Arkansas 2025 Regular Session

Arkansas Senate Bill SB567 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 719 of the Regular Session
3	2		JLL351 03/26/2025 2:53:52 PM JLL351
4	3		State of Arkansas 1
5	4		95th General Assembly A Bill 2
6	5		Regular Session, 2025 SENATE BILL 567 3
7	6		4
8	7		By: Senator Crowell 5
9	8		By: Representative R. Burkes 6
10	9		7
11	10		For An Act To Be Entitled 8
12	11		AN ACT TO AMEND THE MULTISTATE TAX COMPACT AND THE 9
13	12		UNIFORM DIVISION OF INCOME FOR TAX PURPOSES ACT; TO 10
14	13		AMEND AND MODERNIZE THE LAW CONCERNING THE 11
15	14		APPORTIONMENT OF INCOME DERIVED FROM MULTISTATE 12
16	15		OPERATIONS; TO CHANGE THE METHOD FOR SOURCING OF 13
17	16		RECEIPTS FOR SERVICES AND INTANGIBLES FROM COST OF 14
18	17		PERFORMANCE TO MARKET -BASED SOURCING; AND FOR OTHER 15
19	18		PURPOSES. 16
20	19		17
21	20		18
22	21		Subtitle 19
23	22		TO AMEND AND MODERNIZE THE LAW 20
24	23		CONCERNING THE APPORTIONMENT OF INCOME 21
25	24		DERIVED FROM MULTISTATE OPERATIONS; AND 22
26	25		TO CHANGE THE METHOD FOR SOURCING OF 23
27	26		RECEIPTS FOR SERVICES AND INTANGIBLES. 24
28	27		25
29	28		BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 26
30	29		27
31	30		SECTION 1. Arkansas Code § 26 -5-101, Article IV, concerning the 28
32	31		division of income under the Multistate Tax Compact, is amended to read as 29
33	32		follows: 30
34	33		ARTICLE IV 31
35	34		Division of Income 32
36	35		33
37	36		1. As used in this Article, unless the context otherwise 34
38	37		requires: 35
39	38		(a) “Business income” means income arising from 36 SB567
40	39
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42	41		transactions and activity in the regular course of the taxpayer's trade or 1
43	42		business and includes income from tangible and intangible property if the 2
44	43		acquisition, management, and disposition of the property constitute integral 3
45	44		parts of the taxpayer's regular trade or business operation "Apportionable 4
46	45		income" means: 5
47	46		(1) All income that is apportionable under the 6
48	47		United States Constitution and is not allocated under the laws of this state, 7
49	48		including: 8
50	49		(A) Income arising from transactions and 9
51	50		activity in the regular course of the taxpayer's trade or business; and 10
52	51		(B) Income arising from tangible and 11
53	52		intangible property if the acquisition, management, employment, development, 12
54	53		or disposition of the property is or was related to the operation of the 13
55	54		taxpayer’s trade or business; and 14
56	55		(2) Any income that would be allocable to this 15
57	56		state under the United States Constitution, but that is apportioned rather 16
58	57		than allocated pursuant to the laws of this state ; 17
59	58		(b) “Commercial domicile” means the principal place 18
60	59		from which the trade or business of the taxpayer is directed or managed; 19
61	60		(c) “Compensation” means wages, salaries, 20
62	61		commissions, and any other form of remuneration paid to employees for 21
63	62		personal services; 22
64	63		(d) [Repealed.] 23
65	64		(e) “Nonbusiness Nonapportionable income” means all 24
66	65		income other than business apportionable income; 25
67	66		(f) “Public utility” means any business entity (1) 26
68	67		which owns or operates any plant, equipment, property, franchise, or license 27
69	68		for the transmission of communications, transportation of goods or persons, 28
70	69		except by pipeline, or the production, transmission, sale, delivery, or 29
71	70		furnishing of electricity, water, or steam; and (2) whose rates of charges 30
72	71		for goods or services have been established or approved by a federal, state, 31
73	72		or local government or governmental agency; 32
74	73		(g) “Sales” "Receipts" means all gross receipts of 33
75	74		the taxpayer not allocated under paragraphs 4 through 8 of this article and 34
76	75		that are received from transactions and activity in the regular course of the 35
77	76		taxpayer’s trade or business; except that receipts of a taxpayer from hedging 36 SB567
78	77
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80	79		transactions and from the maturity, redemption, sale, exchange, loan or other 1
81	80		disposition of cash or securities shall be excluded ; 2
82	81		(h) “State” means any state of the United States, 3
83	82		the District of Columbia, the Commonwealth of Puerto Rico, any territory or 4
84	83		possession of the United States, and any foreign country or political 5
85	84		subdivision thereof; 6
86	85		(i) “This state” means the state in which the 7
87	86		relevant tax return is filed or, in the case of application of this article 8
88	87		to the apportionment and allocation of income for local tax purposes, the 9
89	88		subdivision or local taxing district in which the relevant tax return is 10
90	89		filed State of Arkansas. 11
91	90		2. Any taxpayer having income from business activity 12
