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.
AI-Generated Summary
This bill, titled the "Free Market Zones Act," aims to provide tax incentives for businesses locating within designated "opportunity zones" in Arkansas. These opportunity zones are defined as population census tracts in Arkansas designated as qualified opportunity zones under federal law as of January 1, 2019. If enacted, the bill would exempt businesses that relocate to these zones on or after the effective date from state income tax. It would also exempt such businesses from the corporate franchise tax. Furthermore, businesses subject to the Elective Pass-Through Entity Tax would also be exempt. The bill repeals existing language related to opportunity zones and revises definitions to align with the new exemptions. The proposed tax exemptions would apply to tax years beginning on or after January 1, 2025. The intent is to encourage business development and investment within these specific geographic areas.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries of this bill would be businesses that choose to relocate or establish operations within Arkansas's designated opportunity zones on or after the act's effective date. This includes entities required to file corporate income tax returns, as well as those subject to the elective pass-through entity tax. The act directly offers these businesses financial relief by exempting them from several state taxes, potentially making these areas more attractive for investment and economic activity.
Who Might Suffer?
The primary entities that could be negatively impacted by this bill are the state government of Arkansas and its taxpayers. By providing broad tax exemptions to businesses in opportunity zones, the state will experience a reduction in tax revenue. This loss of revenue could necessitate cuts in public services, increased taxes on other taxpayers, or a greater reliance on state borrowing. Furthermore, businesses not located within these designated zones might face a competitive disadvantage if businesses in the zones benefit from significant tax reductions.