Arkansas Senate Bill SB38

Arkansas 2023 Regular Session

• Introduced: 1/9/23
• Refer: 1/9/23
• Failed: 5/1/23

Caption

To Amend The Income Tax Provisions Concerning The Apportionment Of Business Income; And To Repeal The Throwback Rule.

Impact

The repeal of the throwback rule, in particular, is anticipated to have a profound impact on businesses that ship goods to other states but might not have a physical presence there. Under the current framework, businesses are taxed on sales that are 'thrown back' to Arkansas if they are not taxable in the destination state. Removing this rule aims to alleviate tax burdens for in-state businesses by eliminating taxes on sales made outside of Arkansas, fostering a more favorable business climate that could stimulate economic growth.

Overall

The discussions around SB38 underscore a broader debate in Arkansas regarding how best to structure tax policy in a way that promotes business growth while ensuring fair contributions to state revenue. As the bill progresses, the legislative body will need to consider the long-term implications of repealing the throwback rule and adjusting income apportionment measures, balancing economic development with the financial necessities of the state.

Summary

Senate Bill 38 is a legislative proposal aimed at amending the income tax provisions related to the apportionment of business income and repealing the 'throwback rule.' This bill represents a significant shift in how business income is taxed in Arkansas, particularly for businesses that sell products or provide services across state lines. One of the central features of the bill is its modification of the criteria that determine how a business's income is allocated and apportioned for tax purposes, which may influence the tax burdens on multi-state operations.

Contention

However, the changes proposed in SB38 may not be without controversy. Opponents might argue that while it may provide tax relief to some businesses, it could also lead to a decrease in tax revenue for the state, necessitating scrutiny of how such changes would affect funding for public services and infrastructure. Additionally, there are concerns about equity; businesses with more substantial revenues or those that conduct more interstate commerce may benefit disproportionately from these changes, potentially creating challenges for local businesses that do not operate outside state lines.