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             ARKANSAS

                        2022

Pass-Through Entity Tax 

             Instructions 

                                 th
Due Date:  On or before the 15  day of the 4th month following 
the close of the tax year, for calendar year filers the due date 
th
is April 15 .

Mailing Address:                   Physical Address:
State of Arkansas                  Pass-Through Entity Tax
Pass-Through Entity Tax            1816 W 7th St, Room 2250
P.O. Box 919                       Ledbetter Building
Little Rock, Arkansas 72203-0919   Little Rock, AR  72201-1030

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TAX HELP AND FORMS

Internet ATAP

You can access the Department of Finance and Administration’s Arkansas Taxpayer Access Point (ATAP) allows taxpayers or
website at www.dfa.arkansas.gov. their representatives to log on to a secure site and manage
their account online.
 Get current year forms and instructions
 Access latest income tax info and archived news Access ATAP at www.atap.arkansas.gov to:

 You can e-mail questions to:  Make Tax Payments
passthrough.entitytax@dfa.arkansas.gov
 Make Estimated Tax Payments
 Make name and address changes
 View account letters

(Registration is not required to make payments or to check
refund status.)

Phone


General Information .................................................(501) 371-7692 Mail

Pass-Through Entity Tax Section
Representatives are available to assist callers at the number
above during normal business hours (Monday through P. O. Box 919
Friday from 8:00 a.m. to 4:30 p.m.) with: Little Rock, AR 72203-0919

 Taxpayer Assistance  Notices Received Be sure to apply sufficient postage or your return will not be
 Forms  Amended Returns delivered by the U.S. Postal Service.
 Audit and Examination  Payment Information

Other useful phone numbers:
Corporation Income Tax.................. (501) 682-4775
Tax Credits ...................................... (501) 682-7106
Withholding Tax .............................. (501) 682-7290 Walk-In
Collections ...................................... (501) 682-5000
Revenue Legal Counsel ................. (501) 682-7030 Representatives are available to assist walk-in taxpayers
Individual Income Tax ..................... (501) 682-1100 with pass-through entity tax questions, but are not available
Sales and Use Tax .......................... (501) 682-7104 to prepare your return.
Problem Resolution and ................. (501) 682-7751
Tax Information Office (Offers In Compromise) No appointment is necessary, but plan to arrive before
4:00 p.m. to allow sufficient time for assistance.
Internal Revenue Service ............... (800) 829-1040
Social Security Administration ........ (800) 772-1213 The Pass-Through Entity Tax Office is located at:
1816 W. 7th Street, Room 2250
Ledbetter Building, Little Rock, AR 72201

Office hours are Monday through Friday from 8:00 a.m. to
Forms 4:30 p.m.

To obtain a booklet or forms you may:

1. Access our website at:
https://www.dfa.arkansas.gov/income-tax/passthroughentity/passthroughentity-forms/
2. Call: (501) 371-7692

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                         CONTENTS
            Tax Help and Forms ..........................................................................................................2
 
  Arkansas Elective Pass-Through Entity Tax/What’s New for 2022................................. 4-6
 
  Important Reminders for 2022.........................................................................................6-9
            Instructions:
 
      General Information on filing Pass-Through Entity Return........................................9-10
      Specific Line Instructions, AR1100PET.......................................................................10-17
 
  Financial Institutions..........................................................................................................18
  Business Incentive Tax Credits. ................................................................................. 19-26

 https://www.dfa.arkansas.gov/income-tax/passthroughentity/passthroughentity-forms/

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      Arkansas Elective Pass-Through Entity Tax 

What is the Pass-Through Entity Tax

The Elective Pass-Through Entity Tax or PET Tax allows a partnership, Sub-S corporation or limited liability compa-
ny to file a single income tax return on behalf of the entity and pay the income tax on behalf of all owner members. 
The PET tax is not available to C corporations, qualified subchapter S subsidiaries, trusts, sole proprietorships or 
limited liability companies taxed as C corporations for federal income tax purposes.   The PET tax is effective for 
tax years beginning on or after January 1, 2022. The PET tax rate for all taxpayers will be the same for all owner 
members and will be equal to the highest income tax rate for individuals. The tax rate on capital gains will be one 
half of the rate of tax on other types of income of an entity subject to the PET tax. For tax years beginning in 2022, 
the tax rate on income other than capital gains will be 4.9% and the tax rate for capital gains will be 2.45%. The 
due date for the PET tax will be the same as other income taxes and will be April 15 for calendar year filers. The 
PET tax will be subject to all provisions of the Arkansas Tax Procedures Act and all penalty and interest provisions, 
statute of limitations for refunds and assessments and other provisions will apply.    

The PET tax must be paid in quarterly installments if the tax exceeds $1,000 in order to avoid the penalty for un-
derpayment of estimated taxes. Estimated tax payments will not be required in 2022 because the PET tax is a new 
tax, but estimated payments may be made in 2022 for any taxpayer wishing to do so. PET tax returns may only be 
filed by paper in calendar year 2022 for entities who need to file short period returns, but electronic filing of returns 
and payments will be available in 2023. Payments for estimated taxes, extension payments, return payments, etc., 
may be made by check or through the Arkansas Taxpayer Access Point (ATAP) system in 2022.

The election to be subject to the PET tax must be made by owner members representing more than 50% of the 
voting power of the pass-through entity. The election is due before the due date for filing a return as extended. 
The election may be made by filing Form AR362 on paper or by registering for the PET tax in ATAP or by filing a 
PET tax income tax return before the due date. DFA encourages taxpayers wishing to make estimated or exten-
sion payments before the filing of a return to file an election so that payments can more easily be associated with 
a specific taxpayer account. 

For entities wishing to elect to be subject to the PET tax, a federal employer identification number (FEIN) must be 
provided. Each entity wishing to elect PET status must have a unique FEIN so that their returns and payments may 
be separated from other entities that may be owned by a single owner member and so that payments and returns 
can be separated from the owner members. FEIN numbers are issued by the Internal Revenue Service which can 
be reached  at 800-829-4933  or at https://www.irs.gov/businesses/small-businesses-self-employed/apply-
for-an-employer-identification-number-ein-online

When filing a PET tax return on Form AR1100PET, a copy of the federal income tax return must be included for 
entities taxed as Sub-S corporations or partnerships for federal purposes. Single member Limited Liability Compa-
nies must include a copy of the federal income tax return of the single member owner. 

                                   WHAT’S NEW FOR 2022

Acts 1 and 2 of the Third Extraordinary Session of 2021 amended Arkansas Code Annotated 26-51-428 to 
adopt Internal Revenue Code Annotated 26-51-428 as in effect on January 1, 2022 for tax years beginning on or 
after January 1, 2022. The adoption of Internal Code Section 179 will result in the Arkansas Section 179 deduc-
tion being raised from $25,000 per year to $1,080,000 for tax years beginning in 2022 and for the dollar-for-dollar 
phaseout being raised from $200,000 to $2,700,000. The lower limits will remain in place for years beginning prior 
to 2022, including any carryforward of Section 179 that could not be claimed in earlier years. Please refer to the 
line-item instructions for Depreciation and the instructions for Form AR1100REC for further details.

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Act 362 of 2021 was passed and signed into law to allow Arkansas businesses to reduce their Federal Tax burden 
by electing Entity-level taxation. The Tax Cuts and Jobs Act of 2017 imposed a cap of $10,000 on the State and 
Local Tax deductions (SALT deduction) for itemized deductions for individuals for tax years 2018 through 2025. 
However, amounts paid by a Partnership, Limited Liability Company or an S Corporation to a state to satisfy a li-
ability for income taxes are not subject to the cap on the SALT deduction as they are considered to be a business 
expense paid by the business.   

Act 362 of 2021 creates a voluntary tax that pass-through entities would pay if owners of more than 50% of the 
voting rights of a pass-through entity elect to do so. Income of a member that is subject to the pass-through entity 
tax would be excluded from Arkansas income tax.  Taxes paid by the pass-through entity will decrease the amount 
of taxes considered in computing the SALT deduction available for Federal income tax purposes of the members 
and thus reduce their Federal tax liability. Act 362 of 2021 is effective for tax years beginning on or after Janu-
ary 1, 2022.
   
       Act 362 provides the following provisions:
   •  Amends Arkansas Code §26-51-404(b) to add an exemption for a person that is subject to the tax imposed by 
        the Elective Pass-through Entity Tax so that the income is not subject to Arkansas income tax for the member 
       owner(s) of the business. Income subject to a similar tax in other states is also exempted by Act 362.

   •  Adds an additional Chapter 65 to the Arkansas Code titled the “Elective Pass-Through Entity Tax Act” to create 
       the Pass-through entity tax.

    • Act 362 of 2021 defines “Business entity” as a general partnership, limited partnership, limited liability company,     
      or for federal income tax purposes, a Subchapter S Corporation, that: 

   •  (A)  Is engaged in a business for profit; and
   
   •  (B)  Is required to file a return under this title;

    •  Adds §26-51-404(b)(31)(B)(i)(a) which provides: A person that is subject to the elective pass-through entity tax 
      as a resident or part-year resident and that is a member of an affected business entity may exclude from the 
      taxable income the person’s pro rata share of income subject to a tax paid to another state or  DC on income of 
      any affected business entity of which the person is a member, if the taxes paid result from a tax that is substan-
      tially similar. Substantially Similar Tax – means a tax that is levied on the aggregate taxable income of each 
      of the persons that have an ownership interest in an entity that is engaged in business for profit. Non-resident 
      members of an entity subject to the pass-through entity tax are not required to file an Arkansas income tax 
      return if all income earned in Arkansas comes from pass-through entities that the member has an ownership 
      interest in pay the pass-through entity tax in Arkansas.

    •   Creates a voluntary tax that pass-through entities would pay at a flat rate of 4.9% on net taxable income for tax 
       years beginning on or after January 1, 2022. The flat tax will be equal to the highest personal income tax rate 
       in Arkansas in effect for that year in future years. 

     •  Limits the rate of tax on net capital gains to 50% of the flat 4.9% rate or 2.45% for net capital gains for tax years   
       beginning in 2022 and will be reduced to 50% of the highest personal income tax rate in future years. 

    •  Provides that the business entity can elect to receive a credit against its liability for the voluntary tax for any 
       Arkansas income tax credit that the business entity has received. If the business does not elect to use a tax 
       credit, that credit may be passed on to the members to offset their Arkansas income tax as allowed under the
       relevant Arkansas laws for each credit. Tax credits earned by members may not be used to offset the 
       pass-through entity tax. 

    •  Provides that entities subject to the pass-through entity tax would be allowed the same provisions  for net operating 
       loss deductions as provided in Arkansas Code §26-51-427. Net operating losses that occur in 2022 and after 
       may be carried forward up to 10 tax years.

    •  The pass-through entity tax is due before the 15th day of the fourth month after the end of the taxable year. 
       It must be paid in quarterly installments to avoid underpayment penalties if the pass-through entity tax was
       elected in the previous year. 
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• The pass-through entity tax would be subject to all interest and penalty provisions of the Arkansas Tax
Procedure Act (ATPA).

