Arkansas 2025 Regular Session

Arkansas House Bill HB1116 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	Stricken language would be deleted from and underlined language would be added to present law.
2	2	JLL076 01/13/2025 11:54:46 AM JLL076
3	3	State of Arkansas 1
4	4	95th General Assembly A Bill 2
5	5	Regular Session, 2025 HOUSE BILL 1116 3
6	6	4
7	7	By: Representative Ray 5
8	8	By: Senator J. Dismang 6
9	9	7
10	10	For An Act To Be Entitled 8
11	11	AN ACT TO CREATE THE REMOTE AND MOBILE WORK 9
12	12	MODERNIZATION AND COMPETITIVENESS ACT; TO AMEND THE 10
13	13	INCOME TAX LAWS APPLICABLE TO NONRESIDENTS; TO AMEND 11
14	14	THE INCOME TAX AND INCOME TAX WITHHOLDING LAWS 12
15	15	APPLICABLE TO CERTAIN REMOTE AND MOBILE EMPLOYEES; TO 13
16	16	EXEMPT CERTAIN REMOTE AND MOBILE EMPLOYEES FROM THE 14
17	17	INCOME TAX LEVIED ON INDIVIDUALS; TO EXEMPT EMPLOYERS 15
18	18	FROM THE REQUIREMENT TO WITHHOLD INCOME TAX FROM THE 16
19	19	WAGES OF CERTAIN REMOTE AND MOBILE EMPLOYEES; TO 17
20	20	PROVIDE THAT EMPLOYERS ARE NOT LIABLE FOR FAILING TO 18
21	21	WITHHOLD INCOME TAX FROM THE WAGES OF CERTAIN REMOTE 19
22	22	AND MOBILE EMPLOYEES IN CERTAIN CIRCUMSTANCES; TO 20
23	23	AUTHORIZE THE DEPARTMENT OF FINANCE AND 21
24	24	ADMINISTRATION TO ENTER INTO RECIPROCITY AGREEMENTS 22
25	25	WITH OTHER STATES REGARDING THE IMPOSITION OF INCOME 23
26	26	TAX ON CERTAIN NONRESIDENT INDIVIDUALS; AND FOR OTHER 24
27	27	PURPOSES. 25
28	28	26
29	29	27
30	30	Subtitle 28
31	31	TO CREATE THE REMOTE AND MOBILE WORK 29
32	32	MODERNIZATION AND COMPETITIVENESS ACT; 30
33	33	AND TO PROVIDE INCOME TAX AND 31
34	34	WITHHOLDING EXEMPTIONS RELATED TO 32
35	35	CERTAIN REMOTE AND MOBILE EMPLOYEES AND 33
36	36	NONRESIDENTS. 34
37	37	35
38	38	BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 36 HB1116
39	39
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41	41	1
42	42	SECTION 1. DO NOT CODIFY. Title. 2
43	43	This act shall be known and may be cited as the "Remote and Mobile Work 3
44	44	Modernization and Competitiveness Act". 4
45	45	5
46	46	SECTION 2. DO NOT CODIFY. Legislative findings. 6
47	47	The General Assembly finds that: 7
48	48	(1) Remote and hybrid work is a fast -growing trend in the United 8
49	49	States; 9
50	50	(2) Surveys have found that thirteen percent (13%) of employees 10
51	51	in the United States work from home, and twenty -eight percent (28%) work a 11
52	52	hybrid model; 12
53	53	(3) Arkansas's tax code has been found to be ranked forty -fifth 13
54	54	out of the fifty (50) states because of its complicated and burdensome filing 14
55	55	and withholding requirements; 15
56	56	(4) Remote and mobile work can be an opportunity to states 16
57	57	willing to make their tax codes hospitable and convenient to remote and 17
58	58	mobile workers; and 18
59	59	(5) While the state has an understandable desire to collect 19
60	60	taxes owed by individuals who spend significant time working in the state, 20
61	61	there is no compelling reason to place an outsized burden on those briefly 21
62	62	passing through the state, particularly those who have no income tax 22
63	63	liability. 23
64	64	24
65	65	SECTION 3. Arkansas Code § 26 -51-202, concerning the application of 25
66	66	income tax laws to nonresidents, is amended to add an additional subsection 26
67	67	to read as follows: 27
68	68	(f)(1) The Department of Finance and Administration may enter into a 28
69	69	reciprocity agreement with another state to exempt residents of the other 29
70	70	state who earn income in this state from the tax levied under this chapter if 30
71	71	the other state has a provision in its tax laws that provides an income tax 31
72	72	exemption to Arkansas residents. 32
73	73	(2) The department shall not enter into a reciprocity agreement 33
74	74	under subdivision (f)(1) of this section unless the reciprocity agreement has 34
75	75	been reviewed and approved by the Legislative Council. 35
76	76	36 HB1116
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79	79	SECTION 4. Arkansas Code Title 26, Chapter 51, Subchapter 3, is 1
80	80	amended to add an additional section to read as follows: 2
81	81	26-51-317. Remote and mobile employees. 3
