Arkansas Economic Development Directory

Arkansas State Incentives

TARGETED BUSINESS INCENTIVES: “Targeted businesses” may qualify for three special incentives designed to help new, knowledge-based businesses in their early years. These discretionary incentives are for start-up companies in emerging sectors (Advanced materials and manufacturing systems; Agriculture, food and environmental sciences; Biotechnology, bioengineering and life sciences; Information technology; Transportation logistics; and Bio-based products):

• A refund of sales and use taxes paid on the purchase of building materials and machinery and equipment associated with the approved project
• A transferable income tax credit equal to 10 percent of payroll for up to five years
• A transferable income tax credit equal to 33 percent of eligible research and development expenditures

Companies must be less than 5-years old; have an annual payroll between $100,000 and $1 million; show proof of an equity investment of at least $250,000; pay at least 150 percent of the lesser of the state or county average hourly wage where the business is located; and meet requisite payroll thresholds.

RESEARCH AND DEVELOPMENT INCENTIVES:

• University Based Research and Development – An eligible business that contracts with one or more Arkansas colleges or universities in performing research may qualify for a 33 percent income tax credit for qualified research expenditures.
• In-House Research and Development – New and existing eligible businesses that conduct “in-house” research that qualifies for federal research and development tax credits may qualify for in-house research income tax credits. The credit allowed is twenty percent of qualified research expenditures that exceed the base year, for a period of three years and the incremental increase in qualified research and expenditures for the succeeding two years. The income tax credit earned for in-house research and development may be used to offset 100 percent of the businesses’ state income tax liability.
• Research and Development in Area of Strategic Value – For qualifying businesses that invest in: 1) in-house research in an area of strategic value—fields having long-term economic or commercial value to the state, and that have been identified in the research and development plan; or 2) a research and development project offered by the Arkansas Science and Technology Authority. The income tax credit is equal to 33 percent of qualified research expenditures with a maximum of $50,000 per tax year.

TOURISM DEVELOPMENT INCENTIVES: 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 (Arkansas, Chicot, Clay, Crittenden, Dallas, Desha and Mississippi) where it is $500,000.
• Sales tax credits are calculated based upon 15 percent (25 percent in high unemployment counties) of eligible project cost for projects spending more than $1 million.
• Sales tax credit may be applied against the business’s increased sales tax liability resulting from the project.
• Other review criteria may be requested to determine whether the project meets the intent of the Act.

Additionally, eligible businesses may receive a state income tax credit equal to 4 percent 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.

NON-PROFIT INCENTIVES: Provides an incentive payment (payroll rebate) equal to 4 percent of the payroll of the new, full-time, permanent employees for a period of up to five years. Eligible non-profit organizations must create a payroll for new, full-time, permanent employees of at least $500,000 and pay an average wage in excess of 110 percent of the state or county average wage (whichever is less) in the county in which the organization locates or expands. In addition, the non-profit organization must receive 75 percent of its income from out-of-state sources. In addition to the payroll rebate, this program also provides a sales and use tax refund for eligible projects that invest a minimum of $250,000. The refund is eligible for taxes paid on construction materials, and machinery and equipment associated with the approved project.

TAX BACK (SALES & USE TAX REFUND): Advantage Arkansas participants investing at least $100,000 are eligible for 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.

INVESTARK (SALES & USE TAX CREDIT): Available to businesses established in Arkansas for at least two years that invest $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 or incurring eligible project costs. The business must obtain a direct-pay sales and use tax permit from the State of Arkansas. All project expenditures must be incurred within four (4) years of the project eligibility date. All projects will be audited upon completion to confirm the tax credits.

ADVANTAGE ARKANSAS (INCOME TAX CREDIT): 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 proposed average hourly wage of the new employees hired as a result of the project must be equal to or greater than the lowest county average hourly wage.

The Advantage Arkansas 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.

EQUITY INVESTMENT TAX CREDIT: Targeted toward new, technology-based businesses that pay wages in excess of the state or county average wage. This program allows an approved business to offer an income tax credit to investors purchasing an equity investment in the business. The income tax credits issued under this program are equal to 33 1/3 percent of the amount invested by an investor in an eligible business. The income tax credit earned may be used to offset 50 percent of the investor’s Arkansas income tax liability. Any unused credit may be carried forward for a period of nine years.

The following incentives may be offered at the discretion of the director of the Arkansas Economic Development Commission in highly competitive situations:

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. The incentive is available for non-retail businesses engaged in commerce for profit that fall into certain categories.

ARKPLUS: A state income tax credit program that provides tax credits of 10 percent 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’s counties are ranked 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 percent 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.