Job Creation Income Tax Credit (Advantage Arkansas)
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2705
The Advantage Arkansas program provides an Arkansas income tax credit to qualified
businesses based upon a percentage of the annual payroll paid to the new full-time
permanent employees hired as a result of an approved project. The tier in which the
project is located determines the qualifying payroll threshold as well as the income
tax benefits calculation. The term of the financial incentive agreement shall be
for a period of sixty (60) months, beginning on the date of the approved financial
incentive agreement. The income tax credit earned cannot be used to offset more than
50% of a business’ income tax liability in any one tax year. Any unused credits
can be carried forward for nine (9) years beyond the year in which they were earned
or until exhausted, whichever occurs first.
For further information regarding application into the Advantage Arkansas Program,
please contact:
Arkansas Department of Economic Development
One State Capitol Mall Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Payroll Rebate (Create Rebate)
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2707
The Create Rebate program provides qualified businesses a financial incentive
equal to 3.9 to 5 percent of the annual payroll of new full-time permanent employees.
The program requires a minimum payroll of $2,000,000 within 24 months for the new
full-time permanent employees hired after the date of the financial incentive
agreement. The payroll rebate benefit can only be authorized at the discretion of the
Director of the Department of Economic Development and may be offered for up to ten
(10) years.
For further information regarding application into the Create Rebate Program,
please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Retention Sales and Use Tax Credit (InvestArk)
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2706(c)
The InvestArk program provides a sales and use tax credit to qualified, established
businesses in Arkansas that invest $5 million or more at a single location in plant
or equipment for new construction, expansion, or modernization. All project cost must
be incurred within four (4) years from the date the project is approved by
the Department of Economic Development. In order to qualify a business must have
been in continuous operation in the state for at least two (2) years. A credit
against the business’ state direct-pay sales and use tax liability, equal to
one-half percent (1/2%) above the sales and use tax rate in effect at the time of
application, is earned based on the total eligible projects costs. The credit may be
applied against the business’s direct-pay state sales and use tax liability
in the year following the year of expenditure. Any unused credits may be carried
forward for a period of up to five (5) years. In any year, tax credits taken under
this program cannot exceed 50% of the business’ direct-pay sales and use
tax liability on taxable purchases.
For projects approved on or after July 1, 2005, all project costs must be incurred
within four (4) years from the date the project is approved by the Department of
Economic Development. However, a qualified business that enters into a lease for
building or equipment for a period in excess of five (5) years may count the lease
payments for five (5) years as qualifying expenditures.
For further information regarding application into the InvestArk Program, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Investment Income Tax Credit (ArkPlus)
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2706(b)
The ArkPlus program is an income tax credit equal to ten percent (10%) of the
investment in land, buildings, equipment and costs related to licensing and
protecting intellectual property (which would include license fees, patent fees
and attorney fees to maintain or enhance the patent’s or trademark’s
application). In order to qualify for this incentive, the business must meet the
investment and payroll threshold for the tier in which the business locates or
expands. The business must reach the investment threshold for the tier in which it
is located within four (4) years from the date of the signing of the financial
incentive agreement. The income tax credit earned cannot be used to offset more
than 50% of the business’ income tax liability in any one tax year. Any
unused credits can be carried forward for nine (9) years beyond the year in which
they were earned or until exhausted, whichever occurs first.
For projects approved on or after July 1, 2005, all project costs must be
incurred within 4 years from the date the project is approved by the Department
of Economic Development however a qualified business that enters into a lease
for building or equipment for a period in excess of five (5) years may count
the lease payments for five (5) years as qualifying expenditures.
For further information regarding application into the ArkPlus Program,
please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Sales and Use Tax Refund for New and
Expanding Eligible Businesses (Tax Back)
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2706(d)
The Tax Back program provides sales and use tax refunds on the purchase of building materials
and machinery and equipment to qualifying businesses that create new jobs as a result of
construction, expansion, or facility modernization projects in Arkansas. This incentive
program is available to all eligible businesses that meet the qualifications for investment
and payroll thresholds for the tier in which it locates or expands and are approved for
benefits by the Department of Economic Development. The approval is contingent upon receipt
of a complete application and a local endorsement resolution for the city, county or both
which authorizes the refund of its local taxes to the eligible company. To qualify, the eligible
business must invest in excess of one hundred thousand dollars ($100,000) and meet the eligibility
criteria of the Advantage Arkansas or the Create Rebate job creation incentive program.
For projects approved on or after July 1, 2005 the refund of state sales and use taxes shall not
include the refund of taxes dedicated to the Educational Adequacy Fund and the taxes dedicated
to the Conservation Tax Fund.
For further information regarding application into the Tax Back Program, please contact:
Arkansas Department of Economic Development
One State Capitol Mall Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Sales and Use Tax Refund for Targeted Businesses
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2706(e)
This incentive program extends the benefits of the Tax Back sales and use tax refund
program to a category of new and expanding eligible businesses referred to as “
targeted businesses”. Targeted businesses are found within six growing business
sectors that include:
(i) Advanced materials and manufacturing systems, with
emphases on the following:
(a) Photonics;
(b) Nanotechnology;
(c) Electronics manufacturing; and
(d) Environmental issues related to material and manufacturing.
(ii) Agriculture, food and environmental sciences, with emphases on the following:
(a) Rice;
(b) Poultry;
(c) Aquaculture;
(d) Toxicology;
(e) Agricultural medicine;
(f) Forestry;
(g) Nutrition;
(h) Waste minimization;
(i) Energy reduction;
(j) Distributed energy generation; and
(k) Spatial technology.
