HB1116
To Create The Remote And Mobile Work Modernization And Competitiveness Act; And To Provide Income Tax And Withholding Exemptions Related To Certain Remote And Mobile Employees And Nonresidents.
Last Action (May 5, 2025): Died in House Committee at Sine Die adjournment.
Sponsors
AI-Generated Summary
The Remote and Mobile Work Modernization and Competitiveness Act aims to simplify Arkansas tax laws for nonresident employees who work in the state temporarily. It provides an income tax exemption for individuals who earn $2,500 or less in Arkansas while working for an employer across multiple states. Additionally, the bill exempts employers from withholding income tax for employees who work in Arkansas for 15 days or fewer during a tax year. Professional athletes, entertainers, and public figures are explicitly excluded from these exemptions. The act also allows the Department of Finance and Administration to establish tax reciprocity agreements with other states, subject to Legislative Council approval. Finally, the bill provides safe harbor protections for employers from penalties related to withholding errors, provided they maintain accurate time and attendance records or rely on specific business documentation. The act is scheduled to take effect for tax years beginning on or after January 1, 2026.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries include out-of-state remote workers and business travelers who perform short-term duties in Arkansas, as they will face fewer tax filing requirements. Employers, particularly those with a mobile or hybrid workforce, also benefit from reduced administrative burdens, lower compliance costs, and increased legal certainty regarding tax withholding obligations for transient employees.
Who Might Suffer?
The primary entity negatively impacted is the State of Arkansas, which will experience a reduction in individual income tax revenue from nonresident workers who qualify for the new exemptions. Additionally, the Department of Finance and Administration may experience a slight increase in short-term administrative requirements as they develop, negotiate, and implement potential reciprocity agreements with other states.
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