Arkansas Timber Industry Provides Value with Incentives, Rebates

It’s a great time to be in the timber and forest products industry, especially in the state of Arkansas. In addition to an abundance of timber, sustainable resources, and a skilled workforce, companies from around the world are opening facilities in the state because of the added value of forest-products tax and investment incentives, payroll rebates, training programs, and pulp-and-paper industry infrastructure grants. Since January 2015, the state of Arkansas has signed incentive agreements with 29 forest products companies for 17 different locations.

Job Creation Incentives

Arkansas's job-creation incentives are based on payroll and use a tier system based on a combination of poverty rate, unemployment rate, per-capita personal income and population growth to determine qualification criteria and benefits. Tiers are assigned annually based on current data. See Arkansas Incentives Tier Map.

When it comes to payroll rebates in the pulp-and-paper industry, the Create Rebate program can provide up to a 5 percent payroll rebate. The program provides annual cash payments based on a company’s annual payroll for new, full-time, permanent employees. Payments ranging from 3.9 percent to 5 percent of new payroll are determined by the tier assignment of the county where the job creation occurs. 

Advantage Arkansas offers a state income tax credit from 1 to 4 percent of new payroll, accruing for five years, for job creation based on the payroll of new, full-time, permanent employees hired as a result of the project. 

The ArkPlus program offers an income tax credit equal to 10 percent of the investment in a new location or expansion project. The benefits under this program are the same regardless of the tier in which the business is located; however, the company must meet the investment and income thresholds established for its tier. 

Investment Incentives

The Arkansas Research and Development incentive programs provide incentives for university-based research, in-house research, and research and development in start-up, technology-based enterprises. The university-based research programs including a 33-percent income tax credit for taxpayers who pay for research performed at Arkansas universities. A 20-percent income tax credit is available for eligible businesses performing in-house research. Targeted businesses may be offered income tax credits equal to 33 percent of approved expenditures for in-house research. 

Tax Advantages

The Tax Back program provides sales and use tax refunds on the purchase of building materials and taxable machinery and equipment to qualified businesses investing at least $100,000 for a new construction, expansion or modernization project.

Arkansas’s Freeport Law provides that raw materials and finished goods in transit or awaiting shipment to out-of-state customers are exempt from property tax.

Grants/Financing

The Quick Action Closing Fund is a discretionary fund that allows the Governor to provide funds for infrastructure, training and other capital expenditures for projects creating, expanding and retaining employment in Arkansas.

The Arkansas Economic Development Commission (AEDC) administers the federally funded state Community Development Block Grant Program (CDBG) for Arkansas. CDBG funds may be loaned to eligible companies for fixed-asset financing on projects that create jobs for low- to moderate-income families. 

Industrial Revenue Bonds provide manufacturers with competitive financing. In addition to long-term, fixed-rate, below-market interest rates on the bonds, it may be possible for the project to receive some property tax relief through the use of a Payment-in-Lieu-of-Tax (PILOT) Agreement for a period of time.

Training

AEDC’s Business and Industry Training Program (BITP) helps new and expanding businesses with recruiting workers, pre-employment training, on-the-job training and train-the-trainer programs. 

Other Advantages

Arkansas has one of the most progressive worker’s compensation programs in the nation, with more than 230 certified insurance underwriters. The state has the nation’s 3rd lowest union membership rate in the U.S. at 3.9 percent, and the cost-of-living indices are among the lowest in the nation.

Companies are taking advantage of these rebates and incentives, and the timber and forest-products industry in Arkansas is continuing to grow.