TAX INCENTIVE PROGRAMS

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|  Investment and Job Creation Incentives  |  Advantage Arkansas  |  Tax Back  |  InvestArk  |

|  Discretionary Incentives  |  Create Rebate Program  |  ArkPlus  |  Targeted Businesses  |  Sales Tax Refund  |

|  Payroll Income Tax Credit  |  Targeted In-House R & D  |

|  Specialized Incentives  |  Child Care Facility Tax Incentive  |  Recycling Equipment Tax Credit  |

|  Tourism Development  |  CDC Resource Guides Home  |  CDCOnline Home  |

Arkansas' various incentives are nationally competitive, understandable, and easy to use. The Arkansas Department of Economic Development will focus on your business's specific needs, conduct a cost-benefit analysis and design a tailored incentive package.  For more information contact Arkansas Department of Economic Development, 1-800-ARKANSAS, or (501) 682-1121, http://arkansasedc.com/

Investment and Job Creation Incentives

Advantage Arkansas

Advantage Arkansas offers a state income tax credit for job creation based on the payroll of new, full-time, permanent employees hired as a result of the project. The payroll threshold for qualifying for Advantage Arkansas and the benefit received depends on the tier in which the business locates or expands.   Arkansas is segmented into four tiers based on poverty rate, population growth, per capita income and unemployment rate.  The income tax credit is earned each tax year for a period of five years. The income tax credit cannot offset more than 50 percent of a business' income tax liability in any one year and may be carried forward for nine years beyond the tax year in which the credit was first earned. The credit begins in the tax year in which the new employees are hired. Employees must be Arkansas taxpayers. The Advantage Arkansas incentive is available for non-retail businesses engaged in commerce for profit that fall into one or more of the following categories:

Contact: 800-ARKANSAS or (501) 682-5277, Advantage Arkansas

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Tax Back

Advantage Arkansas participants investing at least $100,000 are eligible for the Tax Back program. This program provides a refund of sales and use taxes for building materials and taxable machinery and equipment associated with the approved project.

The business must sign a job-creation agreement under the Advantage Arkansas program within 24 months of signing the Tax Back agreement.  Applicants for Tax Back must obtain an endorsement resolution from the local governing authority that authorizes the refund of its local taxes. Applicants must meet the same qualification criteria as Advantage Arkansas and must be approved by the Arkansas Economic Development Commission. Contact: 800-ARKANSAS or (501) 682-5277, Tax Back

InvestArk

InvestArk is a sales and use tax credit program available to businesses established in Arkansas for two years or longer that invests $5 million or more in plant or equipment for new construction, expansion or modernization.  The business must be approved for the program prior to beginning construction. The business must obtain a direct-pay sales and use tax permit from the State of Arkansas. Total project expenditures must be incurred within four years of the project plan approval. All projects will be audited upon completion to confirm the tax credits.

The sales and use tax credit earned is a percentage of eligible project cost. A credit against the business's state sales and use tax liability is authorized equal to % above (currently equal to 6.5%) the state sales and use tax rate in effect at the time a financial incentive agreement is signed.  The credit may be used to offset up to 50% of the business' sales and use tax liability on taxable purchases. The credit is earned in the year the eligible expenditure is made and can be applied against the business's state direct-pay sales and use tax liability in the year following the year of expenditure. If the entire credit cannot be used, the remainder may be carried forward for five years.

The InvestArk Arkansas incentive is available for non-retail businesses engaged in commerce for profit that fall into one or more of the following categories:

Contact: 800-ARKANSAS or (501) 682-5277, Invest Arkansas

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Discretionary Incentives  (All Incentive Programs listed under this category are negotiated by the Arkansas Department of Economic Development in highly competitive situations)

Create Rebate Program

The Create Rebate program provides annual cash payments based on a company's annual payroll for new, full-time, permanent employees. The benefit depends on the tier in which the company locates.  In each tier of counties, a minimum payroll of new, full-time, permanent employees of $2 million annually is required. The minimum payroll threshold must be met.  Incentives are available after the business has fulfilled the minimum payroll requirements and certified the payroll amount to the Arkansas Department of Finance and Administration, within 24 months of the date of the financial agreement.  The program is available for non-retail businesses engaged in commerce for profit that fall into select categories.  Contact: 800-ARKANSAS or (501) 682-5277, Create Rebate Program

ArkPlus

ArkPlus is a state income tax credit program that provides tax credits of 10% of the total investment in a new location or expansion project.  ArkPlus requires both a minimum investment and a minimum payroll of new, full-time, permanent employees hired as a result of the project, depending on the tier in which the business locates. Arkansas is segmented into four tiers based on poverty rate, population growth, per capita income and unemployment rate. Total project expenditures must be incurred within four years of the date the project is approved by AEDC. New, full-time, permanent employees must be hired within 24 months of the date the financial agreement is signed.  The income tax credits may be used to offset 50% of the Arkansas income tax liability in the tax year the credit is earned. Any unused credits may be carried forward for nine years beyond the tax year in which the credit was first earned.  The program is available for non-retail businesses engaged in commerce for profit that fall into select categories.  Contact: 800-ARKANSAS or (501) 682-5277, ArkPlus

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Targeted Businesses

These discretionary incentives are for start-up companies in emerging sectors:

The income tax credits earned under this program may be sold upon approval by the Economic Development Commission.

