Arkansas Credits and Incentives

As we’ve mentioned before, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

We were recently asked about credits and incentives in Arkansas. I was able to speak with some Arkansas economic development professionals and learned some of their details (Arkansas EDC site click here).

Before we get started, let’s cover a sensitive topic:  In 2007, the Arkansas Legislature passed a non-binding resolution declaring that the proper way to punctuate the possessive form of the state’s name ends with apostrophe-S: “Arkansas’s,” and not apostrophe-only, as many newspapers write it. So a word to the wise . . .

Arkansas’s main tax credits and incentives are meant to encourage new jobs within the state.  Incentives and credits are available to a wide range of targeted industries that include manufacturing, distribution, logistics, information technology, motion picture production, headquarters facilities, and others.

Arkansas’s credits and incentives range in complexity and are typically more generous than other states.

Arkansas’s job-creation incentives are based on payroll and use a tier system based on poverty rate, unemployment rate, per capita personal income and population growth (see Arkansas Incentives Tier Map and Tables here).

Advantage Arkansas offers a state income tax credit for job creation based on the payroll of new, full-time, permanent employees hired as a result of the project, earned over five years, offsets up to 50% of yearly income tax liability, and has a nine year carry forward.

ArkPlus is a state income tax credit program that provides tax credits of 10% of the total investment in a new location or expansion project. This discretionary incentive is offered in highly competitive situations.

Create Rebate (Cash Rebate) incentives are negotiated and offered at the discretion of the Executive Director of the Arkansas Economic Development Commission. Annual cash payments, $2 million minimum new payroll.

Arkansas’s Research and Development incentive programs are intended to provide incentives for university-based research, in-house research, and research and development in start-up, technology-based enterprises. Tax credits under these programs may be carried forward for nine years and may offset up to 100% of a business’ tax liability in a given year.

The Equity Investment Incentive Program is a discretionary incentive targeted toward new, technology-based businesses paying wages in excess of the state or county average wage.

Other incentives include tax credits and payroll rebates for digital production/film projects, tourism development, childcare facilities, recycling equipment, employee tuition reimbursement, and even large non-profit projects, among others.

Sales and use tax exemptions, credits and refunds are also available for certain project types and industries.

Compared to Georgia, Arkansas has:

  • A wider range of incentive and credits.
  • A smaller range of companies eligible for most credits.
  • Similar qualifying activities and $$ incentive amounts.
  • BIG DIFFERENCE — most incentives must be pre-approved and carefully planned.

To summarize, Arkansas is very competitive with surrounding states, and on a per-capita basis attracts more new industry than most other states. However, existing Arkansas businesses must get permission from the state to receive benefits from most of the credits and incentive programs.

Do any of your clients have Arkansas connections?  If so, check out Arkansas’s opportunities.  And don’t forget those apostrophe-s’s!!

DaleSig