HB1500
To Enhance Economic Competitiveness By Repealing The Throwback Rule.
AI-Generated Summary
This bill proposes to repeal the "throwback rule" for income tax apportionment in Arkansas. The throwback rule currently requires multistate businesses to include sales in their Arkansas income if they are shipped from Arkansas to a state where they are not subject to tax. The bill's legislative findings state that this rule burdens job creation and investment, hindering economic competitiveness. To address this, the bill amends existing Arkansas Code provisions related to the division of income under the Multistate Tax Compact and sales of tangible personal property. Starting with tax years beginning January 1, 2025, the bill gradually phases out the application of the throwback rule. By tax years beginning on or after January 1, 2030, sales shipped from Arkansas to a state where the taxpayer is not taxable will be sourced entirely outside of Arkansas. The stated intent is to encourage investment and job creation by multistate enterprises within the state. The effective date for these changes is for tax years beginning on or after January 1, 2025.
Potential Impact Analysis
Who Might Benefit?
Multistate businesses that currently ship goods from Arkansas to states where they are not taxable would be the primary beneficiaries. By repealing the throwback rule, these businesses will no longer have to attribute such sales to Arkansas for income tax purposes. This is intended to reduce their tax liability in Arkansas and make the state a more attractive location for investment and job creation. The state's economy, through potential increased investment and job growth, is also presented as a beneficiary.
Who Might Suffer?
The primary entity that would be negatively impacted by this bill is the state of Arkansas itself, specifically its tax revenue. By no longer allowing the state to "throwback" sales to Arkansas when a company is not taxable in the destination state, the tax base for corporate income tax will likely decrease. This reduction in tax revenue could potentially lead to a need for increased taxes elsewhere or a reduction in state services, although the bill's proponents argue that increased economic activity will offset this loss.