Companies must meet the following requirements and do business in one of the six targeted emerging technology sectors listed below:

Emerging technology sectors are:

If a business falls within one or more of the targeted areas, additional eligibility criteria are:

If a business meets all of the above criteria, the director of the Economic Development Commission may offer the business one or more of the following incentives:

Sales Tax Refund

This incentive program provides a refund of sales and use taxes paid on the purchases of building materials and taxable machinery and equipment associated with the approved project for targeted businesses, as defined above. This incentive is not available unless the business has been offered and signed an incentive agreement under the job creation income tax credit for targeted business’ program.  The application for a sales and use tax refund must be accompanied by an endorsement resolution from the local governing authority (city council or quorum court) that authorizes the refund of its local taxes.  Contact: 800-ARKANSAS or (501) 682-5277.

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Payroll Income Tax Credit

The payroll income tax credit for targeted businesses is offered to assist with the start-up of businesses in targeted sectors that pay significantly more than the state or county average wage of the county in which the business locates. This incentive is offered only at the discretion of the Director.  In order to qualify for this incentive, the business must be included in one of six targeted business sectors as defined above. The benefit for a qualifying targeted business is a 10% income tax credit based on its annual payroll, with a cap of $100,000 per year in earned income tax credits for a business that qualifies and is approved for this incentive.  The incentive may be offered for a period not to exceed five years.  Contact: 800-ARKANSAS or (501) 682-5277.

Targeted In-House R & D

Businesses deemed by the commission to fit within the six business sectors classified as “targeted businesses" may enter into a financial incentive agreement for income tax credits based on qualified research and development expenditures. An eligible business may be approved for an income tax credit each year equal to 33% of the qualified research and development expenditures incurred each year for the first five years of the financial incentive agreement. This incentive is a discretionary incentive and is offered only at the discretion of the Director. The application for this income tax credit shall include a project plan, which clearly identifies the intent of the project, the expenditures planned, the start and end dates of the project, and an estimate of total project costs. The Department is partnering with the Arkansas Science and Technology Authority which will review all applications for R&D tax credits and monitor projects if appropriate. The Commission will adhere to some of the federal guidelines for qualifying research for federal tax credits as a guide in determining the eligibility for this state income tax credit.  Qualified research expenditures include in-house expenses for taxable wages paid and supplies used in the conduct of qualified research.  Contact: 800-ARKANSAS or (501) 682-5277, Targeted In-House R&D

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Specialized Incentives

Child Care Facility Tax Incentive

Arkansas offers a tax incentive for businesses that provide child care for their employees.  A business may choose between two state income tax credit options: (1) a credit of 3.9 percent of the total annual payroll of the employees working in the child care facility, or (2) a one-time $5,000 income tax credit for the first year. The income tax credit may be carried forward for two years or until used entirely, whichever occurs first.

In addition to either option, businesses may receive a refund on sales and use taxes on construction materials and furnishings purchased to equip an approved child care facility.  To qualify for these incentives, the business must be approved to operate an early child care program. The business may choose to operate the facility or contract the operations.

http://arkansasedc.com/business-development/incentives/child-care-facility-tax-incentive.aspx

Recycling Equipment Tax Credit

Allows Arkansas taxpayers to receive an income tax credit for the purchase of equipment used exclusively for reduction, reuse, or recycling of solid waste material for commercial purposes, whether or not for profit and the cost of installation of such equipment by outside contractors. Such equipment must be used in the collection, separation, processing, modification, conversion, treatment or manufacturing of products containing at least 50 percent recovered materials of which at least 10 percent is post-consumer waste.  The amount of the tax credit shall equal 30 percent of the cost of eligible* equipment and installation costs. Credits may be carried over a maximum of three consecutive years following the taxable year in which the credits accrued.  Taxpayers receiving credit under this Act for the purchase of machinery and equipment shall not be entitled to any other state or local tax credit or deduction based on the purchase of the machinery or equipment, except normal depreciation. Note: Eligibility is determined by the Arkansas Department of Environmental Quality.

http://arkansasedc.com/business-development/incentives/recycling-equipment-tax-credit.aspx

Tourism Development

The Arkansas Tourism Development Act provides state sales and use tax credits and income tax credits to businesses initiating approved tourism attraction projects.  Sales tax credits shall be determined in accordance with the following criteria:

Eligible minimum project costs must be $1 million, except in high unemployment counties, where it is $500,000. The sales tax credits are calculated based upon 15% of eligible project cost for projects spending more than $1 million; credits are 25% of eligible project cost for the projects in high unemployment counties.

The sales tax credit may be applied against the business's increased sales tax liability that results from the project.  Other review criteria may be requested by the Arkansas Economic Development Commission to determine whether the tourism attraction project meets the intent of the Act.  Additionally, eligible businesses may receive a state income tax credit equal to 4% of the annual payroll of each new, full-time, permanent employee.  The income tax credits begin in the year in which the new employees are hired. Any unused portion of the credit may be carried forward against corporate income tax for the succeeding nine years.

http://arkansasedc.com/business-development/incentives/tourism-development.aspx?id=1193