Arkansas 2023 Regular Session

Arkansas Senate Bill SB482 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		Stricken language would be deleted from and underlined language would be added to present law.
2		-	Act 658 of the Regular Session
3	2		JLL269 03/27/2023 9:59:57 AM JLL269
4	3
5	4		State of Arkansas 1
6	5		94th General Assembly A Bill 2
7	6		Regular Session, 2023 SENATE BILL 482 3
8	7		4
9	8		By: Senator J. Dismang 5
10	9		By: Representative Eaves 6
11	10		7
12	11		For An Act To Be Entitled 8
13	12		AN ACT TO AMEND THE INCOME TAX ACT OF 19 29; TO 9
14	13		PROVIDE AN APPORTION MENT FORMULA FOR THE INCOME OF 10
15	14		RAILROADS; TO AMEND THE MULTISTATE TAX C OMPACT AND 11
16	15		THE DIVISION OF INCO ME FOR TAX PURPOSES ACT 12
17	16		CONCERNING THE DIVIS ION OF INCOME FOR RA ILROADS; AND 13
18	17		FOR OTHER PURPOSES. 14
19	18		15
20	19		16
21	20		Subtitle 17
22	21		TO AMEND THE INCOME TAX ACT OF 1929; AND 18
23	22		TO PROVIDE AN APPORTIONMENT FORMULA FOR 19
24	23		THE INCOME OF RAILROADS. 20
25	24		21
26	25		22
27	26		BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 23
28	27		24
29	28		SECTION 1. DO NOT CODIFY. Legislative findings and intent. 25
30	29		(a) The General Assembly finds that: 26
31	30		(1) The Department of Finance and Administration promulgated 27
32	31		Corporation Income Tax Rule 1.26 -51-204 to require a railroad to apportion 28
33	32		its net operating income attributable to this state by multiplying the net 29
34	33		income by a fraction, the numerator of which is the property factor plus the 30
35	34		payroll factor plus the sales factor doubled and the denominator of which is 31
36	35		four (4); and 32
37	36		(2) Acts 2019, No. 822, §§ 2 and 7, amended the Multist ate Tax 33
38	37		Compact, § 26-5-101 et seq., and the Uniform Division of Income for Tax 34
39	38		Purposes Act, § 26-51-701 et seq., to adopt sales factor apportionment for 35
40	39		purposes of calculating Arkansas corporate income tax liability and 36 SB482
41	40
42	41		2 03/27/2023 9:59:57 AM JLL269
43	42
44	43
45	44		eliminated inclusion of the prope rty and payroll factors for tax years 1
46	45		beginning on or after January 1, 2021. 2
47	46		(b) It is the intent of the General Assembly that, for tax years 3
48	47		beginning on or after January 1, 2023, a railroad shall apportion and 4
49	48		allocate its income using one (1) of the a pportionment methods provided in 5
50	49		this act. 6
51	50		7
52	51		SECTION 2. Arkansas Code § 26 -5-101, Article IV, paragraph 2, 8
53	52		concerning the division of income under the Multistate Tax Compact, is 9
54	53		amended to read as follows: 10
55	54		2. Any taxpayer having income from business a ctivity which is 11
56	55		taxable both within and without this state, other than activity as a railroad 12
57	56		or public utility or the rendering of purely personal services by an 13
58	57		individual, shall allocate and apportion his net income as provided in this 14
59	58		article. If a taxpayer has income from business activity as a public utility 15
60	59		but derives the greater percentage of his income from activities subject to 16
61	60		this article, the taxpayer may elect to allocate and apportion his entire net 17
62	61		income as provided in this article. 18
63	62		19
64	63		SECTION 3. Arkansas Code § 26 -51-204 is amended to read as follows: 20
65	64		26-51-204. Railroads and public utilities — Apportionment. 21
66	65		(a) Every railroad or other public utility, whether organized under 22
67	66		the laws of this state or any other state or the federal go vernment, shall be 23
68	67		subject to the provisions of the Income Tax Act of 1929, § 26 -51-101 et seq., 24
69	68		and shall pay the state income tax levied by this subchapter upon that 25
70	69		proportion of its entire net income applicable to the State of Arkansas. 26
71	70		(b)(1) An organization operating a railroad partly within this state 27
72	71		and partly without this state shall apportion the net operating income 28
73	72		attributable to this state by multiplying the organization's income by: 29
74	73		(A) The sales factor described in subdivision (b)(2) of 30
75	74		this section; or 31
76	75		(B) A fraction, the numerator of which is the sum of the 32
77	76		property factor described in subdivision (b)(3) of this section, the payroll 33
78	77		factor described in subdivision (b)(4) of this section, and two (2) times the 34
