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5/8/2019 Advocacy

Update on the 92nd General Assembly

The 92nd General Assembly of the Arkansas Legislature wrapped up last month, and a number of new laws were passed that were beneficial to small business. The bill with the most impact, Senate Bill 576, passed in the final days of the session and included a number of provisions, 3 of which we’ll highlight here. 

First, and most notably, it lowered the top corporate income tax rate from 6.5% to 5.9% by 2022 (dropping it to 6.2% in 2021 and 5.9% in 2022). This not only saves money for businesses that can then reinvest, but it also makes Arkansas more attractive for companies looking to locate to Arkansas.

Additionally, Senate Bill 576 included an e-commerce fairness provision that levels the playing field to the benefit of local bricks-and-mortar retailers as they compete against out-of-state online retailers. For those online sellers whose Arkansas-bases transactions exceed $100,000 in total value or surpass 200 individual transactions, they must now collect the sales taxes owed on those transactions and remit them to the state of Arkansas. This is not a new tax burden, these represent taxes that were already owed but have typically not been paid, as the burden was on the buyer to submit payment. Thanks to a U.S. Supreme Court ruling last year, the state is no longer prohibited from imposing such a requirement on an out-of-state business. Arkansas will now require the seller to collected the taxes at the point of sale just as is already required for in-state businesses, eliminating the disadvantage faced by local businesses.

A third provision of Senate Bill 576 was the extension of the net operating loss carry-forward period from 5 years to 10 years. Previously, if your business has an unprofitable year, that loss co be carried forward to offset taxable income in a profitable year, but only for up to 5 years into the future. Arkansas was tied with Rhode Island for shortest carry-forward period in the nation. Arkansas will now phase in a 10-year period. Losses incurred in 2020 will be able to be carried forward for up to 8 years, and losses incurred beginning in 2021 will get a full 10-year window.