HB1216
To Create The Free Market Zones Act; And To Exempt A Business Located In An Opportunity Zone From The Income Tax, The Corporate Franchise Tax, And The Elective Pass-through Entity Tax.
Last Action (May 5, 2025): Died in House Committee at Sine Die adjournment.
Sponsors
AI-Generated Summary
House Bill 1216, titled the 'Free Market Zones Act,' proposes significant tax relief for business entities that locate within federally designated 'opportunity zones' in Arkansas. Specifically, the bill provides exemptions from state income tax, corporate franchise tax, and the elective pass-through entity tax for qualifying businesses. To qualify, a business must establish operations within a designated opportunity zone census tract on or after the bill's effective date of January 1, 2025. The bill also repeals previous code provisions regarding the adoption of federal opportunity zone definitions, replacing them with the new state-level exemptions. The stated goal is to incentivize economic development within these historically underinvested or economically distressed census tracts.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries are business owners and corporations that choose to relocate or establish new operations within the designated Arkansas opportunity zones. These entities benefit from reduced operational costs due to the elimination of state income, franchise, and pass-through entity taxes, which may incentivize business expansion and job creation in these specific geographic areas.
Who Might Suffer?
The primary entity negatively impacted is the State of Arkansas, which would experience a reduction in general tax revenue that would otherwise be collected from these businesses. Additionally, taxpayers and public services that rely on state tax funding could be indirectly impacted if the loss of revenue necessitates budget cuts or shifts in fiscal policy to compensate for the tax expenditures.
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