• The pro-rata interest of each member of a pass-through entity shall be reported to each member on forms
prescribed and furnished by the DFA. The form for reporting the member information to DFA is on page 2
of Form AR1100PET. Form AR K-1 is used to report earnings to each member.

• The elective pass-through entity tax is NOT the same as filing a composite return which allows pass-through
entities to file and pay the individual tax on behalf of nonresident members who elect to be included. If the
pass-through entity tax is elected, all Arkansas income of the entity is subject to the PET tax and all
owner members must participate. Owner members may not opt out of participating in the PET tax if
the entity makes the election.

• The election to be subject to the pass-through entity tax must be made before the due date for filing the return
or before the extended due date for filing the return if applicable. The election may be made by filing Form
AR362 or by completing Form AR362 on ATAP. Form AR362 is now available on our DFA website at: https://
www.dfa.arkansas.gov/images/uploads/incomeTaxOffice/AR362_PET_Election_or_Revocation.pdf

• Form AR1100PET is the form for filing the Arkansas pass-through entity tax. The form is 4 pages. The first
page calculates the PET tax. Page 2 is a summary of each member’s share of income and of the taxes paid
on their behalf and multiple page 2 forms may be necessary depending on how many owner members there
are. Page 3 is the calculation of income and deductions for entities that only operate in Arkansas or that have
received prior written permission from DFA to file using the direct accounting method for an entity operating
in more than 1 state. Page 4 is the apportionment schedule for entities operating in more that 1 state and are
required to apportion income. All entities must apportion their in come using only the sales factor unless they
are included in an industry that is required to use a modified 3 factor apportionment method by the special
industry regulations.

Arkansas Code Annotated § 26-51-201(a), as amended by Act 2 of the Second Extraordinary session of
2021 – reduces the income tax rates for individuals and the pass-through entity tax from 5.5% on income other
than capital gains and 2.75% for capital gains to 4.9% for income other than capital gains and 2.45% for capital
gains for tax years beginning in 2022 and after.

IMPORTANT REMINDERS

Act 822 of 2019 amends Arkansas Code Annotated 26-5-101, Article IV and 26-51-709 through 26-51-718
to provide for a single sales factor to apportion income from within and without Arkansas for tax years beginning
on or after January 1, 2021. For tax years beginning on or after January 1, 2021, all taxpayers with income from
sources within and without Arkansas must use a single sales factor to apportion income from Arkansas unless
the taxpayer is subject to a special industry apportionment method authorized for;
1. Railroads by Regulation 1.26-51-204,
2. Construction Contractors by Regulation 1.26-51-718(d)
3. Pipelines by Regulation 6.26-51-718(d).

Airlines are required to use sales factor apportionment only under Regulation 4.26-51-718(d).

Bus Lines and Trucking Companies are required to apportion using a mileage factor only under Regulation 5.26-
51-718(d)and the mileage should be reported in the sales factor area on P4 of Form AR1100PET.

Private Railcar operators should apportion income by dividing the total system miles operated in Arkansas by total
system miles operated everywhere as required in Regulation 2.26-51-204 and report those numbers in the sales
factor on P4 of Form AR1100PET.

Television and Radio Broadcasters should apportion income using only the modified sales factor required in Regu-
lation 2.26-51-718(d). The property and payroll factors mentioned in the regulation should not be used for tax years
beginning in 2021 and after.
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Pipelines should apportion income using only the modified sales factor required in Regulation 3.26-51-718(d). The
property and payroll factors mentioned in the regulation should not be used for tax years beginning in 2021 and
after.

Act 822 amends Arkansas Code Annotated 26-51-427 to allow net operating losses occurring in tax years begin-
ning on or after January 1, 2020 to carry forward for 8 tax years and losses occurring in tax years beginning on
or after January 1, 2021 to carry forward 10 years. Net operating losses that occur in tax years beginning before
January 1, 2020 carry forward 5 tax years.

Tax Exemptions for certain Economic and Covid 19 related U S Government payments

Act 95 of 2020 created Arkansas Code Annotated 26-51-316 and exempts from Arkansas income tax payments
made to a taxpayer by the United States Department of Agriculture under the Market Facilitation Program authorized
by 15 U.S.C. §714c as it existed on January 1, 2020. Expenses for losses related to the receipt of a payment to a
taxpayer under the Market Facilitation Program are not deductible or otherwise permitted to offset any other income
from the tax year in which the loss or expenses are incurred. Act 95 of 2020 is effective for tax years beginning on
or after January 1, 2020.

Act 248 of 2021 amended Arkansas Code Annotated 26-51-404(b) to add the following exclusions from gross income;

1. Title 15 U.S.C. § 626A(i) as in effect on January 1, 2021 exempts sums received under the Paycheck
Protection Program of loan forgiveness as included in § 304(b), 276(a) and 276(b) of the Consolidated
Incentive Act of 2021, Public Law 116-260.
2. Section 277 of the Consolidated Appropriations Act concerning the tax treatment of certain emergency
financial aid grants to students.
3. Section 278 of the Consolidated Appropriations Act concerning the clarification of the tax treatment of
certain loan forgiveness and other business financial assistance. Section 278 includes exemptions for
Paycheck Protection Program loan forgiveness under section 1109(d)(2)(d) of the CARES Act, Economic
Injury Disaster Loan grants also known as EIDL Grants from the Small Business Administration under
section 1110(c) of the Cares Act and section 331 of the Hard-Hit Small Businesses, Nonprofits and
Venues Act, Subsidies for certain SBA loan payments described in Section 1112(c) of the Cares Act and
Grants for Shuttered Venue Operators under Section 324 of the Hard-Hit Small Businesses, Nonprofits
and Venues Act.
4. Payments received under the Coronavirus Food Assistance Program described in 7 C.F.R. Part 9 as
it existed on January 19, 2021.

Expenses related to the exclusion of income under Act 248 of 2021 are deductible. Income exempted under Act 248
of 2021 and Act 95 of 2020 must be added back in the calculation of net operating loss as required by Arkansas Code
Annotated 26-51-427(2). Act 248 also includes language that any successor programs to the PPP loan forgiveness
program will also be exempt and related expenses are also deductible. Therefore, and PPL loan forgiveness under
the ARPA Act will also be exempt from Arkansas income tax and related expenses will be allowed as deductions.

There are a number of federal and state financial assistance programs that are not exempt from Arkansas income
taxes. Among the assistance programs that are not exempt are several government assistance programs included
in the American Rescue Plan Act (ARPA) such as;

1. the Restaurant Revitalization Fund Grants,
2. Rural Health Care and Development Grants,
3. USDA Grants and Loan Subsidies,
4. EIDL GRANTS UNDER ARPA
5. Emergency Rental Assistance under ARPA and the Consolidated Appropriations Act,
6. Aviation Manufacturing Job Protection Grants,
7. Airline and Airline Contractor Extended Payroll Support Program,
8. Arkansas Ready for Business Grants and
9. any other federal, state or local financial assistance program not specifically exempted by Arkansas law.
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DFA has recently clarified that several federal tax credits created by ARPA are not taxable income and that related 
expenses are deductible in Arkansas. These include the Employee Retention Credits and the Employer Tax Credits 
for Paid Sick and Family Leave.

Act 143 of 2021 amends Arkansas Code Annotated 26-51-102 to include a definition for tax practitioner and Arkansas 
Code Annotated 26-51-806 to require a tax practitioner who files federal income tax returns electronically to also 
file Arkansas returns electronically and allows DFA to waive the requirement if the requirement would cause an 
undue hardship on the practitioner.

Act 362 of 2021 creates A new Chapter 65 to Arkansas Code Title 26 and creates the Elective Pass-Through 
Entity Tax for tax years beginning on or after January 1, 2022. Act 362 allows members holding 50% or more of a 
pass-through entity to elect to have the pass-through entity pay Arkansas income taxes itself instead of passing the 
income through to the members to pay income tax on their personal income tax returns or on a composite return. 
Act 362 also amends Arkansas Code Annotated 26-51-404 to exempt income subject to similar taxes in other states 
from Arkansas income tax for residents and part-year residents for tax years beginning in 2022 and after. 

The Pass-through Entity Tax (PET) election must be made by the extended due date of the income tax return but 
may be made at any time prior by registering for the tax on combined registration forms or by completing Form 
AR362, or by registering for the tax on ATAP. Form AR362 for registration, Form AR1100PET, the income tax 
return and vouchers for estimated payments for the Pass-through Entity Tax are available on the DFA Web site. 
The election to be taxed at the entity level and the exemption from income tax of income subject to similar taxes in 
other states is not available for 2021. The tax rate for tax years beginning in 2022 was set at 5.9% on income other 
than capital gains and 2.95% for the Pass-through Entity Tax. However, Acts 1 and 2 of the Third Extraordinary 
Session of 2021 amended the tax rate to be equal to the maximum income tax rate for individual income taxes.  
Therefore, the tax rate for income other than capital gains for tax years beginning in 2022 is 4.9% and the tax rate 
for capital gains is 2.45%.

Sub-S Corporations that elect the PET tax for 2022 should not file Form AR1100S.

Act 629 of 2021 amends Arkansas Code Annotated 26-51-807(a) to allow taxpayers an extension to file of one 
month after the extended due date for a federal income tax return for tax years beginning on or after January 1, 
2021. The one month extended due date does not apply to returns for which a federal extension is not requested 
and does not extend the original due date. As a reminder all tax payments are due on the original return due date 
and interest at 10% per annum and failure to pay penalties at 5% per month will be assessed on all taxes unpaid 
after the original due date which is April 15 for calendar year filers and the 15th day of the fourth month after the 
end of a tax year that does not end in December.

ATAP – Arkansas Taxpayer Access Point

Arkansas Taxpayer Access Point (ATAP) is available for the filing of most Arkansas Pass-Through Entity Income 
Tax payments. However, PET tax returns may not be filed using ATAP in 2022 but will be available in 2023. Fed-
eral returns and other required schedules must be attached with the ATAP filing or mailed separately to the Pass-
through Entity Tax Section. They may be provided on CD, in PDF, or in paper form. The secure   online filing, man-
aging, and payment options of ATAP are available at www.atap.arkansas.gov. Taxpayers and their authorized 
representatives will be able to view and manage their Pass-through Entity Tax activity including other tax activity 
such as Individual Income Tax, Sales Tax, Withholding Tax, and other taxes administered by DFA.

Accountants and attorneys must obtain permission from their clients to access and view their client’s accounts. 
ATAP is a web-based service that will give taxpayers, or their designated representative, online access to their tax 
accounts, and offers the following services:

Register a business, file a return online, file a return using XML return upload, change a name, change an address, 
amend a return, make a payment, store banking information for use during payment submission, view tax period 
financial information (tax, penalty, interest, credits, balance, etc.), view payment received, view recent account 
activity, view correspondence from the department.

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If you are currently enrolled with our online systems to  Arkansas extension(s) must be attached to the Arkan-
either make payments or file a return electronically, you     sas income tax return. Interest at 10% per annum is due 
will need to sign up in ATAP to take advantage of the  on all returns (including those with extensions) if the tax 
enhanced services. To correctly process payments on  is not paid by the original return due date. Interest will be 
ATAP, make sure you are choosing the correct type of  computed on a daily rate of .00027397. To avoid inter-
payment and applying it to the correct tax year.              est and/or penalty, any tax due payment must be made 
                                                              on or before the 15th day of the 4th month following the 
                                                              close of the taxpayer’s tax year. Attach your check to 
General Information on Filing                                 the Extension Voucher attached to Form  AR1155PET if 
    Pass-Through Entity Return                                requesting an Arkansas extension.

