Arkansas Tax Reform Update: SB576 Amended to Add Rate Cut and Drop Throwback Repeal

The major Arkansas tax reform package, Senate Bill 576, passed out of committee as amended and is heading to the floor of the Senate this week.  We covered the package in detail previously. The amendment's changes are as follows:

  1. Adding a corporate income tax rate cut from 6.5% to 5.9%;
  2. Having the NOL carryforward extension be to 10 years (instead of 20);
  3. Eliminating the repeal of the throwback rule (i.e., the throwback rule would be retained); and
  4. Providing safe harbors for marketplace facilitators when relying on information from marketplace sellers.

The overall effect is to broaden the number of taxpayers benefiting from the package.  The corporate rate cut will help all corporate businesses, including purely intrastate C corporations.  The rate cut is phased in over two years, with a 6.2% top rate for tax years beginning on or after January 1, 2021, and then the 5.9% top rate for tax years beginning on or after January 1, 2022.  NOLs would phase in with an eight-year carryforward for losses incurred in the tax year beginning January 1, 2020, and then a ten-year carryforward for losses incurred in tax years beginning on or after January 1, 2021.  The bill continues to provide for single sales factor apportionment.

Expect this bill to move quickly in the coming two weeks.

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