92	91		which is taxable both within and without this state, other than activity as a 13
93	92		railroad or public utility or the rendering of purely personal services by an 14
94	93		individual, shall allocate and apportion his net income as provided in this 15
95	94		article. If a taxpayer has income from business activity as a public utility 16
96	95		but derives the greater percentage of his income from activities subject to 17
97	96		this article, the taxpayer may elect to allocate and apportion his entire net 18
98	97		income as provided in this article. 19
99	98		3. For purposes of allocation and apportionment of income 20
100	99		under this article, a taxpayer is taxable in another state if (1) in that 21
101	100		state he the taxpayer is subject to a net income tax, a franchise tax 22
102	101		measured by net income, a franchise tax for the privilege of doing business, 23
103	102		or a corporate stock tax, or (2) that state has jurisdiction to subject the 24
104	103		taxpayer to a net income tax regardless of whether, in fact, the state does 25
105	104		or does not or any other tax measured by income or other measure of business 26
106	105		activity in the state and the taxpayer files the requisite tax return in the 27
107	106		other state, or (2) the state has no net income tax, franchise tax measured 28
108	107		by net income, or any other tax measured by income or other measure of 29
109	108		business activity in the state as provided in this section and the taxpayer 30
110	109		has activities in the other state that exceed those protected by 15 U.S.C. §§ 31
111	110		381 — 384. 32
112	111		4. Rents and royalties from real or tangible personal 33
113	112		property, capital gains, interest, dividends, or patent or copyright 34
114	113		royalties, to the extent that they constitute nonbusiness nonapportionable 35
115	114		income, shall be allocated as provided in paragraphs 5 through 8 of this 36 SB567
116	115
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118	117		article. 1
119	118		5.(a) Net rents and royalties from real property located 2
120	119		in this state are allocable to this state. 3
121	120		(b) Net rents and royalties from tangible personal 4
122	121		property are allocable to this state: (1) if and to the extent that the 5
123	122		property is utilized in this state, or (2) in their entirety if the 6
124	123		taxpayer's commercial domicile is in this state and the taxpayer is not 7
125	124		organized under the laws of or taxable in the state in which the property is 8
126	125		utilized. 9
127	126		(c) The extent of utilization of tangible personal 10
128	127		property in a state is determined by multiplying the rents and royalties by a 11
129	128		fraction, the numerator of which is the number of days of physical location 12
130	129		of the property in the state during the rental or royalty period in the 13
131	130		taxable year and the denominator of which is the number of days of physical 14
132	131		location of the property everywhere during all rental or royalty periods in 15
133	132		the taxable year. If the physical location of the property during the rental 16
134	133		or royalty period is unknown or unascertainable by the taxpayer, tangible 17
135	134		personal property is utilized in the state in which the property was located 18
136	135		at the time the rental or royalty payer obtained possession. 19
137	136		6.(a) Capital gains and losses from sales of real property 20
138	137		located in this state are allocable to this state. 21
139	138		(b) Capital gains and losses from sales of tangible 22
140	139		personal property are allocable to this state if (1) the property had a situs 23
141	140		in this state at the time of the sale, or (2) the taxpayer's commercial 24
142	141		domicile is in this state and the taxpayer is not taxable in the state in 25
143	142		which the property had a situs. 26
144	143		(c) Capital gains and losses from sales of 27
145	144		intangible personal property are allocable to this state if the taxpayer's 28
146	145		commercial domicile is in this state. 29
147	146		7. Interest and dividends are allocable to this state if 30
148	147		the taxpayer's commercial domicile is in this state. 31
149	148		8.(a) Patent and copyright royalties are allocable to this 32
150	149		state: (1) if and to the extent that the patent or copyright is utilized by 33
151	150		the payer in this state, or (2) if and to the extent that the patent 34
152	151		copyright is utilized by the payer in the state in which the taxpayer is not 35
153	152		taxable and the taxpayer's commercial domicile is in this state. 36 SB567
154	153
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156	155		(b) A patent is utilized in a state to the extent 1
157	156		that it is employed in production, fabrication, manufacturing, or other 2
158	157		processing in the state or to the extent that a patented product is produced 3
159	158		in the state. If the basis of receipts from patent royalties does not permit 4