                                                              Period Covered/Accounting Method
Time/Filing as a Pass-Through Entity
                                                              A Pass-Through Entity must calculate its Arkansas Tax-
The election to be subject to the PET tax must be made        able Income using the same income year and account-
by owner members representing more than 50% of the            ing method for Arkansas tax purposes as used for Fed-
voting power of the pass-through entity. The election is      eral income tax purposes. For tax years beginning after 
due before the due date for filing a return as extended.      1986, all pass-through entities are required to have a 
The  election  may  be  made  by  filing  Form AR362  on      permitted tax year. A permitted tax year is a tax year 
paper or by registering for the PET tax in ATAP or by         ending December 31st or any other tax year for which 
filing a PET tax income tax return before the due date.       the entity established a business purpose.
DFA encourages taxpayers wishing to make estimated 
or extension payments before the filing of a return to        The entity must provide to the Commissioner a copy of 
file  an  election  so  that  payments  can  more  easily  be any certification or approval from the Internal Revenue 
associated  with  a  specific  taxpayer  account.  Form       Service authorizing the pass-through entity to change 
AR1100PET is due on or before the 15th day of the 4th         its accounting method or income year.
month following the close of the Entities tax year.
                                                              Signatures and Verification
When filing a PET tax return on Form AR1100PET, a 
copy of the federal income tax return must be included        ACA 26-51-804 (b) provides, the President, Vice-Presi-
for entities taxed as Sub-S corporations or partnerships      dent, Treasurer, or other principal officer shall certify the 
for federal purposes. Single member Limited  Liability        return. Such agent may certify the return of a foreign 
Companies must include a copy of the federal income           pass-through entity having an agent in the state. If re-
tax return of the single member owner.                        ceiver, trustee in bankruptcy, or assignee  are operat-
                                                              ing the property or business of the pass-through entity, 
Extension of Time for Filing                                  such receiver, trustee, or assignees shall execute the 
                                                              return for such pass-through entity  under certification.
If  you have received an automatic Federal extension 
(Form  7004),  the  time  for  filing  your Arkansas  Pass-   Report of Change in Federal Taxable Income
Through Entity Tax Return shall be extended until one 
month after the extended  due date of your Federal            Revenue Agent Reports (RARs) must  be reported to 
Return for a US domestic entity. When filing the Arkansas     this state within 180 days after the receipt of the RAR or 
AR1100PET, check the box at the top indicating  that          supplemental report reflecting correct net income of tax-
the Federal  Extension  Form 7004  and/or  Arkansas           payer. Amended returns must be filed with payment of 
Extension  Form  AR1155PET  has  been  filed  and  file       any additional tax due. ACA 26-18-306(b)(3)(B) states 
the Arkansas return on or before one month after the          that a refund shall not be paid if the amended return is 
Federal due date. It is not necessary to include a copy       filed on or after the 181st day following receipt of the 
of the Federal Form 7004. To request an initial Arkansas      final notice from the IRS. Any additional tax and interest 
extension of 180 days from the original Arkansas return       must be paid with the amended return or a refund must 
due date or an Arkansas extension of 60 days beyond           be requested on an amended return if applicable. Stat-
the Automatic Federal extension due date, complete and        ute of Limitations will remain open for three (3) years 
mail Arkansas Form AR1155PET Request for Extension            for assessment of tax if the taxpayer fails to disclose 
of Time for Filing Income Tax Returns by the due date         Federal Revenue Agent Reports.
or, if applicable, the extended due date of the Arkansas 
return to the Pass-Through Entity Tax Section.

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Penalties and Interest
                                                              General Instructions
The following penalties shall be imposed:                            Specific Line Instructions for
                                                                         Page 1 of AR1100PET
•  Failure to file timely - 5% per month not to exceed 
   35%.                                                       Type Return
•  Failure to make timely remittance - 5% per month 
                                                              Whether the Entity is filing an Initial Return (first time 
   not to exceed 35%.
                                                              filing),  an  Amended  Return  (making  changes  to  an 
•  Underestimate penalty - 10% of the amount of the           original return), a Final Return (going out of business), 
   underestimate.                                             clearly mark the AR1100PET by checking the applicable 
                                                              box at the top of the form.
•  Failure to file return - $50.00.
                                                              Income (P1)
•  Failure to make required EFT payment - 5% of the   
   tax due.
                                                              Line 1 – Taxable Income
•  Incomplete electronic payment -10% of the amount           Report the taxable income from doing business in Ar-
   of the draft or $20.00, whichever is greater.              kansas  or derived  from sources within  this state and 
•  Failure to Comply - $50.00.                                distributed to members included  on this return.  The 
                                                              amount must equal the total amount shown on page 3 
If any part of any deficiency or tax liability is due to neg- (P3) line 27 or page 4 (P4) line C4.
ligence or intentional disregard of rules and regulations, 
a penalty of 10% of the total amount shall be added.          Line 2 – Compute Tax
Any part of any deficiency determined to be due to fraud 
                                                              Compute tax at 4.90% (.049) of the amount listed on 
shall be subject to a 50% penalty. Interest at the rate 
                                                              Line 1.
of 10% per annum shall be assessed on all tax defi-
ciencies. Interest will be computed using a daily rate of 
                                                              Line 3 - Capital Gains or (Loss) From Page3 (P3) line 
.00027397 from the 15th day of the 4th month after the 
                                                              30 or Page 4 (P4) line D4
close of the tax year until the date the tax is paid.
                                                              Enter gains or losses from the sale, exchange, or invol-
Liability for Filing Returns                                  untary conversion of assets used in trade or business 
                                                              activity. If the corporation is also a partner in a partner-
Every entity organized or registered under the laws of this  ship, include the partner’s share of gains (losses) from 
State or having income from Arkansas sources as defined       sales  or exchanges,  involuntary or compulsory  (other 
in ACA 26-51-205, must file an income tax return.             than casualties or thefts), of the entity’s trade or busi-
                                                              ness assets. Do not include any recapture of expense 
Balance Sheet                                                 deduction for any section 179 deduction passed on to 
                                                              members prior to the election to be subject to the PET 
The balance sheet submitted with the return should be  tax.
prepared from the books and should agree therewith, or 
any difference should be reconciled. All taxpayers en-        Line 4 – Arkansas Capital Gains Tax
gaged in an interstate trade or business and reporting 
                                                              Compute tax at 2.45% (.0245) of the amount listed on 
to the Surface Transportation Board and to any national, 
                                                              Line 3.
state, municipal, or other public office, may submit cop-
ies of their balance sheets prescribed by said Board, or 
                                                              Line 5 – Pass-Through Entity Election Tax
state and municipal authorities, as of the beginning and 
end of the taxable year. If the balance sheet as of the       Enter the Pass-Through Entity Election Tax; add lines 
beginning of the current taxable year does not agree in  2 and 4.
every respect with the balance sheet which was submit-
ted as of the end of the previous taxable year, a recon-      Line 6 – Business Incentive Credits (BIC)
ciliation schedule should be submitted with the return. 
                                                              Enter the Business  Incentive Credits from Form AR-
Balance  sheets as of the beginning  and  close  of the 
                                                              1100BIC.  The  BIC  incentives cannot exceed the 
year and a reconciliation of surplus must be attached 
                                                              amounts reported on Line 5. 
to the return.

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Line 7 – Net Income Tax Partners Share of Income (P2)

Enter the amount of net income tax (Line 5 minus Line
Enter the beginning and ending dates of the tax year.
6).
Enter federal employer identification number. DO NOT
ENTER “APPLIED FOR” anywhere on this return for
Line 8 – Estimated Payments
the entity or any partners. Enter the name of the Pass-
Enter Estimated Tax paid from Form AR1100ESPET/ or Through Entity.
estimate carryforward, if applicable.
Enter the name of each Partner or Entity, complete all
Line 9 – Payment with Extension Request information for each Partner or Entity. Enter a check
mark to indicate Arkansas resident or business domi-
Enter payment(s) made with an extension request.
cile. If there are more than 21 Partners or Entities for
this return, the information must be submitted by CD or
Line 10 – Withholding Payments USB Flash Drive. The information must be in a spread-
Enter amount of withholding from an Entity, if applica- sheet format or a Delimited Text File and should con-
ble, attach Form AR1100WH and/or AR1099PT. tain for each member included on this return: name,
FEIN (DO NOT ENTER “APPLIED FOR”), percentage
Line 11 – Amended Return of stock or interest in partnership or LLC owned, per-
centage of profit, loss or capital, income minus capital
Enter Net tax paid as a positive number on previous gains, capital gains, and the tax amount.
return(s) for this tax year. If the net tax return of the pre-
vious return(s) resulted in a refund or increased over- Form AR K1 must be completed for each member of
payment carried forward, enter the net amounts as a the pass-through entity using the same information that
negative number in brackets. would have been used if the business did not make the
election to file under the PET tax. However, all items
Line 12 - Overpayment on the AR K1 form should be adjusted from the return
Enter Overpayment amount (Lines 8 – 10 plus or minus of the member with the exception of guaranteed pay-
11; less Line 7) ments. Guaranteed payments must be reported as tax-
able income on the member’s Arkansas individual re-
Line 13 – Amount applied to 2023 estimated tax turn. The AR K1 should be used to show amounts to
exclude from income or deductions on Form AR-OI or
Enter amount to be applied to 2023 estimated tax other applicable forms. See the instructions for Form
AR1000F and Form AR1000NR for details.
Line 14 – Overpayment to be Refunded
Enter amount to be refunded. If an entity elects to be taxed under Act 362, all
items of income or deduction which are normally
Line 15 – Tax Due passed onto the owner members on a K-1 form will
be included on the PET tax return. These items in-
Enter tax due (Line 7 less 8, 9, and 10; plus, or minus clude section 179 depreciation, charitable contribu-
Line 11). tions, passive income, rental income, certain capital
gains, guaranteed payments, royalties, dividends,
Line 16 – Interest on Tax due interests and any other item of income or deduc-
Enter the interest on tax due. tion that is not included on the K-1 form as ordinary
income.
Line 17 – Penalty on Late Filing or Payment
Accounting Income Statement (P3)
Enter the penalty for late filing or late payment.
Income
Line 18 – Penalty for Underpayment of Estimated Tax
Enter the penalty for underpayment of Estimated tax, Line 1: Enter the amount of gross sales (less returns
attach AR2220 or enter exception checked in part 3. and allowances).

Line 2: Enter cost of goods sold. Attach schedule; ex-
Line 19 – Amount Due plain method used.

