HB1500
To Enhance Economic Competitiveness By Repealing The Throwback Rule.
Last Action (May 5, 2025): Died in House Committee at Sine Die adjournment.
Sponsors
AI-Generated Summary
House Bill 1500 seeks to phase out the 'throwback rule' currently applied to income tax apportionment for multistate businesses operating in Arkansas. The throwback rule currently requires companies to report certain sales originating in Arkansas as in-state sales for tax purposes if the company is not taxable in the destination state. This bill provides a multi-year schedule starting in 2024 to gradually reduce the percentage of these sales considered 'in-state,' ultimately sourcing 100% of such sales outside of Arkansas by January 1, 2030. The stated legislative intent is to improve Arkansas's economic competitiveness by reducing the tax burden on businesses that manufacture or store goods in the state but sell them elsewhere. This move aligns with recommendations made by the Arkansas Tax Reform and Relief Legislative Task Force.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries are multistate corporations and businesses that maintain inventory, warehouses, or production facilities within Arkansas but conduct significant sales in states where they do not have a sufficient tax nexus. These entities will benefit from a lower overall state income tax liability as the proportion of sales considered 'in-state' decreases, thereby incentivizing them to expand or maintain their logistics and manufacturing footprint within Arkansas.
Who Might Suffer?
The primary entity negatively impacted is the State of Arkansas itself, as the repeal of the throwback rule will lead to a reduction in corporate income tax revenue. This decrease in tax collections could potentially result in less funding available for public services, infrastructure, or state programs unless offset by other economic growth or tax policy changes. Additionally, local taxpayers or smaller, strictly in-state businesses might face a heavier relative tax burden if the state compensates for the lost revenue by increasing other taxes or fees.
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