160	159		allocation to states or if the accounting procedures do not reflect states of 5
161	160		utilization, the patent is utilized in the state in which the taxpayer's 6
162	161		commercial domicile is located. 7
163	162		(c) A copyright is utilized in a state to the 8
164	163		extent that printing or other publication originates in the state. If the 9
165	164		basis of receipts from copyright royalties does not permit allocation to 10
166	165		states or if the accounting procedures do not reflect states of utilization, 11
167	166		the copyright is utilized in the state in which the taxpayer's commercial 12
168	167		domicile is located. 13
169	168		9. For the tax year beginning January 1, 2021, all 14
170	169		business All apportionable income shall be apportioned to this state by 15
171	170		multiplying the income by a fraction, the numerator of which is the total 16
172	171		sales receipts of the taxpayer in this state during the tax period and the 17
173	172		denominator of which is the total sales receipts of the taxpayer everywhere 18
174	173		during the tax period. 19
175	174		10. [Repealed.] 20
176	175		11. [Repealed.] 21
177	176		12. [Repealed.] 22
178	177		13. [Repealed.] 23
179	178		14. [Repealed.] 24
180	179		15. [Repealed.] 25
181	180		16. Sales Receipts from the sale of tangible personal 26
182	181		property are in this state if: 27
183	182		(a) The property is delivered or shipped to a 28
184	183		purchaser within this state regardless of the f.o.b. point or other 29
185	184		conditions of the sale; or 30
186	185		(b) The property is shipped from an office, store, 31
187	186		warehouse, factory, or other place of storage in this state and the taxpayer 32
188	187		is not taxable in the state of the purchaser, in which case the sales 33
189	188		receipts shall be sourced as follows: 34
190	189		(1) For the tax year beginning on January 1, 35
191	190		2024, sales receipts shall be sourced eighty -five and seventy-one hundredths 36 SB567
192	191
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194	193		percent (85.71%) within this state and fourteen and twenty -nine hundredths 1
195	194		percent (14.29%) outside this state; 2
196	195		(2) For the tax year beginning on January 1, 3
197	196		2025, sales receipts shall be sourced seventy -one and forty-two hundredths 4
198	197		percent (71.42%) within this state and twenty -eight and fifty-eight 5
199	198		hundredths percent (28.58%) outside this state; 6
200	199		(3) For the tax year beginning on January 1, 7
201	200		2026, sales receipts shall be sourced fifty -seven and thirteen hundredths 8
202	201		percent (57.13%) within this state and forty -two and eighty-seven hundredths 9
203	202		percent (42.87%) outside this state; 10
204	203		(4) For the tax year beginning on January 1, 11
205	204		2027, sales receipts shall be sourced forty -two and eighty-four hundredths 12
206	205		percent (42.84%) within this state and fifty -seven and sixteen hundredths 13
207	206		percent (57.16%) outside this state; 14
208	207		(5) For the tax year beginning on January 1, 15
209	208		2028, sales receipts shall be sourced twenty -eight and fifty-five hundredths 16
210	209		percent (28.55%) within this state and seventy -one and forty-five hundredths 17
211	210		percent (71.45%) outside this state; 18
212	211		(6) For the tax year beginning on January 1, 19
213	212		2029, sales receipts shall be sourced fourteen and twenty -six hundredths 20
214	213		percent (14.26%) within this state and eighty -five and seventy-four 21
215	214		hundredths percent (85.74%) outside this state; and 22
216	215		(7) For tax years beginning on or after 23
217	216		January 1, 2030, sales receipts shall be sourced one hundred percent (100%) 24
218	217		outside this state. 25
219	218		17. Sales, other than sales of tangible personal 26
220	219		property, are in this state if: 27
221	220		(a) The income-producing activity is performed in 28
222	221		this state; or 29
223	222		(b) The income-producing activity is performed both 30
224	223		in and outside this state and a greater proportion of the income -producing 31
225	224		activity is performed in this state than in any other state, based on costs 32
226	225		of performance. 33
227	226		(a) Receipts, other than receipts described in 34
228	227		subsection 16 of this section, are in this state if the taxpayer’s market for 35
229	228		the sales is in this state. The taxpayer’s market for sales is in this state: 36 SB567
230	229
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232	231		(1) In the case of sale, rental, lease, or 1
233	232		license of real property, if and to the extent the property is located in 2
234	233		this state; 3
235	234		(2) In the case of rental, lease, or license 4
236	235		of tangible personal property, if and to the extent the property is located 5
237	236		in this state; 6
238	237		(3) In the case of sale of a service, if and 7
239	238		to the extent the service is delivered to a location in this state; and 8