Enter the amount due (add Lines 15 through 18). Line 3: Enter the total of Line 1 minus Line 2.
Page 11

- 12 -

Line 4: Enter the amount of dividends received. January 1, 2022. For tax years beginning on or after Jan-
uary 1, 2022, the Arkansas Section 179 deduction limit
Line 5: Enter Taxable Interest.
will be $1,080,000 and the dollar-for-dollar phaseout will
Line 6: Enter Gross Rents/Royalties. begin at $2,700,000. For tax years beginning on or after
January 1, 2011 and beginning before January 1, 2022,
Line 7: Enter Gains or Losses not included in capital
the Arkansas Section 179 deduction limit is $25,000 and
gains or losses
the phaseout begins at $200,000. Form AR1100REC will
Line 8: Enter Other Income not listed above; explain on need to be completed for any taxpayer filing a corpora-
an attached schedule. tion income tax return or pass-through entity tax return
and claiming a Section 179 deduction. Carryforward of
Line 9: Enter total of Lines 3 through 8. Section 179 deductions from prior years may be used to-
wards the Arkansas Section 179 deduction limitation but
may only be claimed if Arkansas depreciation deductions
Deductions were not claimed in those prior years. If the Arkansas
Section 179 deduction is different from the federal Sec-
Line 10: Enter Compensation / Salaries / Wages paid tion 179 deduction, a Form 4562 depreciation schedule
to others, in whatever form paid, other than will need to be completed showing the calculation of the
amounts deducted elsewhere on this return. Arkansas depreciation deduction.
Do not reduce this deduction by any federal job
credit. Enter depletion amount. Enter depletion ex-
Line 19:
Line 11: Enter guaranteed payments to partners. En- pense claimed. Arkansas allows federal deple-
tities may deduct guaranteed payments to its tion allowances as in effect January 1, 2019.
members as ordinary and necessary business In computing depletion allowance deduction for
expenses to the extent they are not required oil and gas wells, the depletion deduction shall
to be capitalized by Arkansas law and otherwise be controlled by the provisions of IRS section
meet the definition of an ordinary and neces- 613A as in effect January 1, 2019.

sary business expense. Enter advertising amount.
Line 20:
Line 12: Enter costs of repairs related to any trade or Line 21: Enter amount of retirement plan costs
business activity.
Line 22: Enter amount of employee benefits.
Line 13: Enter total of bad debts.
Line 23: Enter amount of other deductions and attach
Line 14: Enter rent of business property. schedule.

Line 15: Enter amount of taxes paid. Attach form Line 24: Total of lines 10 through 23.
AR1100REC if applicable. Enter taxes paid or
accrued during the taxable year. Do not include Net Income
Arkansas income taxes, Federal income taxes,
or taxes assessed against local benefits tend- Line 25: Enter the total taxable income before Net
ing to increase the value of the property. Operating Loss (Subtract Line 24 from Line 9)

Line 16: Enter amount of interest paid or incurred by Line 26: Enter the amount of Net Operating losses
the entity not reported elsewhere. (adjust for non-taxable income)
(attach AR1100NOL)
Line 17: Enter amount of contributions.
Line 27: Enter net taxable income (line 25 minus line
Line 18: Enter depreciation and attach AR1100REC. 26) This total will be entered on P3 line 27
Depreciation expense claimed. ACA 26-51-428 does not and on line 1 of P1.
adopt the bonus depreciation provisions contained in In-
ternal Revenue Code 168(k). For Arkansas income tax Capital Gains
purposes, Internal Revenue Code Sections 167 and 168
(a) – (j) as in effect on January 1, 2019 is adopted for tax Line 28: Enter the current year net capital gains.

years beginning on or after January 1, 2019. Line 29: Enter any capital loss carryforward

Internal Revenue Code Section 179 as in effect on Janu- Line 30: Enter the total of Net Capital Gains (line 28
ary 1, 2022 is adopted for tax years beginning on or after minus line 29) Enter on P3 line 30 and P1
line 3 if line 30 is positive.
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- 13 -

Worksheet for Apportionment of                              Financial Institutions must use the single sales factor 
Multistate Corporations (P4)                                as outlined in Arkansas Codes Annotated 26-51-1403. 
                                                            Construction companies, pipelines, and railroads 
For Entities with income from sources within and with-      must utilize the three factor double weighted sales 
out the State:                                              factor apportionment method with factor modifications. 
In general, entities with income derived from activities    Requirements  for apportionment formulas of the 
both within and outside the State are required to allo-     businesses listed in this paragraph (except for financial 
cate and apportion the net income under the following:      institutions) are contained in the Arkansas Corporation 
                                                            Income Tax Regulations which may be obtained from 
Business  and  non-business  income  defined  –  Article 
                                                            www.dfa.arkansas.gov/income-tax/corporation/.
IV 1 (A) defines “Business Income” as income arising 
from transactions and activities in the regular course of 
                                                            Change of Method
taxpayer’s trade or business, and includes income from       
tangible and intangible property if the acquisition, man-   Prior approval Required Before Deviation From the 
agement, and disposition of the property constitute inte-   Allocation and Apportionment Method: If the allocation 
gral parts of the taxpayer’s trade or business operation.   and apportionment provisions as set out above do not 
In essence, all income which arises from the conduct        fairly represent the extent of the taxpayer’s business 
of trade or business operations of a taxpayer is busi-      activity in this State, the taxpayer may petition for, or the 
ness income. Income of any type or class, and from any      Commissioner of Revenue, Department of Finance and 
source, is business income if it arises from transactions   Administration  may require in respect to all or any part 
and activities occurring in the regular course of a trade   of the taxpayer’s business activity, if reasonable:
or business. In general, all transactions and activities of 
                                                            A)  Separate accounting
the taxpayer which are dependent upon or contribute to 
                                                             
the operations of the taxpayer’s economic enterprise as 
                                                            B)  The inclusion of one or more additional factors which 
a whole constitute the taxpayer’s trade or business and
                                                                will fairly represent the taxpayer’s business activity 
will be considered “Business Income” unless otherwise 
                                                               in this State, 
excluded by statute. ACA 26-51-701(e) defines nonbusi-
ness income as all income other than business income        or
                                                            C)  The employment of any other method to effectuate 
For tax years beginning on or after January 1, 2021,           an equitable allocation and apportionment of the tax-
all  multistate  entities  should  use the  single  sales      payer’s income. 
factor only unless they are required to use a three                      
factor apportionment formula under the special in-             To “petition for” and approved by DFA shall mean a
dustry apportionment  regulations.                             formal written request submitted and approved prior   
                                                                   to the filing of a return. 
If a special industry three-factor apportionment rule ap-
plies, the business income is to be apportioned to this     Schedule A - Apportionment of Income for 
state by multiplying the income by a fraction; the nu-      Multistate  Corporation           (Prior  written  approval 
merator of which is the property factor, plus the payroll   with box checked (P1) indicating using 3 factor ap-
factor plus two (2) times the sales factor, and the de-     portionment)
nominator of which is four (4).
                                                            Enter the FEIN in the box provided.

Apportionment Formula                                       Part A - Income To Apportion

In general, taxpayers with income derived from activities   Line 1: Enter net income (Income from Federal Form 
both within and without the State are required to apportion 1120S  Sub  S or Federal  Form  1065 Partnership. For 
Business  Income  and  allocate  the  Nonbusiness  and      Single Member LLC, attach a calculation)

Partnership  income  using  the  following  factors: For    Line 2: Enter any Add Adjustments Examples Include:
tax years beginning on or after January 1, 2021, all        Arkansas Income Taxes Deducted, Bonus Depreciation, 
multistate entities should use the single sales factor      Federal Charitable Contributions, and Partnership Loss 
only unless they are required to use a three factor         etc... (Attach detailed schedule)
apportionment formula under the special industry 
apportionment regulations.                                  Line 3: Enter any Deduct Adjustments Examples in-
                                                            clude: Arkansas Depreciation, Arkansas Charitable Con-
                                                            tributions, etc. (Attach detailed schedule)
                                                                                                                 Page 13

- 14 -

Line 4: Total Apportionable Income: Line 1 + Line 2 –  factor shall include only that compensation which is in-
Line 3 = Line 4, Total Apportionable Income to Arkansas.    cluded in the computation of the apportionable income 
                                                            tax base for the taxable year. (ACA 26-51-713 and ACA 
Part B - Apportionment Factor                               26-51-1405)
                                                             
Column A is for Amounts in Arkansas; Column B is the  Column A is total compensation paid within Arkansas; 
Total Everywhere; Column C is the Percentage of Col-        Column B is total compensation paid everywhere during 
umn (A)÷(B). Calculate all percentages to six (6) places    the tax year; Column C is the percentage of Column (A)
beyond whole percentages. Example 26.123456%                ÷ (B).

Property  Factor:  The  property  factor  is  only  to  be 
                                                            Line  2:  Enter  Salaries,  Wages,  Commissions  and 
used if the taxpayer is subject to a special industry 
                                                            Other Compensation Related to the Production of 
regulation that requires a modified three factor ap-
                                                            Business Income.
portionment method. The property factor is a fraction, 
the numerator is the average value of the taxpayer’s real 
                                                            Sales/Receipts Factor: The receipts factor is a fraction, 
and tangible personal property owned or rented and used 
                                                            the numerator of which is the total sales of the taxpayer 
in this State during the tax period, and the denominator is 
                                                            in this State during the tax period, and the denominator 
the average value of all the taxpayer’s real and tangible 
                                                            of which is the total sales of the taxpayer everywhere 
personal property owned or rented and used during the 
                                                            during  the tax period.  The method of calculating  re-
tax period. Please refer to the special industry appor-
                                                            ceipts for purposes of the denominator is the same as 
tionment regulations for any modifications required.
                                                            the method used in determining receipts for purposes 
                                                            of the numerator. The receipts factor shall include only 
Line 1: Enter Property Used in Business                     those receipts which constitute business income and 
                                                            are included  in the computation of the apportionable 
Line a: Tangible Assets Used in Business and In-            income base for the taxable year. Arkansas requires re-
ventories.                                                  ceipts to be gross receipts instead of net receipts. 

