Phoenix/ Politics & Govt
AI Assisted Icon
Published on February 22, 2024
Arizona Attorney General Files Lawsuit Against IRS Over Taxation of State-Issued RebatesSource: Google Street View

Arizona's legal crusade against the IRS kicked into high gear as Attorney General Kris Mayes filed a lawsuit accusing the federal tax authority of wrongfully trying to get a piece of a one-time state-issued rebate. Taxes, or more specifically, the fact that the IRS has decided to classify the child tax rebate — a relief measure that puts up to $750 in eligible taxpayers' pockets — as taxable income. Mayes and the local legislature clearly aren't having any of it.

Last year's financial bonus was supposed to be a straightforward boost for roughly 740,000 Arizona households. However, the IRS's stance ruffled feathers in the Grand Canyon State, prompting lawmakers to rally behind their constituents. According to a statement released by Mayes and quoted by 12 News, "This lawsuit is about standing up for Arizona taxpayers." Mayes slammed the tax treatment of the rebates as "unfair and unlawful" and vowed to "do everything I can to ensure the tax relief provided to Arizonans by their state government remains in the pockets of Arizona taxpayers, as intended."

The skirmish isn't just about the dough. There's a principle involved, as the AG's office alleged in court papers that the IRS's decision to impose taxes on the rebates lacks a legal leg to stand on and contradicts its own precedents. It's a move that's being called arbitrary, capricious, and discriminatory, especially since, according to information from the Attorney General's website, Arizona acted on "the understanding from previous IRS guidance that such rebates would not be considered taxable income."

Mayes' legal action isn't just a tantrum thrown on behalf of an affected locality. It's pitched as a defense against the economic ripple effects that could reverberate throughout the state — think reduced disposable income and impactful dents in state sales tax revenue. This litigation is pushing for IRS to backtrack and refund any money that's already been taken from Arizona taxpayers, which, according to the lawsuit mentioned by 12 News, was done so "unlawfully."