240	239		(4) In the case of intangible property: 9
241	240		(A) That is rented, leased, or licensed, 10
242	241		if and to the extent the property is used in this state, provided that 11
243	242		intangible property utilized in marketing a good or service to a consumer is 12
244	243		used in this state if that good or service is purchased by a consumer who is 13
245	244		in this state; and 14
246	245		(B) That is sold, if and to the extent 15
247	246		the property is used in this state, provided that: 16
248	247		(i) A contract right, government 17
249	248		license, or similar intangible property that authorizes the holder to conduct 18
250	249		a business activity in a specific geographic area is used in this state if 19
251	250		the geographic area includes all or part of this state; 20
252	251		(ii) Receipts from intangible 21
253	252		property sales that are contingent on the productivity, use, or disposition 22
254	253		of the intangible property shall be treated as receipts from the rental, 23
255	254		lease, or licensing of such intangible property under subsection 24
256	255		17(a)(4)(B)(i) of this article; and 25
257	256		(iii) All other receipts from a 26
258	257		sale of intangible property shall be excluded from the numerator and 27
259	258		denominator of the receipts factor. 28
260	259		(b) If the state or states of assignment under 29
261	260		subsection 17(a) of this article cannot be determined, the state or states of 30
262	261		assignment shall be reasonably approximated. 31
263	262		(c) If the taxpayer is not taxable in a state to 32
264	263		which a receipt is assigned under subsection 17(a) or subsection 17(b) of 33
265	264		this article, or if the state of assignment cannot be determined under 34
266	265		subsection 17(a) of this article or reasonably approximated under subsection 35
267	266		17(b) of this article, such receipt shall be excluded from the denominator of 36 SB567
268	267
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270	269		the receipts factor. 1
271	270		(d) The Secretary of the Department of Finance and 2
272	271		Administration may prescribe rules as necessary or appropriate to carry out 3
273	272		the purposes of this article. 4
274	273		(e)(1) Notwithstanding subsection 17(a) of this 5
275	274		article, a person that is principally engaged in the sale of 6
276	275		telecommunications service, mobile telecommunications service, internet 7
277	276		access service, cable television service, community antenna television 8
278	277		service, or direct-to-home satellite television programming service, or a 9
279	278		combination of these services, may elect to source sales under this 10
280	279		subsection 17(e) for tax years beginning on or after January 1, 2026, but 11
281	280		before December 31, 2035. 12
282	281		(2) An election under this subsection 17(e) 13
283	282		shall be made on the taxpayer’s return for the first tax year for which the 14
284	283		taxpayer is eligible for the election, and once made, an election under this 15
285	284		subsection 17(e) cannot be changed for subsequent years without approval in 16
286	285		writing by the secretary. 17
287	286		(3) Under this subsection 17(e), sales, other 18
288	287		than sales described in subsection 16 of this article, are in this state if: 19
289	288		(A) The income-producing activity is 20
290	289		performed in this state; or 21
291	290		(B) The income-producing activity is 22
292	291		performed both in and outside this state and a greater proportion of the 23
293	292		income-producing activity is performed in this state than in any other state, 24
294	293		based on costs of performance. 25
295	294		18.(a) If the allocation and apportionment provisions of 26
296	295		this Article do not fairly represent the extent of the taxpayer's business 27
297	296		activity in this state, the taxpayer may petition for or the tax 28
298	297		administrator secretary may require, in respect to all or any part of the 29
299	298		taxpayer's business activity, if reasonable: 30
300	299		(a)(1) Separate accounting; 31
301	300		(b)(2) The inclusion of one (1) or more 32
302	301		additional factors which will fairly represent the taxpayer's business 33
303	302		activity in this state; or 34
304	303		(c)(3) The employment of any other method to 35
305	304		effectuate an equitable allocation and apportionment of the taxpayer's 36 SB567
306	305
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308	307		income. 1
309	308		(b)(1) If the allocation and apportionment 2
310	309		provisions of this article do not fairly represent the extent of business 3
311	310		activity in this state of taxpayers engaged in a particular industry or in a 4
312	311		particular transaction or activity, the secretary, in addition to the 5
313	312		authority provided in subsection 18(a) of this article, may establish 6
314	313		appropriate rules for determining alternative allocation and apportionment 7
