BusIness GuIde

INCENTIVESECONOMIC DEVELOPMENTArkansas and must be approved by the ArkansasEconomic Development Commission.InvestArk — Sales and UseTax CreditInvestArk is a sales and use tax credit programavailable to businesses established in Arkansasfor two years or longer that invest $5 million ormore in plant or equipment for new construction,expansion or modernization.The business must be approved for the programbefore beginning construction. The businessmust obtain a direct-pay sales and use tax permitfrom the state of Arkansas. Total project expendituresmust be incurred within four years ofthe project plan approval. All projects will be auditedon completion to confirm the tax credits.The sales and use tax credit earned is a percentageof eligible project cost. A credit against thebusiness' state sales and use tax liability is authorizedequal to 1/2 percent above the state salesand use tax rate in effect at the time a financialincentive agreement is signed.The credit may be used to offset up to 50 percentof the business' sales and use tax liability ontaxable purchases. The credit is earned in theyear the eligible expenditure is made and canbe applied against the business' state direct-paysales and use tax liability in the year followingthe year of expenditure. If the entire creditcannot be used, the remainder may be carriedforward for five years.Create Rebate ProgramThe Create Rebate Program is offered at the discretionof the director of the Arkansas EconomicDevelopment Commission in highly competitivesituations. It provides annual cash paymentsbased on a company's annual payroll for new,full-time, permanent employees. The benefit dependson the tier in which the company locates.Benefit Based on Payrollof New, Full-time,Tier Permanent Employees1 3.9%2 4.25%3 4.5%4 5.0%In each tier of counties, a minimum payroll ofnew, full-time, permanent employees of $2million annually is required. The minimumpayroll threshold must be met.Incentives are available after the business hasfulfilled the minimum payroll requirementsand certified the payroll amount to the ArkansasDepartment of Finance and Administrationwithin 24 months of the date of the financialagreement.The state offers incentives to eligible businesses that contract with Arkansas colleges in performing research.ArkPlusArkPlus is also only offered at the discretion ofthe director of the Arkansas Economic DevelopmentCommission in highly competitive situations.It is a state income tax credit program thatprovides tax credits of 10 percent of the total investmentin a new location or expansion project.ArkPlus requires both a minimum investmentand a minimum payroll of new, full-time, permanentemployees hired as a result of the project,depending on the tier in which the businesslocates. Arkansas is segmented into four tiersbased on poverty rate, population growth, percapita income and unemployment rate.Total project expenditures must be incurredwithin four years of the date the project is approvedby the AEDC. New, full-time, permanentemployees must be hired within 24 monthsof the date the financial agreement is signed.The income tax credits may be used to offset 50percent of the Arkansas income tax liability inthe tax year the credit is earned. Any unusedcredits may be carried forward for nine yearsTier Minimum Investment Minimum Payroll1 $5,000,000 $2,000,0002 $3,750,000 $1,500,0003 $3,000,000 $1,200,0004 $2,000,000 $800,000beyond the tax year in which the credit wasfirst earned.Payment in Lieu of PropertyTaxes (PILOT)Real and personal property financed by revenuebonds and general obligation bonds may beexempt from property taxes during the leaseamortizationperiod in which a local governmentretains title to the property. Paymentsby businesses to local governments in lieu ofproperty taxes are generally encouraged andnegotiated between the parties involved.The negotiated payment in lieu of property taxesshall not be less than 35 percent of the propertytaxes that would have been paid if the propertywere on the tax rolls.Free Port Law of ArkansasArkansas’s Free Port Law applies to finished inventoriesmaintained by manufacturers withinthe state and to goods stored in warehouses intransit to destinations outside the state.This law provides that all goods manufacturedin the state and stored for shipment outsideArkansas shall not be assessed fortaxation in the state.Also covered in this tax exemption aregoods that are moving through thestate and may be stored in a warehouse,dock, etc., and are in transit toa destination outside Arkansas.82 2009 Business Guide Little Rock Regional Chamber of Commerce