     (a1)  Enter the amount at the beginning of the year in 
                                                            Sales of tangible personal property are in this state if:
                 both Column A and Column B.
                                                            (a) the property is delivered or shipped to a purchaser, 
    (a2)  Enter the amount at the end of the year in both 
                                                            other than the United States Government, within this 
                 Column A and Column B.                     State regardless of the f.o.b. point or other conditions 
    (a3)  Enter total amounts: (Add Lines a1 and a2) in     of the sale  or: (b) the property is shipped from an of-
                 both Columns.                              fice, store, warehouse, factory, or other place of stor-
    (a4)  Enter Average of Tangible Assets: (Line a3        age in this State and: (1) the purchaser is the United 
             divided by 2) in both Columns.                 States Government or: (2) the taxpayer is not taxed in 
                                                            the State of the purchaser.
Line b: Enter Rental Property: (8 times annual rent 
Column A and B.)
                                                            Line 3: Sales/Receipt
Line c: Enter Total Property in both Columns: (Add 
                                                            (a) Enter Destination Shipped from Within Arkansas: 
Lines a4 and b).
                                                            Sale of property that is delivered or shipped by a seller 
                                                            located in Arkansas to a purchaser located in Arkansas.
In Column C, calculate the Arkansas percent by dividing 
the amount on Line c, Column A by the amount on Line 
                                                            (b) Enter Destination Shipped from Without Arkansas: 
c, Column B.
                                                            Sale of property that is delivered or shipped to a pur-
                                                            chaser located in Arkansas regardless of the f.o.b. point 
Payroll Factor: The payroll factor is only to be used 
                                                            or other conditions of the sale.
if the taxpayer is subject to a special industry regula-
tion that requires a modified three factor apportion-
                                                            (c)  Enter  Origin  Shipped  from  Within Arkansas  to 
ment method. The payroll factor is a fraction, the nu-
                                                            U.S.Govt.: Gross receipts from sales of tangible per-
merator of which is the total amount paid in this State 
                                                            sonal property to the United States Government are in 
during the tax period by the taxpayer for compensation 
                                                            this state if the property is shipped from an office, store, 
and  the denominator  of which  is the total compensa-
                                                            warehouse,  factory, or other place  of storage in this 
tion paid everywhere during the tax period. The payroll 
                                                            state and the purchaser is the U.S. Government.
Page 14

- 15 -

(d) Enter Origin Shipped from Within Arkansas to Line 2: Enter Direct Income Allocated to Arkansas:
Other Non-Taxable Jurisdictions: Sales of property Include non-business income and partnership income/
that is shipped from an office, store, warehouse, factory loss that are sourced to Arkansas. Arkansas Regula-
or other place of storage in Arkansas to a taxpayer that tion 1.26-51-802(b) requires taxpayers to directly allo-
is not taxable in the state of the purchaser. cate partnership Arkansas income or loss to Arkansas
rather than including partnership income and apportion-
(e) Enter Other Gross Receipts: Includes items such ment factors in the taxpayer’s apportionment formula.
as interest income, other income, proceeds from sales Multistate taxpayers with partnership income should
of assets, rental income. (Attach schedule) deduct all partnership income on Part A, Line 3 (Deduct
Adjustments). Partnership losses should be added on
Gross receipts from transactions other than sales of Part A, Line 2 (Add Adjustments). The taxpayer’s Arkan-
tangible personal property are attributed to Arkansas if: sas partnership income or loss should then be entered
1) The income producing activity is performed entirely on Part C, Line 2 Add: Direct Income Allocated to Ar-
within Arkansas or, kansas line. Attach Forms AR K-1 and if claiming with-
holding, attach Forms AR1099PT. Income or loss from
2) If the income producing activity is performed both a partnership that elects the Arkansas PET tax is not to
inside and outside of Arkansas, the income reportable be included.
to Arkansas is determined by calculating the property,
payroll, and sales factor excluding sales from trans- Line 3: Less: Apportioned NOL to Arkansas (See Net
actions other than the sale of tangible personal prop- Operating Loss (NOL) instructions, Attach AR1100NOL
erty and applying the resulting percentage to the Form). Add or subtract lines 1 and 2, subtract lines 3.
Arkansas sales factor numerator for gross receipts Enter here and on line 1 P1.
from transactions other than sales of tangible personal
property. Special Industry Apportionment Rules

(f) Enter Total Sales/Receipts: (Add Lines 3a through Arkansas Regulations require taxpayers primarily engaged in
3e). Divide Line 3f in Column A by Line 3f in Column B certain industries to apportion income using a special industry
to arrive at the percentage for Line 3f in Column C. apportionment method. See below for a brief description of
each special industry apportionment method. For a complete
(g) Enter Double Weighted: Applies only to taxpayers description of industries that are required to modify their
reporting under the three factor special industry regu- apportionment factors, see the Corporation Income Tax
lations. Taxpayers using a single sales factor appor- Regulations at www.dfa.arkansas.gov.
tionment or a single factor apportionment method for
special industries do not double weight sales. Construction Contractors

Line 4: Enter Sum of Percentages: (Single Weighted: Arkansas Regulation 1.26-51-718(d) modifies the
Add Column C, Lines 1d, 2a and 3f) (Double Weighted: property factor to include the average value of construction
Add Column C, Lines 1d, 2a and 3g). in progress. It also modifies the payroll factor to include
compensation paid for particular construction projects
Line 5: Enter Percentage Attributable to Arkansas: and compensation “thrown back” to Arkansas if not
For Part B, Line 5, divide Line 4 by number of entries oth- reported to another state. The sales factor is modified
er than zero which you make on Part B, Column B, Lines for the percentage of completion method.
(1c), (2a), and (3f). Also, if Double Weighted Sales Factor
applies, any entry other than zero in Part B, Column B, Television and Radio Broadcasting
Line (3f), counts as two (2) entries. For taxpayers using
the sales factor only or a single factor apportionment Arkansas Regulation 2.26-51-718(d) modifies the
method under the special industry regulations, enter numerator of the sales factor to include all gross
the percentage on Line 3 F, Column C. receipts of the taxpayer from sources within Arkansas
plus a ratable part of film or radio programming revenue
Part C - Arkansas Taxable Income including advertising revenue determined by an audience
factor. The audience factor is determined based on the
Line 1: Enter Income Apportioned to Arkansas. (Part ratio that the taxpayer’s Arkansas viewing or listening
A, Line 4) x (Part B, Line 5, Column C). audience bears to its total viewing or listening audience.
Television and radio broadcasters should not use a
property or payroll factor for tax years beginning in 2021
and after.
Page 15

- 16 -

Publishing                                                     that is calculated based on miles operated in Arkansas 
                                                               divided by total system miles.
Arkansas  Regulation  3.26-51-718(d)   modifies  the 
sales factor for taxpayers in the business of publishing,      Private Railcar Operators
selling, licensing or distribution of books, newspapers, 
magazines, periodicals, trade journals, or other printed       Arkansas Regulation 2.26-51-204 requires taxpayers, 
materials that have income from sources both inside and  other than a railroad, engaged in the business of operating 
outside of Arkansas. Outer-jurisdictional property shall  railcars or in the business of furnishing or leasing railcars 
not be included in the property factor’s denominator. The  for the transportation of freight or property whether or not 
sales factor is modified to include a “circulation factor”.    owned by such taxpayer, over any railway lines partly 
Publishers should not use a property or payroll factor for  within and partly without the State to determine Arkansas 
years beginning in 2021 or after.                              net taxable income by taking that portion of total net 
                                                               operating income that the total miles operating in the State 
Airlines                                                       bears to total system miles operated.

Arkansas Regulation 4.26-51-718(d) requires airlines           Public Utilities
to determine Arkansas net taxable income by taking 
that  portion  of  total  operating  revenue  that  the  total Arkansas Regulation 3.26-51-204 requires telephone, 
passenger  and  freight  receipts  in Arkansas  bears  to      electric power, and gas distribution companies operating 
total receipts from both inside and outside of Arkansas.       both inside and outside of Arkansas shall allocate and 
The Arkansas and Total Passenger & Freight Receipts            apportion their net income provided under ACA 26-51-701, 
should be included on line 3.f. on P4 of Form AR1100PET        et seq, ACA 26-51-709 requires income to be apportioned 
with a notation that this represents Passenger & Freight       using a single sales factor.
Receipts.

Bus Lines and Trucking Companies                               Allocated Income

Arkansas Regulation 5.26-51-718(d) requires a company          Partnership Income
whose primary business is bus lines or trucking to 
determine its net income subject to Arkansas income tax        Act 482 of 2017 amends      ACA 26-51-802(c) to require 
by an apportionment formula which is the number of miles       partnership income from activites within and without this 
operated within Arkansas divided by the total system miles.    State that is reflected on a partnership return shall be 
The Arkansas and Total miles operated should be included       apportioned to Arkansas under the uniform Division of 
on Line 3.f on P4 of Form AR1100PET with a notation that       Income for Tax Purposes Act   (ACA 26-51-701 et seq). 
this represents mileage.                                       Entities that are partners in a partnership must allocate 
                                                               their share of partnership income as shown on form AR 
Pipelines                                                      K-1 from the partnership. Partnership Income subject 
                                                               to Arkansas Pass-Through Entity Tax (PET) should be 
Arkansas  Regulation  6.26-51-718(d)   establishes  excluded from the Arkansas Individual return.
special rules for taxpayers operating a pipeline for the 
transportation of oil or gas both inside and outside of        Non-Business Income
Arkansas. The payroll factor includes compensation paid 
both inside and outside of Arkansas plus a ratable part for    The following items of income to the extent that they 
services performed both in and outside the State based         do not constitute business income are to be allocated 
on the total number of barrel or unit miles in Arkansas        to this State.
divided by the total barrel or unit miles system-wide. The 
sales factor includes any gas sales and storage sales          1. Rents & Royalties:
within Arkansas plus a proportionate part of system 
revenue earned in Arkansas determined on the basis of    A) Net rents and royalties from real property located in  
total barrel or unit miles within Arkansas to the total barrel        this State.                           
or unit miles in the system.                                    
                                                                  B) Net rents and royalties from tangible personal  
Railroads                                                             property
                                                                   1) If and to the extent that the property is used in  
Arkansas Regulation 1.26-51-204 modifies the property,                 this State, 
payroll, and sales factor to include a mobile component                or
Page 16

- 17 -

2) In their entirety, if the commercial domicile is in receipts from copyright royalties does not permit allocation
this State and the taxpayer is not organized under to states or if the accounting procedures do not reflect
the laws of or taxable in the state in which the states of utilization, the copyright is utilized in the state in
property is utilized. which the taxpayer’s commercial domicile is located.

The extent of utilization of tangible personal property in a Schedule D - Arkansas Capital Gains
state is determined by multiplying the rents and royalties
by a fraction, the numerator of which is the number of Line 1: Enter Capital Gains apportioned to Arkansas:
days of physical location of the property in the State during Multiply total apportionable net gains or losses by the Ar-
the rental or royalty period in the taxable year; and the kansas apportionment factor from Part B Line 5.
denominator of which is the number of days of physical
location of the property everywhere during all rental or Line 2: Enter Net Capital Gains allocated to Arkansas:
royalty periods in the taxable year. (plus/or minus gains or losses allocated to Arkansas)

If the physical location of the property during the rental Line 3: Enter Less Capital loss carryforward
or royalty period is unknown or unascertainable by the
taxpayer, tangible personal property is utilized in the state Line 4: Enter Net Capital gains add or subtract lines 1 and
in which the property is located at the time the rental or 2 and subtract from line 3 (enter here and on page1, Line
royalty payer obtained possession. 3). If line 4 is positive.

2. Gain and Losses:

Gains and losses from sales of assets:

A) Sales of real property located in this State.

B) Sales of tangible personal property.
1) The property had a situs in this State at the time
of sale,
or
2) The taxpayer’s commercial domicile is in this
State,
or
3) The property has been included in depreciation
which has been allocated to this State; in which
event gains or losses on such sales shall be
allocated on the percentage that is used in the
formula for allocating income to this State.

3. Interest and Dividends:

Interest and dividends if the taxpayer’s commercial
domicile is in this State.

4. Patent and Copyright Royalties:

A) If and to the extent that the patent or copyright is
utilized by the taxpayer in this State,
or
B) If and to the extent that the patent or copyright
is utilized by the taxpayer in a state in which
the taxpayer is not taxable and the taxpayer’s
commercial domicile is in this State.

