by A.R.S. § 43-1131(1).
8/12/02	CTR 02-3:  Foreign corporate dividends- The Arizona Department of Revenue issued Arizona Corporate Tax Ruling 02-3 stating that dividends received from a foreign corporation pursuant to A.R.S. § 43-1122(7) are non-taxable for Arizona income tax purposes as foreign dividends. However, a shareholder in a passive foreign investment company (PFIC) may elect to mark-to-market the stock of the PFIC under Internal Revenue Code § 1296, thereby creating ordinary income equal to the difference between the FMV of the stock and its adjusted basis. Such income is federal taxable income and is not deductible as a foreign dividend for Arizona purposes.
7/16/02	TPR 02-4:  Food vendors- The Arizona Department of Revenue issued Arizona Transaction Privilege Tax Ruling 02-4 stating that, pursuant to Arizona Revised Statutes § 42-5102(A)(5), vendors using a mobile facility to sell food and other items at various locations will be eligible for an exemption for items that do not constitute food for consumption on the premises such as prepackaged chips, candy, bottled or canned soda and prepackaged ice cream products.
7/16/02	TPR 02-3:  Swap meets- The Arizona Department of Revenue issued Arizona Transaction Privilege Tax Ruling 02-3 stating that the gross income from the rental of space by operators or managers of swap meets is taxable as commercial property leasing. However, the tax rate of commercial property leasing is currently zero. Additionally, admission fees charged by operators of swap meets are taxable under Arizona Revised Statutes § 42-5073. Persons making casual sales are not required to be licensed or pay tax, but persons who sell items on a regular basis or sell inventory are considered to be in "business" and are subject to tax.
7/15/02	CTR 02-2:  Installment sales- The Arizona Department of Revenue issued Arizona Corporate Tax Ruling 02-2 stating that gains on installment sales should be apportioned by the apportionment ratio of the year in which the income is reported. Another apportionment method may only be used if the current method of apportionment does not fairly represent the taxpayer's activities.
7/15/02	ITR 02-4: Penalties- The Arizona Department of Revenue issued Arizona Individual Income Tax Ruling 02-4 stating that for the purposes of determining the underpayment of estimated tax penalty, if an individual taxpayer files a corrected return after filing the original return but before the due date for filing the original return (including extensions), the corrected return is the return for the taxable year.  If an individual taxpayer files an amended return after filing the original return and after the due date of the original return (including extensions), the original return remains the return for the taxable year for the purposes of determining the underpayment of estimated tax penalty.
7/15/02	ITR 02-3:  Estimated income tax payments- The Arizona Department of Revenue issued Arizona Individual Income Tax Ruling 02-3 stating that spouses who file separate income tax returns but make estimated tax payments jointly may allocate those payments between their respective returns in whatever manner they agree or if they cannot agree on a method of allocation, by multiplying the tax imposed on either spouse by the estimated payment and then dividing that amount by the total tax imposed on both returns.
6/12/02	TPR 02-2:  Sewage pipes- The Arizona Department of Revenue issued Transaction Privilege Tax Ruling 02-2 stating that pipes and valves 4" or greater in diameter used to transport sewage and waste do not qualify for the transaction privilege tax exemption for pipes or valves 4" or larger in diameter user to transport water, gas and oil. However, qualifying pipes and valves used in water distribution systems, irrigation systems, and storm water drainage systems do qualify for the exemption.
6/12/02	GTP 02-1:  Departmental delay relief- The Arizona Department of Revenue ("Department") issued General Tax Procedure 02-1 to offer guidance for requesting an abatement of tax, interest and penalties pursuant to Arizona Revised Statutes § 42-2065. This provision provides relief for taxes, interest and penalties due to errors or delays caused by an act of an employee of the Department. In order for a taxpayer to be eligible for relief, the delay or error must occur after the Department contacts the taxpayer with regard to underpayment of taxes and no significant aspect of the delay or error may be attributed to the taxpayer. The taxpayer's request for relief must be in writing and contain taxpayer's name, address, telephone number, and taxpayer's license or identification number. If the request is based upon a delay it should also contain the description and duration of the delay and, if known, the cause and employee or department responsible for the delay. If the request is based upon an error it should contain an explanation of the error and the department or employee responsible for the error.
4/24/02	UTR 02-1:  Out-of-state printing- The Arizona Department of Revenue issued Use Tax Ruling 02-1 stating that use tax is applicable to the purchase of printed materials from out-of-state printers that direct the materials to Arizona addresses. The Department took the position that the use tax base includes the total purchase price for the property, including any separately stated services such as sorting, stuffing, bundling, and mailing.
3/22/02	CTP 02-1:  Clarification of foreign corporations- The Arizona Department of Revenue ("Department") issued a corporate tax procedure 02-1 to offer guidance on whether a domestic corporation should be treated as a foreign corporation. Pursuant to Arizona Revised Statutes § 43-1101(5)(b), a domestic corporation is considered a foreign corporation for Arizona tax purposes if less than 20 percent of its business activity is conducted within the United States. The business percentage is calculated as the average of the corporation's U.S. property, payroll and sales factors of the three-year period preceding the current taxable year. If the corporation is not in existence for the entire three-year period, then a fractional part of the period they were in existence must be used. The corporation must exclude absent or non-existent apportionment factors when computing the factor averages. Because this computation is used to determine the percentage of a corporation's activities outside the United States and not to apportion Arizona income, the factors could include federal income that may not be taxable for Arizona purposes.
2/19/02	TPR 02-1:  Complimentary meals- Pursuant to Arizona Transaction Privilege Tax Ruling 02-1, a restaurant that provides complimentary food or beverage to its customers as a business strategy to increase sales is not subject to use tax on the food or beverage. The restaurant will be liable for use tax on the purchase price of food and beverages given away for purposes unrelated to the restaurant business.
1/17/02	ITR 02-2:  Interest income from government obligations- The Arizona Department of Revenue issued Individual Income Tax Ruling 02-2 stating that interest income received from mutual funds that invest exclusively in obligations that are exempt from Arizona income tax may be subtracted from the taxpayer's Arizona gross income.   However, interest received from repurchasing agreements and any gain recognized for federal income tax purposes on the sale of mutual fund shares containing tax exempt obligations are subject to Arizona income tax. Interest and other related expenses incurred to purchase or carry mutual fund shares containing tax-exempt obligations may not be deducted from the taxpayer's Arizona gross income. A percentage of the interest income may be deducted from the taxpayer's Arizona gross income if the mutual fund invests in both taxable and tax exempt obligations.
1/17/02	ITR 02-1:  Income from government obligations- Pursuant to Individual Income Tax Ruling 02-1, interest received from certain United States government, Territorial, and Federal Agency obligations is exempt from Arizona income tax.  However, interest received from repurchasing agreements and any gain recognized for federal income tax purposes on the sale of tax-exempt obligations are subject to Arizona income tax. Interest and other related expenses incurred to purchase or carry tax-exempt obligations may not be deducted from the taxpayer's Arizona gross income.