(iii) Biotechnology, bioengineering and life sciences, with emphases
on the following:
(a) Genetics;
(b) Oncology;
(c) Geriatrics;
(d) Neuroscience;
(e) Medical devices;
(f) Rehabilitation;
(g) Biopharmaceuticals and drug discovery;
(h) Protein structure and function;
(i) Cell molecular biology; and
(j) Sensor technology.
(iv) Information technology, with emphases on the following:
(a) Knowledge and data engineering;
(b) Database systems;
(c) Distributed systems;
(d) Wireless systems;
(e) Software development; and
(f) State of the art applications of information technology to:
(1) Bioinformatics, and (2) Healthcare.
(v) Transportation logistics, with emphases on the following:
(a) Intelligent material handling;
(b) Automated systems; and
(c) Transportation management systems.
(vi) Bio-based products, with emphases on the following:
(a) Biodiesel;
(b) Ethanol;
(c) Methanol;
(d) Synthetic crude oil;
(e) Adhesives;
(f) Polymers;
(g) Automotive components; and
(h) Engineered products from non-traditional biomass
sources.
To qualify as a targeted business, the business must have been in operation
for five years or less and pay, at a minimum 150% to 180% of the lesser of the
state or county average wage and an annual payroll of at least $200,000 and
demonstrate evidence of an equity investment in the targeted business of at least
$500,000. In addition to meeting the targeted business eligibility requirements,
the business must invest in excess of one hundred thousand dollars ($100,000)
and meet the eligibility criteria of the Targeted Business payroll income tax
credit incentive program. A targeted business with an annual payroll in excess
of one million dollars ($1,000,000) will not qualify for the targeted business
sales and use tax refund.
For projects approved on or after July 1, 2005, the business must pay, at minimum,
150% of the lesser of the state or county average wage and the annual payroll must
be at least $100,000 and evidence of an equity investment of at least $400,000.
The refund of state sales and use taxes shall not include the refund of taxes
dedicated to the Educational Adequacy Fund and the Conservation Tax Fund.
The other requirements did not change.
For further information regarding application into the Sales and Use Tax Refund
for Targeted Businesses, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Payroll Income Tax Credit for Targeted Business
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2709
The payroll income tax credit for targeted businesses is offered to assist with
the start-up of businesses in targeted sectors that pay significantly more than
the state or county average wage of the county in which the business locates.
The benefit for a targeted business is an income tax credit based on 10% of its
annual payroll, with a cap of $100,000 per year in earned income tax credits for
a business that qualifies and is approved for this incentive. In order to qualify
for this incentive, the business must be included in one of the six targeted business
sectors. For projects approved prior to July 1, 2005, the business must have an
hourly average wage between 150% to 180% of the lesser of the state or county
average wage and an annual payroll of not less than $200,000 or more than $1,000,000
and demonstrate evidence of an equity investment in the targeted business of at
least $500,000. The incentive may be offered for a period not to exceed five
(5) years and the calculation of this income tax credimmay include existing
employees in the calculation of payroll to qualify for this benefit.
For projects approved on or after July 1, 2005, the business must have an annual
payroll of not less than $100,000 or more than $1,000,000, show proof of an equity
investment of at least $400,000 and pay average hourly wages in excess of 150%
of the county or state average hourly wage, whichever is less.
Any unused credits can be carried forward for nine (9) years beyond the year in
which they were earned or until exhausted, whichever occurs first. Upon approval
of the Department of Economic Development, the income tax credits may be sold.
For further information regarding application into the Payroll Income Tax Credit
for Targeted Businesses, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Research and Development with Universities
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2708(a)
An eligible business that contracts with one or more Arkansas colleges or universities
in performing research may qualify for a 33% income tax credit as authorized in Arkansas
Code Annotated 26-51-1102(b) for qualified research expenditures. The income tax
credit may be carried forward for three years beyond the year in which the credit
was earned.
For further information regarding application into the Research
and Development with Universities, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
or
The Arkansas Science and Technology Authority
501-683-4400 www.asta.ar.gov
In-House Research Income Tax Credit
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2708(b)(1)
An eligible business that conducts “in-house” research within a research
facility that is operated by the eligible business may qualify for in-house research
income tax credits. The eligible business must make an application to the department
generally describing the research to be undertaken and the estimated expenditures to
be made on in-house research. The credit allowed for approved in-house research is ten
percent (10%) of qualified expenditures. However, the maximum credit that can be earned
by each qualified business shall not exceed $10,000 per tax year. The term of the
financial incentive agreement for in-house research and development shall be for a period
not to exceed five (5) years. The financial incentive agreement may be renewed for a
period not to exceed five (5) years upon the submittal of a new application and project
plan.
For further information regarding application into the In-House Research credit, please
contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
or
The Arkansas Science and Technology Authority
501-683-4400 www.asta.ar.gov
In-House Research by a Targeted Business Income Tax Credit
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2708(c)
Business deemed by the Department of Economic Development to fit within the six
business sectors classified as “targeted businesses” may enter into
a financial incentive agreement for income tax credits based on qualified research
and development expenditures. An eligible business may be approved for an income
tax credit each year equal to 33% of the qualified research and development
expenditures incurred each year for the first five (5) years of the financial
incentive agreement. The targeted business applying for in-house research and
development income tax credits shall comply with all the qualifications required
of targeted businesses to qualify for a job creation income tax credit.
The carry forward for this incentive is three years beyond the year in which
the credit is first earned. Act 1232 of 2005 allows credits maintained for use
by the targeted business may be carried forward for a period of nine (9) years
beyond the date of issuance. As with the payroll income tax credits for
targeted businesses, the income tax credit for research and development earned by
targeted businesses may be sold if approved by the Department of Economic Development.