A copyright is utilized in a state to the extent that printing
or other publications originate in the state. If the basis of
Page 17

- 18 -

                                                                      to Arkansas if the billing address of the card holder is in 
                 Financial Institutions
                                                                      Arkansas. Net gains from the sale of loans and loan ser-
                                                                      vicing fees are sourced in the same manner as the loan 
In general, all state and national banks, savings and                 interest. Net gains from the sale of credit card receiv-
loan, building and loan associations, or any other entity             ables are sourced in the same manner as the interest 
operating as financial institutions are to be taxed under             on credit card receivables. Interest, dividends, and net 
existing law. For a complete definition of “financial insti-          gains from investment and trading assets and activities 
tution”, refer to ACA 26-51-1402.                                     are attributed to Arkansas if such receipts are properly 
                                                                      assigned to a regular place of business of the taxpayer 
Who Must File                                                         within Arkansas.

   1)  A financial institution having its principal office in 
          this State shall be taxed as a business corporation 
                 organized and existing under the laws of this State, 
        or
   2)  A financial institution having its principal office out
        side this State but doing business in this State shall 
          be taxed as a foreign business entity doing business
        in this State.

This is not intended to recognize the right of a foreign 
financial institution to conduct any business in this State 
except to the extent and under the conditions permitted 
by any acts or any other now existing applicable laws of 
this State.

ACA 26-51-426 adopted Internal Revenue Code Sec-
tions 582, 585, and 593 as in effect January 1, 1999 
regarding bad debts of financial institutions.

Act 822 of 2019 amends ACA 26-5-101, Article IV, 26-
51- 709 through 26-51-1405 to provide for a single sales 
factor to apportion income from within and without Ar-
kansas for tax years beginning on or after 01/01/2021.

ACA 26-51-1401  requires  that  a  financial  institution 
whose business activity is taxable both within and with-
out this State to allocate and apportion its net income to 
this State. All business income which is includable in the 
apportionable income tax base shall be apportioned to 
this State by multiplying such income by the taxpayer’s 
receipts factor as described in ACA 26-51-1403.

Generally, the receipts factor is a fraction; the numera-
tor is the financial institution’s gross receipts in Arkan-
sas during the taxable year, and the denominator is all 
gross receipts that the financial institution derives from 
transactions and activities in the regular course of its 
trade or business. Interest from loans secured by real 
property is attributed to Arkansas if the property is lo-
cated in Arkansas. Interest from loans not secured by 
real property is attributed to Arkansas if the borrower is 
located in Arkansas. Interest from credit cards receiv-
ables and fees charged to card holders are attributable 

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total investment in a new location or expansion proj-
Business Incentive
ect after signing a financial incentive agreement with
Tax Credits AEDC. The minimum investment and payroll require-
ments depend on the county in which the business is
located. Any unused credits may be carried forward for
1. Purchase of Waste Reduction, Reuse, or nine (9) tax years. The ArkPlus tax credits taken during
Recycling Machinery or Equipment any tax year shall not exceed fifty percent (50%) of the
business’s income tax liability resulting from the project
ACA 26-51-506 provides an income tax credit equal to or facility.
30% of the cost of approved waste reduction, reuse, or
recycling machinery and equipment including the cost of The ArkPlus incentive may be awarded by AEDC as an
installation. No other credit or deductions except normal optional income tax credit or sales tax credit to tech-
depreciation may be claimed on that equipment. Any nology based businesses that create a new payroll of
unused credit may be carried forward for the next three at least $250,000 and pays wages at least 175% of
(3) succeeding tax years or until exhausted, whichever the state or county average hourly wage. The credit is
occurs first. Act 1476 of 2013 also extends the waste between 2% and 8% of the total investment based on
reduction, reuse, or recycling equipment tax credit to the total amount invested. Depending on the average
carry forward for a period of fourteen (14) consecutive hourly wage, the credits earned may be used to off-
tax years following the taxable year in which the credit set 50%, 75%, or 100% of the tax liability. Any unused
originated for the Big River Steel Mill project. Income credits may be carried forward for nine (9) tax years.
tax credits that would otherwise expire during that pe-
riod shall be claimed first. Act 327 of 2019 provides for projects approved after July
24, 2019, that average hourly wages must exceed 150%
2. Consolidated Incentive Act 182 of 2003 of the lesser of state or county average hourly wage to
qualify for the credit. The credit may offset 50% of the
Advantage Arkansas Income Tax Credit income tax or sales tax liability if wages exceed 150% of
the lesser of state or county average hourly wage. The
ACA 15-4-2705 provides an income tax credit for creat- credit may offset 75% of the income tax or sales tax liabil-
ing new jobs after the company signs a financial incentive ity if wages exceed 175% of the lesser of state or county
agreement with the Arkansas Economic Development average hourly wage. The credit may offset 100% of the
Commission. The annual payroll of the new employees income tax or sales tax liability if wages exceed 200% of
must meet the payroll threshold for the county in which the lesser of state or county average hourly wage.
the business is located. The income tax credit earned is
a percentage of the annual payroll of the new full-time Act 911 of 2021 amends ACA 15-4-2703 and 15-4-
permanent employees for a period of five (5) tax years. 2706 to allow project costs to be incurred within 6
Unused credits may be carried forward for nine (9) tax years from the date the incentive agreement was ap-
years. The Advantage Arkansas job creation credit can- proved instead of the current 4 years. Credits earned
not offset more than 50% of a business’s income tax because of costs incurred more than 4 years after the
liability. incentive agreement is approved may not be claimed
until on or after 07/01/2023, and the maximum credits
Act 327 of 2019 provides that to qualify for Advantage for each qualified applicant may not exceed $750,000
Arkansas credits beginning on or after July 24, 2019, per fiscal year.
the business must pay average hourly wages at least
equal to the greater of the average hourly wage of the Research & Development with Universities Tax Credit
county in which the facility is located, or $12.50 per
hour. A qualified business may receive an additional tax ACA 15-4-2708(a) authorizes a business that contracts
credit of 1% of qualifying wages if the average hourly with Arkansas colleges or universities in performing re-
wage is at least equal to 125% of the lesser of the av- search to qualify for an income tax credit as authorized
erage hourly wage for the county or state in which the by ACA 26-51-1102(b) equal to 33% of qualified ex-
business locates or expands. penses. A business must submit an application to AEDC
and the Arkansas Science and Technology Authority
ArkPlus Income Tax Credit must also approve the plan. The credit may offset 100%
of the tax liability and unused credits may carry forward
ACA 15-4-2706(b) allows the AEDC to provide a 10% nine (9) tax years.
income tax credit to eligible businesses based on the
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ACA 26-51-1101 (2)(C) allows an income tax equal to incentive agreement. The maximum tax credit that may
33% of a cash donation that is used by a qualified ed- be claimed by a taxpayer under this program is $50,000
ucational institution in Arkansas to purchase new ma- per tax year. Any unused credits may be carried forward
chinery and equipment in connection with a qualified nine (9) tax years.
education or research program. Taxpayers must submit
an application to the Arkansas Economic Development Targeted Business Payroll Income Tax Credit
Commission on forms prescribed by the Commission
and if approved have itemized receipts documenting the ACA 15-4-2709 provides income tax credits to “targeted
amount of the cash donation and the purchase costs of businesses” approved by AEDC. Companies must pay
the new machinery and equipment. The credit may off- wages that are in excess of 150% of the state or county
set 100% of the tax remaining after all other credits and average wage and meet requisite payroll and invest-
any unused credits may be carried forward for nine tax ment thresholds. The credits may be sold upon approv-
years. al by the AEDC.

In-House Research Income Tax Credit The buyer of the tax credit shall be allowed the remain-
ing carryforward of the tax credit. Any unused credits
ACA 15-4-2708(b) authorizes an income tax credit to may be carried forward for a maximum of nine (9) tax
businesses that conduct “in-house” research. The credit years. The tax credit is equal to 10% of its annual pay-
allowed for approved in-house research is 10% of quali- roll, with a cap of $100,000 per year. The incentive may
fied expenditures. However, the maximum credit that be offered for a period not to exceed five (5) tax years.
can be earned by each business is $10,000 per tax year
and is equal to 20% of qualified expenses. The income To claim the credits authorized under the Consoli-
tax credit may offset 100% of the income tax liability. dated Incentive Act, attach to the tax return a copy
Unused credits may be carried forward for nine (9) tax of the Certificate of Tax Credit issued by Tax Credits/
years. Special Refunds Section. For information regarding
application to any of the incentives under this Act
In-House Research by Targeted Business income Tax contact Arkansas Economic Development at (501)
Credit 682-1121 or their website at http://arkansasedc.com.