315	314		methods for the taxpayers. 8
316	315		(2) A rule adopted under this subsection 18(b) 9
317	316		shall be applied uniformly, except that with respect to any taxpayer to which 10
318	317		the rule applies, the taxpayer may petition for or the secretary may require 11
319	318		an adjustment under subsection 18(a) of this article. 12
320	319		(c) The party petitioning for or the secretary 13
321	320		requiring the use of any method to effectuate an equitable allocation and 14
322	321		apportionment of the taxpayer’s income under subsection 18(a) of this article 15
323	322		shall prove that the: 16
324	323		(1) Allocation and apportionment provisions of 17
325	324		this article do not fairly represent the extent of the taxpayer’s business 18
326	325		activity in this state; and 19
327	326		(2) Alternative to the allocation and 20
328	327		apportionment provisions of this article is reasonable. 21
329	328		(d) The same burden of proof shall apply whether the 22
330	329		taxpayer is petitioning for or the secretary is requiring the use of any 23
331	330		reasonable method to effectuate an equitable allocation and apportionment of 24
332	331		the taxpayer’s income. 25
333	332		(e) Notwithstanding subsection 18(d) of this 26
334	333		article, if the secretary demonstrates that in any two (2) of the prior five 27
335	334		(5) tax years, the taxpayer used an allocation or apportionment method at 28
336	335		variance with the allocation or apportionment method or methods the taxpayer 29
337	336		used for the other tax years, then the secretary shall not bear the burden of 30
338	337		proof in imposing a different allocation or apportionment method under 31
339	338		subsection 18(a) of this article. 32
340	339		(f) If the secretary requires a different allocation 33
341	340		or apportionment method under subsection 18(a) of this article to effectuate 34
342	341		an equitable allocation and apportionment of the taxpayer’s income, the 35
343	342		secretary shall not impose a civil or criminal penalty with reference to the 36 SB567
344	343
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346	345		tax due that is attributable to the taxpayer’s reasonable reliance solely on 1
347	346		the allocation and apportionment provisions of this article. 2
348	347		(g) A taxpayer that has received written permission 3
349	348		from the secretary to use a reasonable method of allocation or apportionment 4
350	349		to effectuate an equitable allocation and apportionment of the taxpayer’s 5
351	350		income shall not have that permission revoked with respect to transactions 6
352	351		and activities that have already occurred unless there has been a material 7
353	352		change in or a material misrepresentation of the facts provided by the 8
354	353		taxpayer upon which the secretary reasonably relied. 9
355	354		10
356	355		SECTION 2. Arkansas Code § 26 -51-202, concerning the income taxation of 11
357	356		nonresidents, is amended to add an additional subsection to read as follows: 12
358	357		(f) The income of a nonresident corporation or partnership with no 13
359	358		physical presence in the state through real or personal property, employees, 14
360	359		agents, representatives, or otherwise shall be subject to tax under this 15
361	360		chapter if the nonresident's Arkansas receipts under §§ 26 -51-701 — 26-51-718 16
362	361		exceed two hundred fifty thousand dollars ($250,000) for the current or the 17
363	362		immediately preceding tax year. 18
364	363		19
365	364		SECTION 3. Arkansas Code § 26 -51-701 is amended to read as follows: 20
366	365		26-51-701. Definitions. 21
367	366		As used in this Act, unless the context otherwise requires: 22
368	367		(a) “Business income” means income arising from transactions and 23
369	368		activity in the regular course of the taxpayer's trade or business and 24
370	369		includes income from tangible and intangible property if the acquisition, 25
371	370		management, and disposition of the property constitute integral parts of the 26
372	371		taxpayer's regular trade or business operations "Apportionable income" means: 27
373	372		(1) All income that is apportionable under the United 28
374	373		States Constitution and is not allocated under the laws of this state, 29
375	374		including: 30
376	375		(A) income arising from transactions and activity in 31
377	376		the regular course of the taxpayer's trade or business; and 32
378	377		(B) income arising from tangible and intangible 33
379	378		property if the acquisition, management, employment, development, or 34
380	379		disposition of the property is or was related to the operation of the 35
381	380		taxpayer’s trade or business; and 36 SB567
382	381
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384	383		(2) Any income that would be allocable to this state under 1
385	384		the United States Constitution, but that is apportioned rather than allocated 2
386	385		pursuant to the laws of this state . 3