For further information regarding application into the In-House Research credit,
please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
or
The Arkansas Science and Technology Authority
501-683-4400 www.asta.ar.gov
In-House Research Area of Strategic Value Income Tax Credit
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2708(d)(1)(A)
The program provides for an income tax credit equal to 33% of qualified research
expenditures for research in an area of strategic value. Research area of strategic
value means research in fields having long-term economic or commercial value to the
state, and that have been identified in the research and development plan approved
from time to time by the Board of Directors of the Arkansas Science and
Technology Authority. The tax credit for research in an area of strategic value
may be earned for the first five years following the signing of a financial
incentive agreement with the department. The income tax credit earned cannot
offset more than 50% of a business’ income tax liability in any one tax year
and the benefits can be carried forward for nine (9) years beyond the year in which
they were earned or until exhausted, whichever occurs first.
For projects approved prior to July 1, 2005 the carry forward was three (3) years.
The maximum tax credit that may be claimed by a taxpayer under this program is
$50,000 per tax year.
For further information regarding this tax credit, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
or
The Arkansas Science and Technology Authority
501-683-4400 www.asta.ar.gov
Research under Programs of the
Arkansas Science And Technology Authority Tax Credit
Act 182 of 2003, as amended by Act 1296 of 2005
Arkansas Code Annotated § 15-4-2708(d)(1)(B)
The program provides for an income tax credit equal to 33% of qualified research
expenditures for research under programs of the Arkansas Science and Technology
Authority. The Authority specifies the application format for its programs. The
tax credit may be earned for the first five years following the signing of a
financial incentive agreement with the Department of Economic Development.
The income tax credit earned cannot offset more than 50% of a business’ income tax
liability in any one tax year and the benefits can be carried forward for nine (9)
years beyond the year in which they were earned or until exhausted, whichever occurs
first. For projects approved prior to July 1, 2005 the carry forward was three (3) years.
The maximum tax credit that may be claimed by a taxpayer under this program is $50,000
per tax year.
For further information regarding this tax credit, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
or
The Arkansas Science and Technology Authority 501-683-4400 www.asta.ar.gov
Manufacturer's Investment Credit
Act 529 of 1985, as amended by Act 807 of 1997, allows eligible
manufacturers a sales and use tax credit of seven percent (7%) of the total qualified
expenditures for an approved project. This credit may be used to reduce the State monthly
direct pay sales and use tax liability by 50% for a maximum of seven (7) years. To
qualify, a company must have been in continuous operation in Arkansas for at least
two years and engages in a manufacturing plant construction or expansion project costing
more than five (5) million dollars. The last day to sign a financial incentive agreement
for this credit was March 2, 2003. Please see the Retention Sales and Use Tax Credit
(InvestArk) section above for new applications.
Enterprise Zone Program
Act 947 of 1993, as amended by Acts 394 and 1250 of 1995 and 807
of 1997, authorizes sales/use tax refunds and income tax credits to businesses
located in Arkansas that embark on certified projects involving the construction
of a new plant or facility, the expansion of an established plant or facility, or,
the replacement of production or processing equipment or support infrastructure.
To obtain the benefits of this Act, the business does not have to be located within
a designated enterprise zone; however, the qualified business must fit into specific
Standard Industrial Classification (SIC) code numbers 20 through 39, 7375, 7376, or
is a distribution center, corporate headquarters, office sector business, trucking
sector business operating under SIC 4231, or, research, development, testing business
under SIC 8731. Businesses fitting into SIC codes 20-39, 7375, 7376 and 8731
should hire at least one new permanent employee; while distribution centers must hire
at least 25, corporate headquarters and office sector businesses at least 50, and
trucking sector businesses at least 100 new permanent employees. Also, any industry
that locates a facility at a municipal airport which qualifies as a special target
applicant is eligible to apply for benefits regardless of whether the industry would
otherwise qualify for the benefits of the Enterprise Zone Program. A special target
applicant refers to any governing body of a municipal airport wherein is located a
military installation slated for closure, or any governing body of a municipal airport
located within 30 miles of a military installation slated for closure, provided the
installation exceeds 30,000 acres of total land.
The income tax credit is equal to 100 times the average hourly wage paid per net new
permanent employee. This credit is doubled, with a maximum of $2,000.00, if the business
is located in a county that had an unemployment rate greater than 10% or greater
than 3% of the state's average unemployment rate for the preceding calendar year.
A new permanent employee is a position or job which was created as a result of the
project and which is filled by one or more employees or contractual employees. The
position must have had someone working in it for at least twenty-six (26) consecutive
weeks with an average of at least thirty (30) hours per week.
This tax credit shall be used for the taxable year in which the net new permanent
employees were hired. If the entire credit cannot be used in the year earned, the
remainder may be applied against the income tax for the succeeding four (4) years
or until the credit is entirely used, whichever occurs first. For projects approved
on or after March 25, 1997, the credit may be applied against income tax for the
succeeding nine (9) years. The sales and use tax refund is allowed on the purchases
of materials used in the construction of a building or buildings, or any addition
or improvement thereon, and machinery and equipment to be located in or in connection
with the building or buildings. The last day to sign a financial incentive agreement
for this credit was March 2, 2003. Please see the Job Creation Income Tax Credit
(Advantage Arkansas) and the Sales and Use Tax Refund for New and Expanding Eligible
Businesses (Tax Back) above.
Economic Development Incentive Program
Act 851 of 1993, as amended by Acts 590 and 820 of 1995 and 807 of 1997,
authorizes the Arkansas Economic Development Commission to negotiate proposals
on behalf of the State with prospective businesses which are considering locating
a new facility, or expanding an existing facility. A business must fall within
Standard Industrial Classification (S.I.C.) code numbers 20 through 39, or, is
a distribution center, corporate headquarters, or office sector business.