82	82	There is allowed an exemption from the income tax imposed by this 4
83	83	chapter for income received by an individual as compensation for employment 5
84	84	duties performed by the individual while he or she was present in the state 6
85	85	if: 7
86	86	(1) The total aggregate amount of income received by the 8
87	87	individual for employment duties performed while the individual was present 9
88	88	in the state is two thousand five hundred dollars ($2,500) or less for the 10
89	89	tax year; and 11
90	90	(2) The individual performed employment duties for an employer 12
91	91	in more than one (1) state during the tax year. 13
92	92	14
93	93	SECTION 5. Arkansas Code § 26 -51-905 is amended to read as follows: 15
94	94	26-51-905. Withholding of tax. 16
95	95	(a)(1) Every Except as otherwise provided in this section, an employer 17
96	96	making payments of wages to employees shall deduct and withhold from the 18
97	97	employees' wages an amount determined from withholding tables promulgated by 19
98	98	the Secretary of the Department of Finance and Administration and furnished 20
99	99	to the employer. 21
100	100	(2) The full amount deducted and withheld from any an employee's 22
101	101	wages during the income year shall be credited against the tax liability of 23
102	102	the employee under the Income Tax Act of 1929, § 26 -51-101 et seq., for that 24
103	103	year. 25
104	104	(b)(1) Notwithstanding the provisions of subsection (a) of this 26
105	105	section, every an employer who withholds less than one thousand dollars 27
106	106	($1,000) for a full year's withholding shall report and remit annually on a 28
107	107	date specified by the secretary any amounts so withheld by the employer. 29
108	108	(2) An employer shall be advised by the secretary of the 30
109	109	employer's classification and shall report as classified until such time as 31
110	110	the employer advises the secretary in writing that the employer no longer has 32
111	111	employees or the employer is closing the business. 33
112	112	(3) However, it shall be the duty of the employer to report to 34
113	113	the secretary at the end of each income year all wages paid to any such 35
114	114	employees on the same forms provided in this subchapter for making employer 36 HB1116
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117	117	annual withholding statements in order that the secretary may determine the 1
118	118	tax liability, if any, of those employees during that income year. 2
119	119	(c)(1) An employer is not required to deduct and withhold from an 3
120	120	employee's wages the amount determined from the withholding tables 4
121	121	promulgated by the secretary and furnished to the employer if: 5
122	122	(A) The employee performed employment duties while the 6
123	123	employee was present in the state for fifteen (15) or fewer calendar days 7
124	124	during the tax year; 8
125	125	(B) The employee performed employment duties for the 9
126	126	employer in more than one (1) state during the tax year; and 10
127	127	(C) The employee is not being paid for employment duties 11
128	128	performed in the employee's capacity as: 12
129	129	(i) An athlete who receives wages for performing 13
130	130	services in a professional athletic event; 14
131	131	(ii) An entertainer who receives wages on a per -15
132	132	event basis for performing services in the professional performing arts; or 16
133	133	(iii) A public figure who receives wages on a per -17
134	134	event basis for performing services at discrete events, including without 18
135	135	limitation speeches, public appearances, and similar events. 19
136	136	(2) If an employee performs employment duties for an employer 20
137	137	while the employee was present in the state for more than fifteen (15) 21
138	138	calendar days during the tax year, the employer shall withhold and remit 22
139	139	taxes for every day the employee performed employment duties while present in 23
140	140	this state during the tax year, including the first fifteen (15) days in 24
141	141	which the employee performed employment duties in this state. 25
142	142	(3)(A) For purposes of this subsection, an employee is 26
