Arkansas has a pro-business government working to make it easier for companies to expand, locate, relocate, and thrive within the state.
The Arkansas legislature recently passed several laws that encourage economic development. Below are the most notable recent laws passed in Arkansas that directly and indirectly create economic opportunity and generate positive growth throughout the state.
Tax for State Highways, Bridges, and County Roads
The HJR 1018 House Joint Resolution was a companion piece to the Governor’s highway package. This will be a ballot issue for voters to decide on extending the sales and use tax of 0.5% on taxable sales of tangible personal property, specified digital products, digital codes, and services that are levied under Amendment 91. The revenue generated is used for the state’s four-lane highway system, county roads, and city streets. This ballot issue was passed as Issue 1 on November 3, 2020.
Tax Credits for Donation of Machinery and Equipment
Act 203 of 2019 amends the law to allow an income tax credit for donations or sales of machinery and equipment to educational institutions to include cash donation. The cash donation by a taxpayer will be for the purchase of new machinery and equipment for a qualified education program or a qualified research program. Credit for a cash donation will be 33% of the amount of the cash donation used by the educational institution to purchase new machinery and equipment. AEDC administers this program through the Business Finance Division.
Arkansas Cyber Initiative
Act 1085 of 2019 authorizes AEDC to support a Cyber Alliance in order to reduce cyber risks and encourage economic development. The Act created the Arkansas Cyber Initiative Fund and authorizes AEDC to work with universities, colleges, government agencies, and private businesses to establish an alliance called the Arkansas Cyber Initiative that will support collaborations for the purpose of improving cybersecurity and the state economy by improving cyberinfrastructure. (However, the above fund received no appropriation.)
Create the Major Historic Rehabilitation Income Tax Credit and Trust Fund
Act 855 of 2019 legislation created the Arkansas Major Historic Rehabilitation Trust Fund to consist of the Arkansas Major Historic Rehabilitation Income Tax Credit Act and allows an income tax credit up 25% of the total
qualified rehabilitation expenses incurred by the owner to complete a certified rehabilitation.
Amends the Arkansas Historic Rehabilitation Income Tax Credit
Act 470 of 2019 lowers the threshold for renovation expenses to qualify under the historic rehabilitation tax credit. Income-producing properties must have a minimum investment of $25,000 in qualified rehabilitation expenses and non-income producing properties must have a minimum investment of $5,000 in qualified rehabilitation expenses. Effective for tax years beginning on or after January 1, 2019.
Amends Military and Military Spouse License Portability Laws
Act 820 of 2019 allows automatic licensure for active duty service members, returning military veterans, and their spouses in their professions stationed in Arkansas. The individual must be a holder in good standing of an equivalent occupational license issued by another state or territory.
Adopt Federal IRS Code Provisions Concerning Opportunity Zones
Act 201 of 2019 provides state tax incentives related to investments in Opportunity Zones. This mirrors the Federal Opportunity Zone Program. Taxpayers will be able to defer tax on a capital gain from an Opportunity Zone Investment if they invest the money from the gain in a Qualified Opportunity Fund.
The Governor’s Highway Bill
Act 416 of 2019 created to provide additional revenue to maintain and repair highways, streets, and bridges in the State. The Legislation levies a wholesale sales tax on motor fuel and distillate special fuel. It creates an indexed wholesale tax on motor fuel and adds annual fees to a hybrid ($100) and electric vehicle ($200) registration. The Act calls for the transfer of these new revenues and casino tax revenues that are in excess of $31,200,000 to be transferred to the State Highway Fund and be used in maintaining and repairing public highways, streets, and bridges.