Corporate headquarters and office sector businesses must employee 50 or more new
permanent employees, while all other type businesses must hire 100 or more
new permanent employees. A financial incentive plan may be negotiated to equal
an amount of up to 3.9% of the company’s annual payroll for the new permanent
employees, or, up to 5% if the business locates in an area of high unemployment.
The term of a financial incentive plan cannot exceed 126 months. The last day to
sign a financial incentive agreement for this program was March 2, 2003. Please
see the Payroll Rebate (Create Rebate) section above.
Arkansas Economic Development Act of 1995
Act 831 of 1995, as amended by Act 807 of 1997, authorizes the Arkansas
Economic Development Commission to negotiate proposals on behalf of the State
with prospective businesses which are considering locating a new facility, or
expanding an existing facility, that would employee at least 100 new permanent
employees and expend at least $5,000,000 on the project.
An income tax credit may be granted based upon the business' annual amount
of debt service (principal and interest) paid to a lender in connection with
the project financing. The amount of credit that may be claimed each year will
depend on the average hourly wage of the new permanent employees. For projects
initiated after June 1, 2000, the income tax credit may be based on total
investment, without regard to how the project is financed.
A sales and use tax refund may also be granted on the purchases of the material
used in the construction of a building or buildings, or any addition or improvement
thereon, for housing a legitimate business enterprise, and machinery and equipment
to be located in or in connection with such building.
To qualify, the business must fit into specific Standard Industrial Classification
(S.I.C.) code numbers 20 through 39, 7375, 7376; or is a distribution center, corporate
headquarters, regional headquarters, or office sector business located in Arkansas.
The business must also hire at least 100 new permanent employees within 24 months.
The last day to sign a financial incentive agreement for this program was March 2,
2003. Please see the Investment Income Tax Credit (ArkPlus) section above.
Biotechnology Development Credit
Act 1117 of 1997 provides income tax credits for the development of biotechnology
in Arkansas. Biotechnology means the uses of biochemistry, molecular biology,
genetics, and bioengineering to meet the needs of agricultural, aquaculture, forestry
and environmental industries, as well as developing products useful for modern medicine,
veterinary science, and pharmaceuticals.
The credits available are equal to: five percent (5%) of the cost for construction,
expansion, improvement, renovation, or purchase of a biotechnology facility; thirty
percent (30%) of the cost for training employees in biotechnology and Higher Education
Partnerships; twenty percent (20%) of the amount the cost of qualified research,
exceeds the cost of such research in the base year.
The credits allowed shall be used to offset the first fifty thousand dollars
($50,000) of income tax liability arising during the credit year, and fifty percent
(50%) of any remaining income tax liability. Any unused credit may be carried
forward for a maximum of nine (9) taxable years after the credit year in which
the credit originated.
To claim the benefits of this program, a taxpayer must obtain certification
from the Director of the Arkansas Economic Development Commission certifying to
the Revenue Division of the Department of Finance and Administration that the
taxpayer is engaged in qualified research in biotechnology. The last day to sign
a financial incentive agreement for this program was March 2, 2003. Please see one
the research and development credits above.
Emerging Technology Development
Arkansas Code Annotated § 15-4-2104
Act 976 of 1999 provides an income tax credit for companies that design, develop,
or produce photovoltaic devices, electric vehicle equipment, or fuel cells.
The credit is equal to 50% of the amount spent during the taxable year to purchase
or construct the facility, including land acquisition, infrastructure improvements,
renovations, building improvements, machinery, and other manufacturing equipment.
Any unused credit may be carried forward 6 years. A taxpayer must obtain
certification from the Arkansas Department of Economic Development certifying to
DFA that the taxpayer is engaged in qualifying activities. Act 1284 of 2001
expands the credit to include businesses that design, develop, or produce
microturbines, stirling engines, or devices reliant on nanotechnology.
The last day to sign a financial incentive agreement for this program was
March 2, 2003. Please see one the research and development credits above.
Water Resource Conservation and Development Incentives
Arkansas Code Annotated § 26-51-1001 et seq.
Projects Approved Prior to January 1, 1996
Act 417 of 1985, as amended by Act 26 of the 1st Extraordinary Session of 1985, provides
an income tax credit equal to 50% of the cost of construction and installation or
restoration of water impoundments or water control structures of twenty (20) acre
feet or more and used for the production of food or fiber as a business or for
industrial purposes. The credit shall not exceed $3,000 per year for not more than
ten (10) years. Consequently, the credit has a maximum nine (9) year carry forward.
Projects Approved January 1, 1996 and Later
Act 341 of 1995, as amended by Act 421 of 1997, and Acts 765 and 1050 of 1999,
creates additional credits for taxable years beginning on or after January 1, 1996.
An income tax credit equal to 50% of the cost of construction and installation
or restoration of water impoundments or water control structures of twenty (20)
acre feet or more designed for the purpose of storing water to be used primarily
for agricultural irrigation or industrial process water. The amount of credit
used for any taxable year may not exceed $9,000 and may be carried over for
maximum of nine (9) consecutive taxable years following the taxable year in which
the credit originated.
There is also a tax credit equal to 10% for projects outside critical groundwater
areas, and 50% for projects within critical groundwater areas, of the cost
incurred for the reduction of ground water used by substitution of surface water
for water used in industrial, commercial, agricultural, or recreational purposes.
The amount of credit used for any taxable year may not exceed $9,000 and may be
carried over for maximum of two (2) consecutive taxable years following the taxable
year in which the credit originated. Exception: Credits earned from a project for
industrial or commercial purposes that is located in critical groundwater areas
may be used in an amount up to $30,000, increased to $200,000 effective with
tax years beginning January 1, 1999. These credits may be carried over for a
maximum of four (4) consecutive taxable years.
