SB38
To Amend The Income Tax Provisions Concerning The Apportionment Of Business Income; And To Repeal The Throwback Rule.
Last Action (May 1, 2023): Sine Die adjournment
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AI-Generated Summary
Senate Bill 38 seeks to modify the way business income is apportioned for corporate income tax purposes in Arkansas. Specifically, the bill amends the criteria for determining when a taxpayer is considered taxable in another state. Furthermore, the bill repeals the 'throwback rule,' which previously required companies to include sales in their Arkansas taxable income if those sales were shipped to a state where the company was not subject to income tax. By removing this provision, the bill changes the calculation of corporate income tax by limiting the tax base to income directly associated with states where the business maintains a taxable presence. The changes are intended to apply to tax years beginning on or after January 1, 2023.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries of this bill are multi-state corporations operating within Arkansas. By repealing the throwback rule, these businesses will likely see a reduction in their state income tax liability, as they will no longer be required to attribute certain out-of-state sales to Arkansas for tax purposes. This change serves to make the Arkansas business climate more competitive for companies that manufacture goods within the state but sell them across various jurisdictions.
Who Might Suffer?
The primary entity negatively impacted by this bill is the State of Arkansas, as the repeal of the throwback rule is expected to result in a decrease in total state corporate income tax revenue. Depending on how these budget shortfalls are managed, the reduction in tax revenue could potentially lead to less funding for state-provided public services or require adjustments to other areas of the state's fiscal policy.
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