State Tax Structure
Labor Union Members
2005: 4.8% statewide; Arkansas is a right-to-work state.
State Franchise Tax
2005: .0027 of capital stock
The Arkansas corporate franchise tax is an annual tax calculated by multiplying the number of outstanding capital shares by the par values of those shares. This value is then multiplied by the percentage of shares applicable to Arkansas. The resulting figure is then multiplied by .0027 to obtain the franchise tax. Corporations without authorized capital stock pay an annual tax of $100 regardless of valuation.
Property Tax
There is no state property tax. Local property tax rates vary by community. To calculate property tax using millage rate. Use a 20 percent assessment ratio of fair Market Value.
State Sales/Use Tax
2005: 6.0%
Unemployment Insurance Rate (New Businesses)
2005: 3.7%
Contribution rates range between 0.9% and 10.8%
Unemployment Insurance Taxable Wage
2005:$10,000
State Incentives
Incentives, Financing
See expanded description.
State tax Deficit
Arkansas' constitution requires the state to maintain a balanced budget. As a result, there is no possibility of the state's incurring a tax deficit.
TOOLS: INCENTIVES
Arkansas' incentives are nationally competitive, understandable and easy to use. The Arkansas Department of Economic Development focuses on a company's specific needs, conducts a cost-benefit analysis and designs a tailored incentive package.
Because Arkansas' incentives are performance-based, they are not paid until the company fulfills investment and employment commitments.
In November 2004, Arkansas voters overwhelmingly approved an amendment to the state constitution that will help attract super projects. The state can now issue general obligation bonds to build infrastructure, such as rail, roads and water lines, for projects that create 500 jobs and $500 million in investment. The maximum amount of bonds that can be issued is equal to 5 percent of state general revenues during the most recent year.
ADED and the Arkansas Development Finance Authority must provide an economic impact analysis on the proposed super project to the governor and legislature before a decision to issue bonds is made.
Arkansas incentives are based on payroll instead of number of jobs and are determined according to location. Counties are divided into four tiers, based on poverty rate, unemployment, per capita income and population growth. The tiers are assigned annually on July 1, based on the previous year's statistics.
In general, companies that qualify for Arkansas incentives include manufacturers in NAICS codes 31-33 and businesses primarily engaged in commercial physical or biological research; computer-related activities; motion-picture production; and scientific/technical services. Office sector, corporate or regional headquarters, and trucking/distribution centers are also eligible. Companies must have no retail public sales and derive at least 75 percent of their revenue from out-of-state.
ARKANSAS' BASIC INCENTIVES ARE:
Advantage Arkansas (income tax credit)
Advantage Arkansas provides a credit on state income tax equal to between 1 percent and 4 percent of new payroll for five years, depending on the tier of the county in which the business locates.
Tax Back (sales and use tax refund)
Advantage Arkansas participants can also receive a refund of sales and use taxes for building materials and taxable equipment connected with the eligible project. Tax Back applicants must obtain an endorsement resolution from the local governing authority.
InvestArk (sales and use tax credit)
Companies that have been in Arkansas for at least two years are eligible for InvestArk, a sales and tax credit, if they invest $5 million or more in plant or equipment for new construction expansion or modernization.
Create Rebate (payroll rebate negotiated by ADED in highly competitive situations)
Companies that have a minimum annual payroll of $2 million for new, full-time, permanent employees may receive a payroll rebate ranging from 3.9 percent in Tier 1 counties to 5 percent in Tier 4 counties.
ArkPlus (state income tax credit negotiated by ADED in highly competitive situations)
ArkPlus offers a state income tax credit of 10 percent of the total amount of a company's new investment of at least $2 million to $5 million and a payroll of at lease $1 million to $2 million, depending on the county tier.
Research and Development (income tax credit)
Income tax credits of 33 percent are available for taxpayers who pay for research performed at Arkansas universities. For companies performing in-house research, credits from 10 percent to 33 percent are available.
Targeted Businesses (transferable income tax credit; sales and use tax credit)
Start-up companies in emerging sectors may be eligible for a transferable income tax credit equal to 10 percent of patrol for up to five years, a transferable income tax credit equal to 33 percent of eligible research and development cost, and sales and use tax refunds on building materials and necessary equipment. Emerging technology sectors include:
- Advanced materials and manufacturing systems
- Agriculture, food and environmental sciences
- Biotechnology, bioengineering and life sciences
ADED has two types of Customized Training Incentives:
The Business and Industry Training Program provides pre-employment training for Arkansas workers.
The Existing Workforce Training Program provides financial assistance to Arkansas' businesses and eligible consortia of businesses to upgrade the skills of their current workforce.
Other specialized incentives include:
- Non-Profit Incentive Act of 2005
- Tuition Reimbursement Tax Credit
- Recycling Equipment Tax Credit
- Childcare Facility Tax Incentive
- Public Roads Improvement Credit
More information is available on the ADED Web site. www. 1-800-ARKANSAS.com