Also available for taxable years beginning January 1, 1996 is a tax credit equal
to 10% of the project cost incurred for agricultural land leveling to conserve
irrigation water. The amount of credit used for any taxable year may not exceed
$9,000 and may be carried over for maximum of two (2) consecutive taxable years
following the taxable year in which the credit originated.
For further information regarding application for the Water Resource Conservation
and Development Incentives, please contact:
Soil and Water Conservation Commission
101 E. Capitol, Suite 350
Little Rock, Arkansas 72201
(501) 682-3972 www.aswcc.arkansas.gov/
Private Wetland/Riparian Zone Creation and Restoration Incentive
Arkansas Code Annotated § 26-51-1501 et seq.
Act 561 of 1995 created income tax credits for taxable years beginning on or after
January 1, 1996 equal to the project cost incurred in the development or restoration
of private wetlands and riparian zones. The amount of credit used for any taxable year
may not exceed $5,000 and may be carried over for a maximum of 9 consecutive taxable
years following the taxable year in which the credit originated. The project must be
maintained for a minimum life of 10 years after the project is completed.
For further information regarding application for the Private Wetland and Riparian
Zone Creation and Restoration and Incentive Program, please contact:
Soil and Water Conservation Commission
101 E. Capitol, Suite 350
Little Rock, Arkansas 72201
(501) 682-1608 www.aswcc.arkansas.gov/
Waste Reduction and Recycling Equipment Credit
Arkansas Code Annotated § 26-51-506
Act 748 of 1991 and Act 654 of 1993 authorizes an income tax credit equal
to 30% of the cost of waste reduction, reuse, or recycling equipment, including
the cost of installation of such machinery and equipment. To become eligible, the
company must obtain a certification from the Arkansas Department of Environmental
Quality stating that the taxpayer is engaged in the business of reducing, reusing,
or recycling solid waste material for commercial purposes.
The credit used for a taxable year may not exceed the individual or corporation
income tax due. Any unused credit may be carried over for a maximum of three (3)
consecutive years, unless the business is a qualified steel mill that has invested
more than $200,000,000, and then the carry forward period is fourteen (14) years.
A taxpayer claiming the credit shall not be entitled to claim any other credit or
deduction based on the purchase price of the equipment, except for the deduction
for normal depreciation.
For further information regarding application for the Waste Reduction and Recycling
Equipment Credit, please contact:
Department of Pollution Control and Ecology
Recycling Division
8001 National Drive
Little Rock, Arkansas 72209
(501) 682-0609 www.adeq.state.ar.us
Employer Provided Early Childhood Program
Arkansas Code Annotated § 26-51-507 and 508
Act 987 of 1993, as amended by Act 850 of 1995 allows an income tax credit of
3.9% of the annual salary of personnel employed exclusively for providing child
care services to the business's employees, or a $5,000 income tax credit for the
first tax year the business provides its employees with a child care facility.
The credit is first available for use in the taxable year following the year
the business makes payment of wages to child care workers. Any unused credit
may be carried forward two (2) years.
Additionally, a refund of sales and use taxes paid on the purchase of construction
materials and initial furnishings for a approved child care center of a business
qualified as having an appropriate early childhood program. The Arkansas Department
of Education must certify a facility as qualifying having an appropriate early
childhood program.
For further information regarding application into the Appropriate Early
Childhood Program, please contact:
Arkansas Early Childhood Commission
Four Capitol Mall
Little Rock, Arkansas 72201
(501) 682-4891
County and Regional Industrial Development Corporation Credit
Arkansas Code Annotated § 15-4-1224
The original purchaser of common stock of a corporation or a unit of interest
of a limited liability company shall be entitled to a credit against any Arkansas
income tax liability, which may be imposed on such a purchaser for any tax year
commencing on or after January 1, 1999, for common stock purchased from a
corporation or units of interest of a limited liability company and retained
during any of the calendar years 1999-2003. In any one-tax year the credit shall
not exceed 50% of the income tax liability, after all other credits and reductions
in tax have been calculated. Any unused credit credits may be carried forward for
the next three (3) succeeding tax years or until exhausted, whichever occurs first.
The credit shall be determined in the following manner:
Any fees or commissions in excess of 15% of the total purchase price shall not
be considered in calculating the amount of the credit determined in this section.
Any original purchaser of common stock or units of interest who seeks to
qualify for and maintain the income tax credit provided in this section must
obtain and attach to its annual income tax return a certified statement from
the company issuing the common stock or units of interest stating:
• The name and address of the original purchaser;
• The number of shares or units of interest purchased;
• The amount paid by the original purchaser for the common stock or
units of interest, specifying what portion of the original purchase price consisted
of fees or commissions to the underwriter or sales agent;
• The date of purchase of the common stock or units of interest;
• The number of shares or units of interest of the original
purchase still owned by the original purchaser; and
• The amount and date of distributions made from the company to
the purchaser and whether or not such distributions are ones made pursuant
to § 15-4-1215.
Equipment Donation or Sale below Cost Credit
Arkansas Code Annotated § 26-51-1102-1104
Act 759 of 1985 provides a tax credit to taxpayers who donate, or sell below cost,
new machinery or equipment to a qualified educational institution. A credit is also
allowed for taxpayers who have expenditures under a Qualified Research Program approved
by the Arkansas Science and Technology Authority and the Department of Higher Education.
Qualified Educational Institution means any public or private university, college,
junior college, vocational school, or, public elementary or secondary school located in
the state of Arkansas.
The credit is equal to 33% of the donation, reduction in cost, or research expenditures.
The tax credit shall not exceed 50% of the total tax due and any unused credits may be
carried forward for three years, or until exhausted, whichever occurs first.
To claim this credit the taxpayer must receive a statement or receipt from the institution
receiving the donation, sale below cost or research expenditure, stating that the machinery
and equipment is new, that the machinery or equipment has actually been received, and that
the machinery or equipment was either a donation or a sale below cost.