143	143	considered present and performing employment duties in this state for a day 27
144	144	if the employee performs more of the employee's employment duties in this 28
145	145	state than in any other state during that day. 29
146	146	(B) A portion of a day during which an employee is in 30
147	147	transit shall not be considered in determining the location of the employee's 31
148	148	performance of employment duties. 32
149	149	33
150	150	SECTION 6. Arkansas Code § 26 -51-916 is amended to read as follows: 34
151	151	26-51-916. Employer liable for amounts required to be withheld — 35
152	152	Exceptions — Definition. 36 HB1116
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155	155	(a) As used in this section, "time and attendance system" means a 1
156	156	system: 2
157	157	(1) Through which an employee is required to record the 3
158	158	employee's work location for every day worked outside the state where the 4
159	159	employee's employment duties are primarily performed; and 5
160	160	(2) That is designed to allow an employer to allocate an 6
161	161	employee's wages for income tax purposes among all states in which the 7
162	162	employee performs employment duties for the employer. 8
163	163	(b)(1) Every Except as otherwise provided in this section, an employer 9
164	164	shall be liable for amounts required to be deducted and withheld by this 10
165	165	subchapter regardless of whether or not the amounts were in fact deducted and 11
166	166	withheld. 12
167	167	(2) However, if the employer fails to deduct and withhold the 13
168	168	required amounts and if the tax against which the required amounts would have 14
169	169	been credited is paid, the employer shall not be liable for those amounts not 15
170	170	deducted and withheld if the failure was due to reasonable cause. 16
171	171	(c) An employer is not liable for any penalties or interest otherwise 17
172	172	applicable for failing to deduct and withhold the amount required under this 18
173	173	subchapter from the wages of an employee who performed employment duties for 19
174	174	the employer in more than one (1) state if the employer: 20
175	175	(1) Maintains a time and attendance system specifically designed 21
176	176	to allocate employee wages for income tax purposes among all taxing 22
177	177	jurisdictions in which the employee performs employment duties for the 23
178	178	employer and relies on data from the time and attendance system in making its 24
179	179	determination regarding whether withholding is required; or 25
180	180	(2) Does not maintain a time and attendance system and relies on 26
181	181	one (1) or more of the following in making its determination regarding 27
182	182	whether withholding is required: 28
183	183	(A) The employer's own records, maintained in the regular 29
184	184	course of business, concerning the employee's location while performing his 30
185	185	or her employment duties; 31
186	186	(B) The employee's reasonable determination of the time 32
187	187	the employee expected to spend performing employment duties in the state, if 33
188	188	the employer did not: 34
189	189	(i) Have actual knowledge of fraud on the part of 35
190	190	the employee in making the determination; or 36 HB1116
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193	193	(ii) Conspire with the employee to evade taxation in 1
194	194	making the determination; 2
195	195	(C) Travel records; 3
196	196	(D) Travel expense reimbursement records; or 4
197	197	(E) A signed, written statement from the employee of the 5
198	198	time spent performing employment duties for the employer in the state during 6
199	199	the tax year. 7
200	200	8
201	201	SECTION 7. DO NOT CODIFY. Severability. 9
202	202	The provisions of this act are severable, and the invalidity of any 10
203	203	provision of this act shall not affect other provisions of this act that can 11
204	204	be given effect without the invalid provision. 12
205	205	13
206	206	SECTION 8. EFFECTIVE DATE. Sections 1 -6 of this act are effective for 14
207	207	tax years beginning on or after January 1, 2026. 15
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