387	386		(b) “Commercial domicile” means the principal place from which 4
388	387		the trade or business of the taxpayer is directed or managed. 5
389	388		(c) “Compensation” means wages, salaries, commissions, and any 6
390	389		other form of remuneration paid to employees for personal services. 7
391	390		(d) [Repealed.] 8
392	391		(e) “Nonbusiness Nonapportionable income” means all income other 9
393	392		than business apportionable income. 10
394	393		(f) “Public utility” means any business entity which owns or 11
395	394		operates for public use any plant, equipment, property, franchise, or license 12
396	395		for the transmission of communications, transportation of goods or persons, 13
397	396		or the production, storage, transmission, sale, delivery, or furnishing of 14
398	397		electricity, water, steam, oil, oil products, or gas. 15
399	398		(g) “Sales” "Receipts" means all gross receipts of the taxpayer 16
400	399		not allocated under §§ 26 -51-704 — 26-51-708 and that are received from 17
401	400		transactions and activity in the regular course of the taxpayer’s trade or 18
402	401		business; except that receipts of a taxpayer from hedging transactions and 19
403	402		from the maturity, redemption, sale, exchange, loan, or other disposition of 20
404	403		cash or securities shall be excluded . 21
405	404		(h) “State” means any state of the United States, the District 22
406	405		of Columbia, the Commonwealth of Puerto Rico, any territory or possession of 23
407	406		the United States, and any foreign country or political subdivision thereof. 24
408	407		(i) "This state" means the State of Arkansas. 25
409	408		26
410	409		SECTION 4. Arkansas Code § 26 -51-704 is amended to read as follows: 27
411	410		26-51-704. Nonbusiness Nonapportionable income. 28
412	411		Rents and royalties from real or tangible personal property, capital 29
413	412		gains, interest, dividends, or patent or copyright royalties, to the extent 30
414	413		that they constitute nonbusiness nonapportionable income, shall be allocated 31
415	414		as provided in §§ 26 -51-705 — 26-51-708. 32
416	415		33
417	416		SECTION 5. Arkansas Code § 26 -51-709 is amended to read as follows: 34
418	417		26-51-709. Business Apportionable income. 35
419	418		For the tax year beginning January 1, 2021, all business All 36 SB567
420	419
421	420		12 03/26/2025 2:53:52 PM JLL351
422	421		apportionable income shall be apportioned to this state by multiplying the 1
423	422		income by a fraction, the numerator of which is the total sales receipts of 2
424	423		the taxpayer in this state during the tax period and the denominator of which 3
425	424		is the total sales receipts of the taxpayer everywhere during the tax period. 4
426	425		5
427	426		SECTION 6. Arkansas Code §§ 26 -51-716 — 26-51-718 are amended to read 6
428	427		as follows: 7
429	428		26-51-716. Sales Receipts from sales of tangible personal property. 8
430	429		Sales Receipts from sales of tangible personal property are in this 9
431	430		state if: 10
432	431		(a) the property is delivered or shipped to a purchaser within 11
433	432		this state regardless of the f.o.b. point or other conditions of the sale; or 12
434	433		(b) the property is shipped from an office, store, warehouse, 13
435	434		factory, or other place of storage in this state and the taxpayer is not 14
436	435		taxable in the state of the purchaser, in which case the sales receipts shall 15
437	436		be sourced as follows: 16
438	437		(1) For the tax year beginning on January 1, 2024, sales 17
439	438		receipts shall be sourced eighty -five and seventy-one hundredths percent 18
440	439		(85.71%) within this state and fourteen and twenty -nine hundredths percent 19
441	440		(14.29%) outside this state; 20
442	441		(2) For the tax year beginning on January 1, 2025, sales 21
443	442		receipts shall be sourced seventy -one and forty-two hundredths percent 22
444	443		(71.42%) within this state and twenty -eight and fifty-eight hundredths 23
445	444		percent (28.58%) outside this state; 24
446	445		(3) For the tax year beginning on January 1, 2026, sales 25
447	446		receipts shall be sourced fifty -seven and thirteen hundredths percent 26
448	447		(57.13%) within this state and forty -two and eighty-seven hundredths percent 27
449	448		(42.87%) outside this state; 28
450	449		(4) For the tax year beginning on January 1, 2027, sales 29
451	450		receipts shall be sourced forty -two and eighty-four hundredths percent 30
452	451		(42.84%) within this state and fifty -seven and sixteen hundredths percent 31
453	452		(57.16%) outside this state; 32
454	453		(5) For the tax year beginning on January 1, 2028, sales 33
455	454		receipts shall be sourced twenty -eight and fifty-five hundredths percent 34
456	455		(28.55%) within this state and seventy -one and forty-five hundredths percent 35
457	456		(71.45%) outside this state; 36 SB567
458	457
459	458		13 03/26/2025 2:53:52 PM JLL351
460	459		(6) For the tax year beginning on January 1, 2029, sales 1