If the credit is from a donation or sale below cost, a retailer or wholesaler must attach
a copy of the invoice showing the actual cash paid. Manufacturers must attach a copy of
their wholesale price list showing the lowest price of the item.
To claim a credit from qualified research expenditure, the taxpayer must provide a statement from the Arkansas Science and Technology Authority that it, and the Department of Higher Education, have approved the expenditure as part of a qualified research program.
Department of Higher Education
114 East Capital Avenue
Little Rock, Arkansas 72201
(501) 371-2000
Youth Apprenticeship Training Program
Act 1103 of 1995 provides for an income tax credit of up to $2,000 for each qualified youth apprentice. To claim the benefits, a taxpayer must obtain a certification from the Bureau of Apprenticeship and Training of the U.S. Department of Labor. A taxpayer who trains a youth apprentice in a registered youth apprenticeship program shall be entitled to a credit in the amount of $2,000 or 10% of the wages earned by the youth apprentice, whichever is less. The credit used for a taxable year may not exceed the individual or corporate income tax otherwise due in the year the credit was earned. Any unused credit may be carried over for a maximum of two (2) consecutive taxable years.
For further information regarding application into the Youth Apprenticeship Program, please contact:
Department of Labor
Bureau of Apprenticeship and Training
700 West Capitol
Little Rock, Arkansas 72201
(501) 324-5415
Youth Apprenticeship/Work-Based Learning Program
Act 1168 of 1997 provides for an income tax credit of up to $2,000 for each qualified youth apprentice. To claim the benefits, a taxpayer must obtain a certification from the Department of Workforce Education. Beginning January 1, 1998, a taxpayer who trains a youth apprentice in an approved apprenticeship/work-based learning program which is in an occupation not eligible under the Youth Apprenticeship Training Program provided by Act 1103 of 1995 shall be entitled to a credit in the amount of $2,000 or 10% of the wages earned by the youth apprentice, whichever is less. The credit used for a taxable year may not exceed the individual or corporate income tax otherwise due in the year the credit was earned. Any unused credit may be carried over for a maximum of two (2) consecutive taxable years.
For further information regarding application into the Youth Apprenticeship/Work-Based Learning Program, please contact:
Department of Workforce Education
3 Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1579
Motion Picture Industry Incentives
Arkansas Code Annotated § 15-4-2001 through 2012
Act 919 of 1997 provides incentives for motion picture and television industries
in the State of Arkansas. A company must first apply with the Arkansas Film Office
of the Arkansas Economic Development Commission to receive approval prior to the
commencement of filming in Arkansas. To qualify the company must: spend five hundred
thousand dollars ($500,000) within a six (6) month period in connection with the
filming and/or production of one (1) feature film, telefilm, music video, documentary,
episodic television show, or commercial advertising project; or spend in excess of
one million dollars ($1,000,000) within a twelve (12) month period in connection
with the filming and /or production of one (1) or more feature films, telefilms,
music video, documentary, episodic television show, or commercial advertising projects.
The qualified production company shall be entitled to a tax refund of one
hundred percent (100%) of the sales or use tax paid on the purchase of property and
services in Arkansas in connection with the filming and/or production projects within
Arkansas. The refund would not include any sales or use tax imposed by constitutional
amendment, which as of this date is only the 1/8% conservation tax, or any local taxes.
For further information regarding application into the Motion Picture Incentives
Program, please contact:
Arkansas Economic Development Commission
Arkansas Film Office
1 Capitol Mall Suite 2C-200
Little Rock, Arkansas 72201
(501) 682-7676 jglass@1800ARKANSAS.com
Prior to Act 2038 of 2005 the Arkansas Tourism Development Act provides state
sales tax credits and income tax credits to businesses operating or intending
to operate an approved tourism attraction project. Sales tax credits shall be
determined in accordance with the following criteria;
(1) Eligible minimum project costs must be $500,000.
(2) The percentage of sales tax credits shall be determined by total approved project
costs. Project with expenditures of $500,000 but less than $1,000,000 are eligible for
a credit of 10% of the eligible project expenditures. Projects with expenditures of
more than $1,000,000 are eligible for a credit of 25% of the eligible project expenditures.
(3) The sales tax credit may only be applied against the increased sales tax liability of
the approved project; and any other review criteria requested by the Arkansas Department
of Economic Development.
Act 2308 of 2005 provided that an approved company shall be entitled to a
credit if the company certifies to the Director of the Department of Finance
and Administration that it has expended at least five hundred thousand dollars
($500,000) in a high unemployment county and one million dollars ($1,000,000)
in all other counties in approved costs and the Director of the Department of
Economic Development certifies that the approved company is in compliance with
the code section. The sales tax credit memorandum will equal fifteen (15%)
of the approved costs except for approved projects located in high unemployment
areas the memorandum will equal twenty-five percent (25%) of the approved costs.
Unused credits may be carried forward for a period of nine (9) years.
Except as provided in Arkansas Code Annotated § 15-11-511, the credit
memoranda shall not be used to offset any tax other than state sales tax.
Income Tax Credit
Prior to Act 2308 of 2005 eligible businesses may receive an income tax
credit equal to 100 times the average hourly wage of each new full-time
permanent employee, with a $3,000 cap per employee. The multiplier increases
from 100 to 400 with a $6,000 cap per employee in a “high-unemployment’
county. New full-time permanent must be Arkansas taxpayers.
Income tax credits are earned in the tax year in which the new full-time permanent
employees are hired. The income tax credits must be used in the tax year the credits
are earned.