79	78		sales factor describ ed in subdivision (b)(2) of this section, and the 35
80	79		denominator of which is four (4). 36 SB482
81	80
82	81		3 03/27/2023 9:59:57 AM JLL269
83	82
84	83
85	84		(2) The sales factor is a fraction, the numerator of which is 1
86	85		the sum of the taxpayer's gross revenue from within this state and the 2
87	86		proportionate part of the taxpayer's interstate revenues determined on the 3
88	87		basis of the taxpayer's miles operated within this state compared to the 4
89	88		taxpayer's total miles operated within the railway system, and the 5
90	89		denominator of which is the total operating revenues of the taxpayer. 6
91	90		(3)(A) The property factor is a fraction, the numerator of which 7
92	91		is the average value of the taxpayer's real and tangible personal property 8
93	92		owned or rented and used in this state during the tax year, and the 9
94	93		denominator of which is the average value of all the taxpayer's real and 10
95	94		tangible personal property owned or rented and used during the tax year. 11
96	95		(B) The average value of the taxpayer's operating 12
97	96		equipment, including without limitation locomotives, freight and passenger 13
98	97		cars, and work and miscellaneous equipment, shall be apportioned to this 14
99	98		state in the ratio of the total miles the taxpayer's property is operated 15
100	99		within this state to the total miles the taxpayer's property is operated 16
101	100		throughout the railway system. 17
102	101		(C) The average value of the taxpayer's real and tangible 18
103	102		personal property owned in this state is the average of the original cost of 19
104	103		the real and tangible personal property at the beginning and the end of the 20
105	104		tax year. 21
106	105		(D) The taxpayer's real and tangible personal property 22
107	106		rented and used in this state is valued at eight (8) times the net annual 23
108	107		rental amount. 24
109	108		(4) The payroll factor is a fraction, the numerator of which is 25
110	109		the sum of the compensation paid by the taxpayer for services performed 26
111	110		entirely within the state and a p roportionate part of the compensation paid 27
112	111		by the taxpayer for services performed both within and without the state 28
113	112		based on the ratio of the taxpayer's total miles traveled within the state to 29
114	113		the taxpayer's total miles traveled, and the denominator of wh ich is total 30
115	114		compensation paid by the taxpayer during the tax year. 31
116	115		(5) As used in this subsection: 32
117	116		(A) “Nonoperating income” means all income other than 33
118	117		operating income; and 34
119	118		(B) “Operating income” means income arising from 35
120	119		transactions and activity in the regular course of the taxpayer’s trade or 36 SB482
121	120
122	121		4 03/27/2023 9:59:57 AM JLL269
123	122
124	123
125	124		business and includes income from tangible and intangible property if the 1
126	125		acquisition, management, and disposition of the property constitute integral 2
127	126		parts of the taxpayer’s regular trade or business operations. 3
128	127		(c) The Secretary of the Department of Finance and Administration may 4
129	128		promulgate rules to administer this section. 5
130	129		6
131	130		SECTION 4. Arkansas Code § 26 -51-702 is amended to rea d as follows: 7
132	131		26-51-702. Apportionment of net income authorized. 8
133	132		Any taxpayer having income from business activity which is taxable both 9
134	133		within and without this state, other than activity as a railroad or public 10
135	134		utility or the rendering of purely person al services by an individual, shall 11
136	135		allocate and apportion his net income as provided in this Act. 12
137	136		13
138	137		SECTION 5. DO NOT CODIFY. TEMPORARY LANGUAGE. Rules. 14
139	138		Any rules or provisions of rules adopted by the Department of Finance 15
140	139		and Administration that conf lict with this act are void, including without 16
141	140		limitation the conflicting provisions of Corporation Income Tax Rule 1.26 -51-17
142	141		204. 18
143	142		19
144	143		SECTION 6. EFFECTIVE DATE. Sections 1 -5 of this act are effective for 20
145	144		tax years beginning on or after January 1, 2023. 21
146	145		22
147	146		23
148		-	~~APPROVED: 4/11/23~~ 24
	147	+	24
149	148		25
150	149		26
151	150		27
152	151		28
153	152		29
154	153		30
155	154		31
156	155		32
157	156		33
158	157		34
159	158		35
160	159		36