ACA 15-4-2708(c) provides income tax credits for busi- 3. Equity Investment Incentive Credit
nesses deemed by the AEDC to fit within the six (6)
business sectors classified as “targeted businesses”. Act 164 of 2015 amends ACA 15-4-3305 to provide
An eligible business may be approved for an income tax credits for entities investing in eligible businesses
tax credit each year equal to 33% of the qualified re- and purchases the qualified business in calendar years
search and development expenditures incurred each 2007- 2028. The credit shall not exceed 33.33% of the
year for the first five (5) tax years of the financial in- actual purchase price paid for the equity interest and
centive agreement. The income tax credit for research shall not exceed 50% of the state income or premium
and development earned by targeted businesses may tax liability. The total amount of credits available to all
be sold. The business must make application to AEDC purchasers of equity interest in a qualified business
within one year of issuance and the credits may only shall not exceed $6,250,000. Any unused credit may be
be sold one time. Any unused credits may be carried carried forward for a period of nine (9) tax years and in
forward for nine (9) years. no event be carried past December 31, 2037. The ap-
plication must be filed with AEDC.
In-House Research in Area of Strategic Value Tax
Credit Act 537 of 2019 amends Arkansas Code Annotated 15-
4-3305(g) to clarify that an equity investment incentive
ACA 15-4-2708(d) authorizes an income tax credit credit may be sold only 1 time at any time before the
equal to 33% of qualified research expenditures for an credit is exhausted or expires.
Arkansas taxpayer that invests in:(A) In-house research
in an area of strategic value; or (B) A project under the 4. Child Care Facility
research and development programs approved by the
state of Arkansas Science and Technology Authority. The ACA 26-51-507 provides an income tax credit of 3.9%
taxpayer must apply to AEDC in order to qualify for the of the annual salary of employees employed exclusive-
income tax credit. The tax credit may be earned for the ly in providing child care services if the revenue to the
first five (5) tax years following the signing of a financial business does not exceed the direct operating costs
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of the facility. Certification of eligible childcare facilities The amount of tax credit allowed to each approved ap-
must be made by the Division of Childcare and Early  plicant  per project  shall  not exceed  the lesser  of the 
Childhood Education.                                            amount of individual or corporate income tax otherwise 
                                                                due or $9,000. Any unused credit may be carried for-
ACA 26-51-508 provides that a business which quali-             ward for the next fifteen (15) succeeding tax years or 
fies for the refund of the Gross Receipts Tax or Com-           until exhausted, whichever occurs first. After March 12, 
pensating Use Tax under ACA 26-51-516 or     ACA 26-            2001, projects used for commercial purposes can qual-
53-132 shall be allowed an income tax credit of 3.9%  ify for this credit.
of the annual salary of its employees employed exclu-
sively in providing child care service, or a $5000 income       Act 875 of 2021 amends ACA 26-51-1005 for tax years 
tax credit for the first tax year the business provides its     beginning on or after 01/01/2021 to provide that the in-
employees with a child care facility. This credit is for a  come tax credit is equal to the lesser of 50% of the proj-
business which operates a child care facility for its em-       ect cost incurred or $120,000. The amount of tax credit 
ployees only. Any unused credit may be carried forward  shall not exceed the lesser of the amount of individual or 
for the next two (2) succeeding tax years or until ex-          corporate income tax otherwise due or $18,000.
hausted, whichever occurs first.
                                                                b) Surface Water Conversion:
5. Water Resource Conservation
                                                                    1.  Outside Critical Areas - ACA 26-51-1007 provides 
All water resource conservation credits must be ap-                      an income tax credit that shall not exceed the lesser 
proved by the Arkansas Natural Resource Commission.                      of 10% of the project cost incurred or $27,000 for 
                                                                         the reduction of ground water use by substitution of 
Act 1073 of 2019 provides that Water Resource Con-                       surface water for water used for industrial, com-
servation credits may be transferred for tax years begin-                mercial, agricultural or recreational purposes. The 
ning on or after January 1, 2020. The transferor must                      credit shall not exceed the lesser of the entity’s     
provide documentation of  the  transfer  to  the  Depart-                income tax otherwise due or $9,000 per project and 
ment of Finance and Administration within 30 days of           any unused credit may be carried forward for the 
the transfer. The transferor of a credit is liable for the           next two (2) succeeding tax years or until exhausted 
repayment of the credit if the transferor fails to complete              whichever occurs first.
and maintain the project as  required under Arkansas 
Code Ann. 26-51-1011.                                                    Act 875 of 2021 amends ACA 26-51-1007 for tax 
                                                                         years beginning on or after 01/01/2021 to provide 
Act 563 of 2021 amends ACA 26-51-1101(c)(1) to allow           that the income tax credit is equal to the lesser of 
water  conservation  projects  receiving  certificates  of  tax          25% of the project cost incurred or $35,000. The 
credit approval on or after 01/01/2017 five years to com-                amount of tax credit shall not exceed the lesser of 
plete a project instead of the previous three year require-              the individual or corporate income tax otherwise 
ment.                                                                    due or $18,000. Any unused credits may be carried 
                                                                         over for a maximum of 15 consecutive tax years or 
Act 875 of 2021 amends ACA 26-51-1013 to state that                      until exhausted, whichever occurs first.
when  the total amount  of tax credits  used  under  this 
subchapter exceeds $20,000,000 in any calendar year,      2.  Within Critical Areas - ACA 26-51-1008 provides 
the tax credits established under the subchapter shall              an income tax credit not to exceed the lesser of   
expire on December 31 of the following calendar year.                        50% of the cost incurred or $27,000 for the re-
                                                                        duction of groundwater use by substitution of surface 
(a) Water Impoundment outside and within critical areas:                 water for water used for agricultural or recreation-
                                                                          al purposes. The credit shall not exceed the lesser 
Act  1125  of 2017 amends ACA 26-51-1005 to pro-                          of income tax otherwise due or $9,000 for projects 
vide an income tax credit equal to 50% of the cost of               using water for agricultural or recreational purposes.  
construction and installation or restoration of water im-                 For industrial or commercial projects, there shall 
poundments or water control structures of twenty (20)           be allowed a tax credit to each approved applicant 
acre-feet or more designed for the purpose of storing           not to exceed the lesser of 50% of the project cost 
water to be used for agricultural, commercial or indus-                  incurred or $1,000,000. The amount of tax credit 
trial purposes. The credit shall not exceed the lesser of           allowed is the amount of the entity’s income tax   
50% of the project cost incurred or $90,000.                              otherwise due or $200,000 If the approved applicant 
                                                                         is a pass-through entity the amount of tax credit
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that may be used for a taxable year shall not exceed to exceed the lesser of income tax due or $5,000. An
the lesser of the aggregate amount of entity’s in- eligible donor may earn only one Wetland and Riparian
come tax due by all members or $9,000.“Critical Zone Conservation Tax Credit per income tax year. The
areas”means those areas so designated by the availability of the tax credits shall expire on December
Arkansas Natural Resources Commission. 31st of the calendar year following the calendar year the
tax credits used exceed $500,000. Any unused credit
For projects approved on or after August 1,1997 may be carried forward for a maximum of nine (9) con-
and using water for industrial or commercial pur- secutive taxable years.
poses any unused credit may be carried forward
for the next four (4) succeeding tax years or until 6. Equipment Donation, Sale Below Cost or
exhausted, whichever occurs first. Qualified Research Expenditure & Research
Park Authority
Act 875 of 2021 amends ACA 26-51-1008 for tax years
beginning on or after 01/01/2021 to change the defini- ACA 26-51-1102 provides an income tax credit for a
tion of within critical groundwater areas to include coun- taxpayer who donates or sells below cost new machin-
ties contiguous to counties with areas designated as ery or equipment to a qualified educational institution,
critical groundwater areas. It also provides that the in- or a taxpayer who has qualified research expenditures
come tax credit for an agricultural or recreational project under a qualified research program. This credit is equal
is equal to the lesser of 50% of the project cost incurred to 33% of the cost of the donation, sale below cost, or
or $35,000. The amount of tax credit shall not exceed qualified expenditure, and the credit may offset 100%
the lesser of the amount of the entity’s income tax due of the net income tax liability. Any unused credit may
or $18,000. Any unused credits may be carried over be carried forward for the next nine (9) succeeding tax
for a maximum of 15 consecutive tax years or until ex- years or until exhausted, whichever occurs first.
hausted, whichever occurs first.
Act 203 of 2019 provides for an income tax credit equal
(c) Land Leveling for Water Conservation: to 33% of cash donations made to a qualified educational
institution for the purpose of purchasing machinery and
ACA 26-51-1009 provides an income tax credit equal equipment. The Act is effective July 24, 2019. To qualify
to 10% of the project cost incurred or $27,000 for agri- for the credit for cash donations, an application must
cultural land leveling to conserve irrigation water. The be filed with and approved by the Arkansas Economic
credit shall not exceed the lesser of the amount of the Development Commission. The taxpayer must obtain
entity’s income tax otherwise due or $9,000 per project. documentation from the qualified educational institution
Any unused credit may be carried forward for the next showing the amount of the donation and document the
two (2) succeeding tax years or until exhausted, which- amounts spent purchasing machinery and equipment.
ever occurs first.
ACA 14-144-311 authorizes the creation and operation
Act 875 of 2021 amends ACA 26-51-1009 for tax years of research park authorities for the purpose of economic
beginning on or after 01/01/2021 to provide that the tax development, exempting the property of each research
credit shall not exceed the lesser of 25% of the project park authority from all state, county and municipal taxes
cost incurred or $35,000. The amount of tax credit shall including income tax, inheritance tax and estate tax.
not exceed the lesser of the amount of the entity’s income The act allows contributions to research park authorities
tax otherwise due or $18,000. Any unused credits may be to qualify for the credit provided by ACA 26-51-1102.
carried over for a maximum of 15 consecutive tax years or
until exhausted, whichever occurs first. 7. Workforce Training Credit

(d) Wetland and Riparian Zone Creation and Restoration ACA 6-50-702 permits an income tax credit based on a
and Conservation Tax Credits Act: portion of the cost of workforce training. If the training
is in an Arkansas state supported educational institu-
ACA 26-51-1505 allows the Wetland and Riparian Zone tion, the credit allowed is the lesser of one-half (1/2)
Creation and Restoration Tax Credit amount not to ex- of the amount paid by the company or the hourly train-
ceed $50,000 and shall equal 50% of the fair market ing cost up to $80 per instructional hour for tax years
value of the qualified property interest donation, calcu- prior to 2014 to increase to $100 per hour for tax years
lated to exclude any short term capital gain under 26 beginning on or after January 1, 2014. If training is by
U.S.C. 170(e)(1)(A) as in effect on January 1, 2009. The company employees or company paid consultants, the
amount of credit shall be equal to the project costs not tax credit cannot be more than $25 per hour. There is no
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carryforward period for this credit. Applications for this forward for the next three (3) succeeding tax years or
credit are available from the AEDC at (501) 682-7675. until exhausted, whichever occurs first.

8. Tourism Development Credit 12. Public Road Improvement

ACA 15-11-509 provides an income tax credit equal to ACA 15-4-2306 provides a tax credit for those taxpay-
4% of the payroll of the new full-time permanent em- ers who contribute to the “Public Roads Incentive Fund”
ployees working at a tourism attraction project. To be for the improvement of public roads. The credit is limited
counted as a new full-time permanent employee for the to 33% of the total contributions made to the fund and
purpose of qualifying for the tax credit, the employee in in any tax year is limited to 50% of the net Arkansas
the position must have been an Arkansas taxpayer dur- tax liability after all other credits have been taken. Any
ing the year in which the credit was earned. For projects unused credit can be carried forward for the next three
receiving approval after March 1,1999, the credit may (3) succeeding tax years or until the credit is exhausted,
be applied against the approved company’s income tax whichever occurs first. This program is administered by
liability for the succeeding nine (9) tax years or until ex- the AEDC.
hausted, whichever occurs first.
Act 628 of 2021 amends ACA 15-4-2306(b) to allow
9. Apprenticeship Program the credit to offset 100% of the tax liability for tax years
beginning on or after 01/01/2020.
Act 1042 of 2017 amends ACA 26-51-509 to provide
an income tax credit of $2,000, or 10%, of the wages 13. Low Income Housing Credit
earned by a youth apprentice (whichever is less) to a
business participating in the United States Department ACA 26-51-1702 provides an income or premium tax
of Labor apprenticeship program. The credit may not credit for a taxpayer owning an interest in a qualified
exceed the income tax otherwise due and shall not ex- low income building which is approved through the Ar-
ceed $10,000 per year for each corporation. Any unused kansas Development Finance Authority. The tax credit
credit may be carried forward for the next two (2) suc- is computed by multiplying the Federal Low Income
ceeding tax years or until exhausted, whichever occurs Housing Tax Credit for the qualified project by 20%.The
first. Arkansas Code Title 26, Chapter 51, Subchapter credit may not exceed $250,000, or the income or an-
16 is repealed. nual premium tax otherwise due. Any unused credit may
be carried forward for the next five (5) succeeding tax
10. Tuition Reimbursement Credit years or until exhausted, whichever occurs first.