Act 2308 of 2005 provided that tourism attraction projects meeting the eligibility
requirements are entitled to receive an income tax credit based upon a percentage
of the payroll of the new full-time permanent employees working at the tourism
attraction project. Upon certification by the company and audit, an income tax credit
equal to four percent (4%) of the payroll of the new full-time permanent employees
of the approved project will be issued.
Any unused portion of the tax credit may be applied against the income tax
liability for the succeeding nine (9) years.
For further information regarding approval into the Arkansas Tourism
Development Program, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Motorcoach Carrier Incentives
Arkansas Code Annotated § 23-13-501 to 506
Eligible applicants are entitled to an incentive payment equal to twenty-five
dollars ($25.00) per night per group for travel involving an overnight stay
in Arkansas while transporting tourists by motorcoach within the state.
(a) To qualify for the incentive payment, an eligible applicant must provide
documentation to the Director of the Department of Parks and Tourism necessary
to establish the rental of at least twenty (20) rooms per night per payment claimed.
(b) The documentation shall include:
(1) An itinerary for each trip and copies of overnight lodging receipts which
provide the date and location of each overnight stay; and
(2) Any other documentation the director requires to adequately determine
the entitlement to the incentive provided by this subchapter.
Coal Mining Tax Credit
Arkansas Code Annotated § 26-51-511
An income tax credit of $2.00 per ton of coal mined, produced, or extracted
on each ton of coal mined in Arkansas in a tax year. An additional credit of
$3.00 per ton will be allowed for each ton of coal mined in Arkansas in excess
of 50,000 tons in a tax year. The credit can only be earned if the coal is sold
to an electric generation plant for less than $40.00 per ton excluding freight
charges. The credit expires five (5) tax years following the tax year in which
the credit was earned.
For further information regarding approval for the Coal Mining Tax Credit,
please contact the Tax Credits Section at 501-682-7106.
Manufacturer’s Investment Tax Credit
Arkansas Code Annotated § 26-51-2001 et seq.
Program provides for an income tax credit for investment of at least $100 million
before December 31, 2004 in a qualified paper manufacturing business equal to 7%
of the investment. The credit shall not exceed 50% of the income tax liability,
after all other credits and reductions in tax have been calculated. Any unused
credit may be carried forward for the next six (6) succeeding years or until
exhausted, whichever comes first.
For further information regarding application into the Manufacturer’s
Investment tax credit, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Low Income Housing Credit
Arkansas Code Annotated § 26-51-1702
The program provides for an income tax credit for taxpayer owning an interest in
a qualified low income building which is approved through the Arkansas Development
Finance Authority. The tax credit is computed by multiplying the Federal Low
Income Housing Tax Credit for the qualified project by 20%. The credit may not
exceed the income tax otherwise due. Any unused credit may be carried forward
for the next five (5) succeeding tax years or until exhausted, whichever comes first.
For further information regarding application into the Low Income Housing Credit, please contact:
Arkansas Development Finance Authority
100 Main Street, Suite 100
Little Rock, Arkansas 72203
501-682-5900/5903
Arkansas Public Roads Improvements Credit
Arkansas Code Annotated § 15-4-2301 et seq.
Act 1347 of 1999 provides an income tax credit for taxpayers that contribute
to the Public Roads Incentives Fund of the Arkansas Economic Development Commission.
The credit is equal to 33% of the taxpayer’s contribution. The credit may not
exceed 50% of the taxpayer’s income tax liability after all other credits and
reductions in tax have been calculated. Any unused credit may be carried forward for
three (3) years.
For further information regarding application into the Arkansas Public Roads
Improvement credit, please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
To qualify, the business must be classified as on of the following: manufacturers
classified in N.A..I.C.S codes 31-33, including semiconductor and microelectronic
manufactures; computer firms primarily engaged in providing computer programming
services, the design and development of prepackaged software, engaged in digital
content production, computer processing and data preparation services, informational
retrieval services, computer and data processing consultants and developers, all
of which must derive at least 75% of their revenue from out-of state sales and
not be engaged in retail sales to the general public; firms primarily engaged in
commercial physical and biological research (N. A.I.C.S. 541710), as in effect January 1,
2003. Eligible companies that use state supported educational institutions for
classroom training are eligible for either a grant or income tax credit, while a
consortium can only receive a grant, for the lesser of ½ of the amount paid
by the company to the educational institution, or, the instructional hour rate
(not to exceed $60 per hour) times the number of instructional hours. If the company
uses company employees or paid consultants to deliver the classroom training,
the amount of assistance shall not be more than $15 per instructional hour, which can
only be in the form of an income tax credit. There is no carry forward period for this credit.
For further information regarding the Arkansas Existing Workforce Training Program, please contact:
Arkansas Department of Economic Development
Attn: Gay Johnson
One State Capital Mall
Little Rock, Arkansas 72201
(501) 682-1121
Nonprofit Organization Incentives
Arkansas Code Annotated § 15-4-3201 et seq.
Act 1277 of 2005 provides a program for sales and use tax refunds and payroll rebates.
In order to receive benefits the nonprofit organization shall sign a financial incentive
agreement with the Department of Economic Development prior to the start of construction.
Only those nonprofit organizations that have a payroll of new full-time permanent employees
in excess of one million ($1,000,000) annually may apply for and receive any benefits.
The nonprofit organization shall pay wages that average in excess of one hundred ten percent
(110%) of the lesser of the county or state average wage; and receive a minimum of seventy-five
(75%) of its income from out-of-state sources. Hospitals, medical clinics, accredited academic
educational institutions, and churches are specifically excluded from receiving benefits.
A nonprofit organization cannot receive sales and use tax refunds without meeting the job
creation requirements. A sales and use tax refund shall be made only if after the audit of
expenditures and payroll by D F A. The sales state portion of the sales and use tax refund
will exclude the tax dedicated to the Conservation Tax Fund and the Educational Adequacy Fund.