461	460		receipts shall be sourced fourteen and twenty -six hundredths percent (14.26%) 2
462	461		within this state and eighty -five and seventy-four hundredths percent 3
463	462		(85.74%) outside this state; and 4
464	463		(7) For tax years beginning on or after January 1, 2030, 5
465	464		sales receipts shall be sourced one hundred percent (100%) outside this 6
466	465		state. 7
467	466		8
468	467		26-51-717. Sales — Income-producing activity Receipts — Market for 9
469	468		sales. 10
470	469		Sales, other than sales of tangible personal property, are in this 11
471	470		state if: 12
472	471		(a) the income-producing activity is performed in this state; or 13
473	472		(b) the income-producing activity is performed both within and 14
474	473		without the state, in which event the portion of income allocable to this 15
475	474		state shall be the percentage that is used in the formula for allocating 16
476	475		income to Arkansas during the year of the sale. 17
477	476		(a) Receipts, other than receipts of sales of tangible personal 18
478	477		property, are in this state if the taxpayer’s market for the sales is in this 19
479	478		state. The taxpayer’s market for sales is in this state: 20
480	479		(1) in the case of sale, rental, lease, or license of real 21
481	480		property, if and to the extent the property is located in this state; 22
482	481		(2) in the case of rental, lease, or license of tangible 23
483	482		personal property, if and to the extent the property is located in this 24
484	483		state; 25
485	484		(3) in the case of sale of a service, if and to the extent the 26
486	485		service is delivered to a location in this state; and 27
487	486		(4) in the case of intangible property: 28
488	487		(A) that is rented, leased, or licensed, if and to the 29
489	488		extent the property is used in this state, provided that intangible property 30
490	489		utilized in marketing a good or service to a consumer is used in this state 31
491	490		if that good or service is purchased by a consumer in this state; and 32
492	491		(B) that is sold, if and to the extent the property is 33
493	492		used in this state, provided that: 34
494	493		(i) a contract right, government license, or similar 35
495	494		intangible property that authorizes the holder to conduct a business activity 36 SB567
496	495
497	496		14 03/26/2025 2:53:52 PM JLL351
498	497		in a specific geographic area is used in this state if the geographic area 1
499	498		includes all or part of this state; 2
500	499		(ii) receipts from intangible property sales that 3
501	500		are contingent on the productivity, use, or disposition of the intangible 4
502	501		property shall be treated as receipts from the rental, lease, or licensing of 5
503	502		such intangible property under subdivision (a)(4)(B)(i) of this section; and 6
504	503		(iii) all other receipts from a sale of intangible 7
505	504		property shall be excluded from the numerator and denominator of the receipts 8
506	505		factor. 9
507	506		(b) If the state or states of assignment under subsection (a) of this 10
508	507		section cannot be determined, the state or states of assignment shall be 11
509	508		reasonably approximated. 12
510	509		(c) If the taxpayer is not taxable in a state to which a receipt is 13
511	510		assigned under subsection (a) or subsection (b) of this section, or if the 14
512	511		state of assignment cannot be determined under subsection (a) of this section 15
513	512		or reasonably approximated under subsection (b) of this section, such 16
514	513		receipts shall be excluded from the denominator of the receipts factor. 17
515	514		(d) The Secretary of the Department of Finance and Administration may 18
516	515		prescribe rules as necessary or appropriate to carry out the purposes of this 19
517	516		section. 20
518	517		(e)(1) Notwithstanding subsection (a) of this section, a person that 21
519	518		is principally engaged in the sale of telecommunications service, mobile 22
520	519		telecommunications service, internet access service, cable television 23
521	520		service, community antenna television service, or direct -to-home satellite 24
522	521		television programming service, or a combination of these services, may elect 25
523	522		to source sales under this subsection for tax years beginning on or after 26
524	523		January 1, 2026, but before December 31, 2035. 27
525	524		(2) An election under subdivision (e)(1) of this section shall 28
526	525		be made on the taxpayer’s return for the first tax year for which the 29
527	526		taxpayer is eligible for the election, and once made, an election under 30
528	527		subdivision (e)(1) of this section cannot be changed for subsequent years 31
529	528		without approval in writing by the secretary. 32
530	529		(3) Under this subsection, sales, other than sales described in 33
531	530		§ 26-51-716, are in this state if: 34
532	531		(A) The income-producing activity is performed in this 35
