The State of Arkansas is a profitable choice for locating or expanding a business - not only because of our tax structure, location, and workforce, but also because of our nationally competitive incentive program. The Arkansas Economic Development Commission (AEDC) can tailor an incentive package to your business's specific needs through cost-benefit analysis.
During the 2003 legislative session, laws regarding Arkansas incentives were changed to base incentives on payroll rather than number of jobs. The incentives are also now determined by the location of the new facility, and take into account that county's poverty rate, unemployment, per capita income and population growth. The following new incentives were added and can be combined with other incentives:
Businesses that have been established in Arkansas for 2 years or longer that invest $5 million or more in equipment, new construction, expansion or modernization may be eligible for a sales and use tax credit. The amount of the authorized credit will be equal to ½% above the state sales and use tax rate in affect at the time the incentive agreement is signed. Eligible businesses include manufacturers, some computer-related businesses, motion picture production companies, distribution centers, or scientific and technical services businesses.
Eligible employers such as manufacturers, some computer-related businesses, motion picture production companies, distribution centers, or scientific and technical services businesses may receive credit on state income tax equal to between 1% and 4% for 5 years. The amount of the tax credit depends on the county in which the business locates, and applies only to employees who are Arkansas taxpayers.
The ArkPlus program provides state income tax credits of 10% of the amount of the total new investment in construction or expansion. The business must have a payroll of at least $1 million in new, full-time employees within 24 months of the date the incentive agreement is signed. Eligible businesses include manufacturers, some computer businesses, motion picture production businesses, distribution centers, national or regional headquarters, and office sector businesses, as well as businesses involved in commercial physical and biological research or scientific and technical services.
The following discretionary incentives can be negotiated by ADED in highly competitive situations:
New or expanding businesses may be offered a rebate of between 3.9% and 5% of annual payroll for new, full-time employees. A minimum of $2 million on payroll is required. Eligible business include manufacturers, some computer businesses, motion picture production businesses, distribution centers, national or regional headquarters, and office sector businesses, as well as businesses involved in commercial physical and biological research or scientific and technical services.
Start-up businesses in emerging technology sectors may be eligible for a transferable income tax credit equal to 10 percent of payroll for up to five years, a transferable income tax credit equal to 33 percent of eligible research and development costs, and sales and use tax refunds on building materials and necessary equipment. These sectors include:
Advanced materials and manufacturing systems
Agriculture, food and environmental sciences
Biotechnology, bioengineering and life sciences
Childcare Facility Tax Incentives
Employers that operate or contract the operations of a licensed childcare center for their employees may choose between two state income tax credit options: 1) a credit of 3.9% of the total annual payroll of the employees working in the child care facility, or 2) a one-time $5,000 income tax credit for the first year. Businesses may also receive a refund on sales and use taxes on construction materials and furnishings purchased to equip an approved childcare facility.
Recycling Equipment Tax Credit
Businesses may be eligible to receive an income tax credit for equipment purchases used exclusively for the reduction, reuse, or recycling of solid waste material for commercial purposes. The tax credit may be 30% of the cost of the equipment as approved by the Arkansas Department of Environmental Quality.
Customized Training Incentives
The Business and Industry Training Program (BITP) was designed for new and expanding companies that include manufacturing firms, national regional headquarters, distribution centers, or knowledge-based companies. The BITP has three emphases: recruiting workers, pre-employment training, and on-the-job training. For eligible businesses that use a state-supported educational institution, the participating business is provided direct funding or income tax credits up to 50% of the cost of training or up to $60 per instructional hour, whichever is less. Eligible businesses that use their own employees or company-paid consultants to deliver the classroom training are offered an income tax credit of $15 per instructional hour.
Tuition Reimbursement Tax Credit
Arkansas provides a 30% income tax credit to eligible companies for reimbursements they make to employees for approved educational expenses. The employees must attend an accredited Arkansas post-secondary institution.
Businesses that pay for research performed at Arkansas universities may receive a 33% income tax credit. Eligible businesses performing in-house research may receive a 10% income tax credit. Targeted businesses may also earn income tax credits equal to 33% of approved expenses for in-house research.
Additional, more specialized incentives may be considered for specific program emphases such as:
Motion Picture Incentives
Qualifying motion picture production companies spending more than $500,000 within 6 months, or $1 million within 12 months, for the filming or production of a film, video, commercial, documentary, or television show may receive a refund of sales and use taxes on qualified expenses.
State sales tax credits and corporate income tax credits are available for businesses operating approved tourism attractions. The minimum project costs must be $500,000. ADED will determine the eligibility of the business for the tax credits.