The sales and use tax refund is only on the purchases by the nonprofit organization of the
material used in the construction of a building or buildings or any addition, modernization,
or improvement for housing any new or expanding nonprofit organization and machinery and
equipment to be located in or in connection with a building.. To qualify for the sales
and use tax refund, a qualified nonprofit organization shall spend in excess of five hundred
thousand dollars ($500,000) on buildings, machinery, and equipment in the new or improved
facility. A refund shall not be authorized for (1) routine operating expenditures; or (2)
The purchase of items previously purchased as part of a project unless the items previously
purchased are necessary for the implementation or completion of the project. The award of the payroll
rebate incentive is at the discretion of the Department of Economic Development.
For further information regarding application for the Nonprofit Organization Incentive,
please contact:
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, Arkansas 72201
(501) 682-1121 http://www.1800arkansas.com/
Venture Capital Investment Credit
Arkansas Code Annotated §15-5-1406
An income tax credit up to $10 million per year as recommended by the Arkansas Development
Finance Authority and approved by the State Board of Finance. The credit may not exceed the
income tax otherwise due. Any unused credit may be carried forward for the next five (5)
succeeding tax years or until exhausted, whichever occurs first.
For further information regarding application into the Venture Capital Investment credit,
please contact:
Arkansas Development Finance Authority
100 Main Street, Suite 100
Little Rock, Arkansas 72203
501-682-5900
Family Savings Initiative Credit
Arkansas Code Annotated § 20-86-109
Provides for the Family Savings Initiative Act, effective July 1, 1999,
which provides a tax credit to those taxpayers who make contributions to a
designated fiduciary organization created pursuant to the Act. The fiduciary
will notify the Department of Human Services of the deposits and will issue
a certificate to be attached to the tax return for the first year the credit
is taken. The credit allowed is the lesser of the income tax due or $25,000
per taxpayer. The total tax credit allowed for all taxpayers is $100,000 per year.
Any unused credit may be carried forward for the next 3 succeeding tax years or
until exhausted, whichever occurs first.
For further information regarding application into the Family Savings
Initiative tax credit, please contact:
Department of Human Services
Donaghey Plaza, 7th and Main Streets
Little Rock, Arkansas 72203
(501) 682-1001/6500
Affordable Neighborhood Housing Credit
Arkansas Code Annotated 15-5-1301 et seq.
Provides for an income tax credit for any business firm engaged in providing
affordable housing which is approved through the Arkansas Development Finance
Authority. The tax credit is limited to 30% of the total amount invested in
affordable housing assistance activities. The credit may not exceed the income tax
otherwise due. Any unused credit may be carried forward for the next 5 succeeding
tax years or until exhausted, whichever occurs first.
For further information regarding application into the Affordable Neighborhood
Housing credit, please contact:
Arkansas Development Finance Authority
100 Main Street, Suite 100
Little Rock, Arkansas 72203
501-682-5900
Tuition Reimbursement Tax Credit
Arkansas Code Annotated §26-51-1901 et seq.
The program provides for an income tax credit equal to 30% of the cost of
tuition reimbursed by the employer to a full-time permanent employee on or after
July 30, 1999. The credit cannot exceed 25% of the business’ income tax
liability in any tax year. There is no carryforward for this credit.
Act 1235 of 2005 allows for the employer to pay on behalf of the full-time,
permanent employees. In order to qualify for the income tax credit, the employer
shall document that the employee has successfully completed the course. Only
certain types of businesses are eligible to qualify.
For further information regarding the form to claim the credit please contact:
Corporation Income Tax Section
(501) 682-4775
Individual Income Tax Section
(501) 682-7250
Rice Straw Income Tax Credit
Arkansas Code Annotated § 26-51-512
Act 2247 of 2005 allows for an income tax credit in the amount of $15.00
for each ton of rice straw in excess of 500 tons that is purchased by an
Arkansas taxpayer who is the end user of the straw (person who purchases
and uses the straw for processing, manufacturing, generating energy or
producing ethanol). The amount of the credit is limited to 50% of the income
tax due for the tax year. Unused credit may be carried forward for 10
consecutive tax years following the year in which the credit is earned.
This Act is effective for tax years beginning on or after January 1, 2006.
Purchase of Equity in a Capital Development
Company Income Tax Credit
Arkansas Code Annotated § 15-4-1026
A person who purchases an equity interest in a capital development company
in any of the calendar years 2003 - 2013 is entitled to a credit against any
state income tax liability or premium tax liability that may be imposed on the
purchaser for any tax year commencing with the tax year that is two years after
the date of the purchase. The credit shall be equal to thirty-three and
one-third percent (33 1/3%) of the actual purchase price paid for the equity
interest to the company, which shall include any fees or commissions to
underwriters or sales agents paid by the company. Unused credit can be carried forward
and applied against Arkansas state income tax or premium tax for the next-succeeding
tax year and annually thereafter for a total period of eight (8) years next succeeding
the year in which the equity interest in a company was purchased or until the credit
Is exhausted, whichever occurs first. No credit will be allowed for any tax year ending
after December 31, 2021.
Act 1759 of 2005 amends the Arkansas Capital Development Company Act to limit the
maximum amount of tax credits available in any calendar year. The cap is $5,000,000
per calendar year, with an additional $1,250,000 allowed if approved by the Director
of D.F.A., who must certify that that issuance of the additional amount will not harm
or adversely affect public education or other government programs or functions funded by
general revenues.
The act amends the C.D.C.A. to clarify and define what types of transactions are permissible
and are eligible for the tax credit. It extends by 2 years the period during which a purchaser
must invest to be eligible for this tax credit (from 2013 to 2015) and the last tax period in
which this tax credit is allowed (from 2019 to 2021).
