Summary of 2019 Arkansas Tax Credits and Incentives Legislation

2019 was an active legislative session for economic development credits and incentives.  Notable changes include comprehensive revisions to the major state-level incentives and the expansion of local incentive powers to include retail and also sports complexes. 

Act 203 expands the 33% income tax credit for donations of machinery and equipment to certain educational institutions, so as to allow the 33% credit also for each cash donations for the purchase of new machinery or equipment. 

Act 213 expands the apprenticeship tax credit to apply to all apprentices, not just youth apprentices. The credit is the lesser of 10% of wages or $2,000.

Act 242 authorizes the Department of Workforce Services to provide employment data to the Arkansas Economic Development Commission.

Act 289 amends the procedural requirements for industrial revenue ("Act 9") bonds to require notice of actions regarding approval of such bonds to the county assessor, county tax collector, and county treasurer (in addition to existing notice requirements to the school district and DFA). Arkansas city or county industrial revenue bonds are commonly used to effectuate a property tax abatement incentive. 

Act 327 is a comprehensive, broadly positive revision of the Consolidated Incentive Act of 2003, which provides Arkansas's primary general business economic development incentives. Numerous changes include: expanding the definition of "eligible business," relaxing the qualification standards for Create Rebate (payroll incentive) in poorer counties, increasing the qualification standards for Tax Back (sales tax rebate) in wealthier counties, adding an extra 1% kicker to Advantage Arkansas and Create Rebate benefits for high-wage jobs, and making R&D credit requirements simpler and more stringent. AEDC intends for these changes to apply prospectively to new economic development incentive awards. Taxpayers entering into new incentive agreements should carefully consider the impact of these changes. 

Act 367 extends and makes technical corrections to the Arkansas film incentive program (the Digital Product and Motion Picture Industry Development Act of 2009), including specifying that the incentives are discretionary. 

Act 457 reduces the amount of premium tax that accident and health insurers may offset using the home office credit that is calculated based on qualifying Arkansas salaries and wages. The reduction phases in from the current cap of eighty percent of premium tax liability down to fifty percent of premium tax due in 2023. (This credit was the one credit identified by the Tax Reform Task Force for elimination or reduction.)

Act 470 lowers the threshold for renovation expenses to qualify under the historic rehabilitation tax credit, for non-income producing properties, from $25,000 in renovation expenses to $5,000. Income-producing properties continue to have a $25,000 minimum. Effective for tax years beginning on or after January 1, 2019.

Act 537 clarifies that a tax credit under the Equity Investment Incentive Tax Act (angel investor tax credit) may be sold once at any time before the tax credit is exhausted or expires.

Act 798 adds retail to the list of qualifying economic development projects for which localities can provide support and incentives.

Act 855 creates the Major Historic Rehabilitation Income Tax Credit, a discretionary credit calculated as 25% of qualified rehabilitation expenses. The transferable credit may offset up to 100% of a taxpayer's income tax or insurance premium tax. Applications for credits will open beginning July 1, 2020.

Act 910, the Transformation and Efficiencies Act of 2019, is a comprehensive reorganization of Arkansas government to place various agencies under several cabinet-level departments. The AEDC will become part of the Department of Commerce. 

Act 1066 creates the Arkansas Delta Music Trail Act to promote tourism and includes an income tax credit incentive equal to the lesser of 100% of the total qualified expenses or $25,000. Unused credits may be carried forward for five years. Qualified expenses included the cost of supplies and an artist's labor in creating the art project.

Act 1072 adds sports complexes to the list of qualifying economic development projects for which localities can provide support and incentives. 

Act 1073 makes water conservation credits transferable for tax years beginning on or after January 1, 2020.

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