ACA 26-51-1902 permits an income tax credit equal to 14. Purchase of Equity in a Capital Development
30% of the cost of tuition reimbursed by the employer Company
to a full-time permanent employee on or after July 30,
1999. The credit cannot exceed 25% of the business’ ACA 15-4-1026 allows the original purchaser of an eq-
income tax liability in any one tax year and has no carry- uity interest in a Capital Development Company in cal-
forward provision. The employee must attend a qualified endar years 2003-2015 to be entitled to an income or
Arkansas institution. Form AR1036 must be attached to annual premium tax credit equal to 33.33% of the actual
the Arkansas return in addition to Form AR1100BIC to purchase price, limited to 50% of the net Arkansas in-
claim this credit. come or premium tax liability in any one tax year. No
capital development company shall enter into an agree-
11. Family Savings Initiative Credit ment or commitment for the purchase by any person of
equity interests in the capital development company on
ACA 20-86-109 creates the Family Savings Initiative or after July 1, 2007. Any unused credit may be carried
Act, which provides a tax credit to those taxpayers who forward for the next succeeding tax year and annually
make contributions to a designated fiduciary organiza- thereafter for a total of eight (8) years succeeding the
tion created pursuant to this act. The fiduciary will no- year in which the equity interest was purchased or until
tify the Department of Human Services of the deposits exhausted, whichever occurs first. In no event may the
which will issue a certificate to be attached to the tax credit be allowed for any tax year ending after Decem-
return for the first year the credit is taken. The credit al- ber 31, 2021.
lowed 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
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15. Affordable Neighborhood Housing Tax Credit business, a tourism attraction, or tourism supporting
business project that attracts out of state visitors in an
ACA 15-5-1301 et seq. provides an income or annual economically distressed area of the Lower Mississippi
premium tax credit for any business firm engaged in River Delta in Arkansas. Applications’ must be made to
providing affordable housing which is approved through the Tax Credits Section of the Department of Finance
the Arkansas Development Finance Authority. The tax and Administration and must also be approved by the
credit is limited to 30% of the total amount invested in Arkansas Department of Parks and Tourism. The credit
affordable housing assistance activites. The credit may may be transferred to another tourism related business
not exceed $750,000, or the income or premium tax in Arkansas upon approval by DFA and Parks and Tour-
otherwise due in any taxable year. Any unused credit ism. The minimum investment to qualify for the credit is
may be carried forward for the next five (5) succeeding $25,000 and a transferee of a credit must invest a mini-
tax years or until exhausted, whichever occurs first. mum of $100,000 in a tourism related business project
in Arkansas. Unused tax credits may be carried forward
16. Coal Mining Tax Credit five (5) taxable years after the year the credit is earned
or until exhausted, whichever occurs first.
ACA 26-51-511 provides an income or annual premium
tax credit of $2.00 per ton of coal mined, produced, or The credit expires and no credit may be established for a
extracted on each ton of coal mined in Arkansas in a tax year ending after December 31, 2021. The amount of
tax year. An additional credit of $3.00 per ton will be credit that may be used by a taxpayer for any taxable year
allowed for each ton of coal mined in Arkansas in ex- shall not exceed twenty-five thousand dollars ($25,000).
cess of 50,000 tons in a tax year. The credit can only be
earned if the coal is sold to an electric generation plant 20. Arkansas Historic Rehabilitation Income
for less than $40.00 per ton excluding freight charges. Tax Credit
The credit expires five (5) tax years following the tax
year in which the credit was earned. ACA 26-51-2201 creates a credit for income taxes or pre-
mium taxes for qualified historic rehabilitation expenses
17. Venture Capital Investment Credit in an amount equal to 25% of the total cost incurred by
a person, firm or corporation subject to state income tax
ACA 15-5-1401 et seq. provides an income tax credit or an insurance company paying annual premium tax to
up to $10 million per fiscal year as recommended by complete a certified rehabilitation project up to the first
the Arkansas Development Finance Authority and ap- $500,000 of expenses on income producing property or
proved by the State Board of Finance. The credit may $100,000 on non-income producing property. The mini-
not exceed the income tax otherwise due and is non- mum investment to obtain the credit is $25,000. Historic
refundable. Any unused credit may be carried forward rehabilitation credits are approved by the Department of
for five (5) succeeding tax years after the tax year in Arkansas Heritage. The maximum tax credits that may
which the credit was first earned. be approved in one year is $4,000,000. The credit may
offset 100% of income or annual premium tax due. Any
18. Rice Straw Tax Credit unused credit may be carried forward for five (5) tax
years or until exhausted.
ACA 26-51-512 allows an income tax credit in the amount
of $15.00 for each ton of rice straw over 500 tons that The Arkansas Historic Rehabilitation tax credit program
is purchased by an Arkansas taxpayer who is the end expires for tax years ending on or before December 31,
user of the straw (person processing, manufacturing, 2027. The holder of rehabilitation tax credits may sell or
generating energy or producing ethanol). The amount of assign all or a portion of unused credits by notifying the
the credit is limited to 50% of the income tax due for the Department of Arkansas Heritage and the Department
tax year. Any unused credit may be carried forward for of Finance & Administration if the credit is an income
ten (10) consecutive tax years following the tax year the tax credit.
credit was earned and is effective for tax years beginning
on or after January 1, 2006. Act 393 of 2017 increases the maximum costs eligi-
ble for the historic rehabilitation credit to $1,600,000
19. Delta Geotourism Incentive Act for projects starting on or after July 1, 2017. Act 470
of 2019 reduces the minimum investment necessary
The Delta Geotourism Incentive Act of 2007 as amend- for non-income producing properties to $5,000 for tax
ed allows an income tax credit equal to 25% of an in- years beginning on or after January 1, 2019.
vestment of up to $250,000 in a geotourism supporting
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Act 855 of 2019 provides for a Major Historic Reha- 23. Arkansas Wood Energy Products and For-
bilitation Credit equal to 25% of qualified rehabilitation est Maintenance Credit
incurred by the owner to complete a certified rehabilita-
tion approved by the Department of Arkansas Heritage. Act 594 of 2021 provides for an income tax credit equal
The minimum investment for the credit is $1,500,000. to 30% of the cost of qualifying equipment with a mini-
The Department of Arkansas Heritage may charge an mum investment in excess of $50 million required in a
application fee of up to 1% of the amount of the credit project approved by the Arkansas Economic Develop-
and may charge a fee of 0.75% of the amount of any ment Commission with a signed economic incentive
credit transferred. Applications for the credit must be agreement. Each project must create at least 100 new
made between July 1, 2020 and June 30, 2025. full-time jobs with an average salary of $60,000 per year.
Up to $5 million of the credit may be claimed each year,
Act 840 of 2021 amends ACA 26-51-2204 to increase and the State of Arkansas may purchase the tax credits
the maximum tax credits that may be approved in one at 80% of face value. Unused credits may be carried for-
year from $4 million to $8 million per fiscal year begin- ward in perpetuity until fully claimed. Act 594 is effective
ning with fiscal year 2022. for tax years beginning on or after 01/01/2021.

21. Arkansas Central Business Improvement 24. Motion Picture Credit
District Rehabilitation and Development In-
vestment Tax Credit Act 797 of 2021 provides for a rebate or tax credit for
approved film projects. The income tax credit or rebate
ACA 26-51-2407 amends Arkansas Code 26, Chapter is equal to 20% of all qualified production and post-
51 to add Subchapter 24 to establish an investment tax production costs for an approved project that spends
credit equal to 25% for a qualified rehabilitation or de- at least $200,000 in a six month period. An additional
velopment expenditure incurred for a qualified project 10% of payroll costs for full-time Arkansas residents,
up to the first $500,000 on income producing property or veterans, or veteran owned small businesses is al-
or $200,000 on non-income producing property with a lowed. The credit is limited to the first $500,000 of a
minimum investment of $30,000. The total credit will be highly compensated individual’s salary. The Arkansas
issued for up to $1,000,000 in any one fiscal year on a Economic Development Commission shall not approve
first come, first serve basis. The credit may be trans- more than $4 million in motion picture tax credits in any
ferred, sold, or assigned only one (1) time and will offset fiscal year. Unused credits may be carried forward for 5
up to 100% of the state income tax due. Any unused tax tax years, and unused credits may be transferred.
credit may carryforward for five (5) consecutive taxable
years or until exhausted, whichever occurs first. This 25. Steel Specialty Products Manufacturing
act will take effect only if the Chief Fiscal Officer of the Credit
State certifies that sufficient funds are available. The
credit will not be funded for tax year 2018. If it is deter- Act 895 of 2021 amends ACA 26-51-506 to provide a
mined that funding is available, the act will be effective tax credit equal to 30% of the cost of equipment includ-
for tax years beginning on or after January 1 of the year ing installation costs for an approved project that in-
following the certification and continue for a period of vests in excess of $200 million and employs at least 150
two (2) years. employees with an average salary of at least $75,000
per year. The maximum credit that may be claimed is
22. Delta Music Trail Credit $4 million if the total investment is $200 million to $275
million, $5 million if the total investment is $275 million
Act 1066 of 2019 provides for an income tax credit to $350 million, and $6.5 million if the investment is at
equal to the lesser of 100% of the cost or $25,000 for an least $350 million. The State of Arkansas has the op-
art project that promotes awareness and encourages tion to purchase the credits for 80% of face value. If the
enjoyment of the stories, biographies, and points of in- State fails to purchase credits the taxpayer or a trans-
terest in blues, rock and roll, country and country music feree may carry forward unused credits for 3 tax years.
throughout the Arkansas Delta. Taxpayers must apply The act is effective for tax years beginning on or after
for the credit with the Arkansas Delta Music Commis- 01/01/2021.
sion and the commission may not approve more than
$250,000 of expenses in any one calendar year. The
credit may offset 100% of the tax due and unused cred-
its may be carried forward up to five tax years.

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26. Philanthropic Investment in Arkansas 
Kids Scholarship Program Credit

Act 904 of 2021 provides for a tax credit equal to 100% 
of the eligible contributions to a scholarship granting or-
ganization. Total tax credits awarded shall not exceed
$2 million per calendar year, and unused credits may 
be carried forward for 3 tax years. Tax credit applica-
tions must be submitted to and approved by the Tax 
Credits and Special Refunds Section of the Department 
of Finance & Administration. The act is effective for tax 
years beginning on or after 01/01/2022.

27. Railroad Modernization Tax Credit

Act 967 of 2021 provides a tax credit for Class II and 
Class III railroad track maintenance. The credit is equal 
to 50% of railroad track maintenance expenditures up to
$5,000 per track mile. The credit claimed may not ex-
ceed the tax liability, and unused credits may be carried 
forward up to 5 tax years and may be transferred. Main-
tenance projects must be approved by the Department 
of Commerce before expenditures are incurred. Certi-
fication of the tax credits is issued by the Department 
of Finance & Administration. The act is effective for tax 
year beginning on or after 01/01/2021.

The Business and Incentive Tax Credit forms
and instructions may be obtained from:

       Department of Finance and 
       Administration Tax Credit/Special 
       Refunds Section
       P O Box 1272
       Little Rock, AR 72203-1272 
       or call (501) 682-7106
       website: www.dfa.arkansas.gov

NOTE:  On  any credit issued to a  taxpayer 
that is sold/ transferred to another taxpayer, 
the owner of the credit must contact the is-
suing agency and request a Transfer Docu-
ment.  The  issuing agency  will  send  a  copy 
of the approved trans- fer documents to the 
Tax Credit Section upon completion of the 
sale/transfer.  For  verification  purposes,  the 
taxpayer claiming the credit should attach a 
copy  of  the  approved  transfer  document to 
the return claiming credit.

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