533	532		state; or 36 SB567
534	533
535	534		15 03/26/2025 2:53:52 PM JLL351
536	535		(B) The income-producing activity is performed both in and 1
537	536		outside this state and a greater proportion of the income -producing activity 2
538	537		is performed in this state than in any other state, based on costs of 3
539	538		performance. 4
540	539		5
541	540		26-51-718. Procedure when allocation does not fairly represent 6
542	541		taxpayer's business activity. 7
543	542		(a) If the allocation and apportionment provisions of this Act do not 8
544	543		fairly represent the extent of the taxpayer's business activity in this 9
545	544		state, the taxpayer may petition for or the Secretary of the Department of 10
546	545		Finance and Administration may require, in respect to all or any part of the 11
547	546		taxpayer's business activity, if reasonable: 12
548	547		(a)(1) separate accounting; 13
549	548		(b)(2) the inclusion of one or more additional factors 14
550	549		which will fairly represent the taxpayer's business activity in this state; 15
551	550		or 16
552	551		(c)(3) the employment of any other method to effectuate an 17
553	552		equitable allocation and apportionment of the taxpayer's income. 18
554	553		(b)(1) If the allocation and apportionment provisions of this Act do 19
555	554		not fairly represent the extent of business activity in this state of 20
556	555		taxpayers engaged in a particular industry or in a particular transaction or 21
557	556		activity, the secretary, in addition to the authority provided in subsection 22
558	557		(a) of this section, may establish appropriate rules for determining 23
559	558		alternative allocation and apportionment methods for the taxpayers. 24
560	559		(2) A rule adopted under this subsection shall be applied 25
561	560		uniformly, except that with respect to any taxpayer to which the rule 26
562	561		applies, the taxpayer may petition for or the secretary may require an 27
563	562		adjustment under subsection (a) of this section. 28
564	563		(c) The party petitioning for or the secretary requiring the use of 29
565	564		any method to effectuate an equitable allocation and apportionment of the 30
566	565		taxpayer’s income under subsection (a) of this section shall prove that the: 31
567	566		(1) Allocation and apportionment provisions of this Act do not 32
568	567		fairly represent the extent of the taxpayer’s business activity in this 33
569	568		state; and 34
570	569		(2) Alternative to the allocation and apportionment provisions 35
571	570		of this Act is reasonable. 36 SB567
572	571
573	572		16 03/26/2025 2:53:52 PM JLL351
574	573		(d) The same burden of proof shall apply whether the taxpayer is 1
575	574		petitioning for or the secretary is requiring the use of any reasonable 2
576	575		method to effectuate an equitable allocation and apportionment of the 3
577	576		taxpayer’s income. 4
578	577		(e) Notwithstanding subsection (d) of this section, if the secretary 5
579	578		demonstrates that in any two (2) of the prior five (5) tax years the taxpayer 6
580	579		used an allocation or apportionment method at variance with the allocation or 7
581	580		apportionment method or methods the taxpayer used for the other tax years, 8
582	581		then the secretary shall not bear the burden of proof in imposing a different 9
583	582		allocation or apportionment method under subsection (a) of this section. 10
584	583		(f) If the secretary requires a different allocation or apportionment 11
585	584		method under subsection (a) of this section to effectuate an equitable 12
586	585		allocation and apportionment of the taxpayer’s income, the secretary shall 13
587	586		not impose a civil or criminal penalty with reference to the tax due that is 14
588	587		attributable to the taxpayer’s reasonable reliance solely on the allocation 15
589	588		and apportionment provisions of this Act. 16
590	589		(g) A taxpayer that has received written permission from the secretary 17
591	590		to use a reasonable method of allocation or apportionment to effectuate an 18
592	591		equitable allocation and apportionment of the taxpayer’s income shall not 19
593	592		have that permission revoked with respect to transactions and activities that 20
594	593		have already occurred unless there has been a material change in or a 21
595	594		material misrepresentation of the facts provided by the taxpayer upon which 22
596	595		the secretary reasonably relied. 23
597	596		24
598	597		SECTION 7. Arkansas Code § 26 -51-722 is repealed. 25
599	598		26-51-722. Effective date. 26
600	599		The provisions of this Act shall be applicable to all income earned or 27
601	600		accrued in the income years, both calendar and fiscal, beginning on or after 28
602	601		January 1, 1961. 29
603	602		30
604	603		SECTION 8. EFFECTIVE DATE. This act is effective for tax years 31
605	604		beginning on and after January 1, 2026. 32
606	605		33
607	606		34
608		-	~~APPROVED: 4/16/25~~ 35
	607	+	35
609	608		36