Stricken language would be deleted from and underlined language would be added to present law.
Act 719 of the Regular Session
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State of Arkansas 1
95th General Assembly A Bill 2
Regular Session, 2025 SENATE BILL 567 3
4
By: Senator Crowell 5
By: Representative R. Burkes 6
7
For An Act To Be Entitled 8
AN ACT TO AMEND THE MULTISTATE TAX COMPACT AND THE 9
UNIFORM DIVISION OF INCOME FOR TAX PURPOSES ACT; TO 10
AMEND AND MODERNIZE THE LAW CONCERNING THE 11
APPORTIONMENT OF INCOME DERIVED FROM MULTISTATE 12
OPERATIONS; TO CHANGE THE METHOD FOR SOURCING OF 13
RECEIPTS FOR SERVICES AND INTANGIBLES FROM COST OF 14
PERFORMANCE TO MARKET -BASED SOURCING; AND FOR OTHER 15
PURPOSES. 16
17
18
Subtitle 19
TO AMEND AND MODERNIZE THE LAW 20
CONCERNING THE APPORTIONMENT OF INCOME 21
DERIVED FROM MULTISTATE OPERATIONS; AND 22
TO CHANGE THE METHOD FOR SOURCING OF 23
RECEIPTS FOR SERVICES AND INTANGIBLES. 24
25
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 26
27
SECTION 1. Arkansas Code § 26 -5-101, Article IV, concerning the 28
division of income under the Multistate Tax Compact, is amended to read as 29
follows: 30
ARTICLE IV 31
Division of Income 32
33
1. As used in this Article, unless the context otherwise 34
requires: 35
(a) “Business income” means income arising from 36 SB567
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transactions and activity in the regular course of the taxpayer's trade or 1
business and includes income from tangible and intangible property if the 2
acquisition, management, and disposition of the property constitute integral 3
parts of the taxpayer's regular trade or business operation "Apportionable 4
income" means: 5
(1) All income that is apportionable under the 6
United States Constitution and is not allocated under the laws of this state, 7
including: 8
(A) Income arising from transactions and 9
activity in the regular course of the taxpayer's trade or business; and 10
(B) Income arising from tangible and 11
intangible property if the acquisition, management, employment, development, 12
or disposition of the property is or was related to the operation of the 13
taxpayer’s trade or business; and 14
(2) Any income that would be allocable to this 15
state under the United States Constitution, but that is apportioned rather 16
than allocated pursuant to the laws of this state ; 17
(b) “Commercial domicile” means the principal place 18
from which the trade or business of the taxpayer is directed or managed; 19
(c) “Compensation” means wages, salaries, 20
commissions, and any other form of remuneration paid to employees for 21
personal services; 22
(d) [Repealed.] 23
(e) “Nonbusiness Nonapportionable income” means all 24
income other than business apportionable income; 25
(f) “Public utility” means any business entity (1) 26
which owns or operates any plant, equipment, property, franchise, or license 27
for the transmission of communications, transportation of goods or persons, 28
except by pipeline, or the production, transmission, sale, delivery, or 29
furnishing of electricity, water, or steam; and (2) whose rates of charges 30
for goods or services have been established or approved by a federal, state, 31
or local government or governmental agency; 32
(g) “Sales” "Receipts" means all gross receipts of 33
the taxpayer not allocated under paragraphs 4 through 8 of this article and 34
that are received from transactions and activity in the regular course of the 35
taxpayer’s trade or business; except that receipts of a taxpayer from hedging 36 SB567
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transactions and from the maturity, redemption, sale, exchange, loan or other 1
disposition of cash or securities shall be excluded ; 2
(h) “State” means any state of the United States, 3
the District of Columbia, the Commonwealth of Puerto Rico, any territory or 4
possession of the United States, and any foreign country or political 5
subdivision thereof; 6
(i) “This state” means the state in which the 7
relevant tax return is filed or, in the case of application of this article 8
to the apportionment and allocation of income for local tax purposes, the 9
subdivision or local taxing district in which the relevant tax return is 10
filed State of Arkansas. 11
2. Any taxpayer having income from business activity 12
which is taxable both within and without this state, other than activity as a 13
railroad or public utility or the rendering of purely personal services by an 14
individual, shall allocate and apportion his net income as provided in this 15
article. If a taxpayer has income from business activity as a public utility 16
but derives the greater percentage of his income from activities subject to 17
this article, the taxpayer may elect to allocate and apportion his entire net 18
income as provided in this article. 19
3. For purposes of allocation and apportionment of income 20
under this article, a taxpayer is taxable in another state if (1) in that 21
state he the taxpayer is subject to a net income tax, a franchise tax 22
measured by net income, a franchise tax for the privilege of doing business, 23
or a corporate stock tax, or (2) that state has jurisdiction to subject the 24
taxpayer to a net income tax regardless of whether, in fact, the state does 25
or does not or any other tax measured by income or other measure of business 26
activity in the state and the taxpayer files the requisite tax return in the 27
other state, or (2) the state has no net income tax, franchise tax measured 28
by net income, or any other tax measured by income or other measure of 29
business activity in the state as provided in this section and the taxpayer 30
has activities in the other state that exceed those protected by 15 U.S.C. §§ 31
381 — 384. 32
4. Rents and royalties from real or tangible personal 33
property, capital gains, interest, dividends, or patent or copyright 34
royalties, to the extent that they constitute nonbusiness nonapportionable 35
income, shall be allocated as provided in paragraphs 5 through 8 of this 36 SB567
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article. 1
5.(a) Net rents and royalties from real property located 2
in this state are allocable to this state. 3
(b) Net rents and royalties from tangible personal 4
property are allocable to this state: (1) if and to the extent that the 5
property is utilized in this state, or (2) in their entirety if the 6
taxpayer's commercial domicile is in this state and the taxpayer is not 7
organized under the laws of or taxable in the state in which the property is 8
utilized. 9
(c) The extent of utilization of tangible personal 10
property in a state is determined by multiplying the rents and royalties by a 11
fraction, the numerator of which is the number of days of physical location 12
of the property in the state during the rental or royalty period in the 13
taxable year and the denominator of which is the number of days of physical 14
location of the property everywhere during all rental or royalty periods in 15
the taxable year. If the physical location of the property during the rental 16
or royalty period is unknown or unascertainable by the taxpayer, tangible 17
personal property is utilized in the state in which the property was located 18
at the time the rental or royalty payer obtained possession. 19
6.(a) Capital gains and losses from sales of real property 20
located in this state are allocable to this state. 21
(b) Capital gains and losses from sales of tangible 22
personal property are allocable to this state if (1) the property had a situs 23
in this state at the time of the sale, or (2) the taxpayer's commercial 24
domicile is in this state and the taxpayer is not taxable in the state in 25
which the property had a situs. 26
(c) Capital gains and losses from sales of 27
intangible personal property are allocable to this state if the taxpayer's 28
commercial domicile is in this state. 29
7. Interest and dividends are allocable to this state if 30
the taxpayer's commercial domicile is in this state. 31
8.(a) Patent and copyright royalties are allocable to this 32
state: (1) if and to the extent that the patent or copyright is utilized by 33
the payer in this state, or (2) if and to the extent that the patent 34
copyright is utilized by the payer in the state in which the taxpayer is not 35
taxable and the taxpayer's commercial domicile is in this state. 36 SB567
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(b) A patent is utilized in a state to the extent 1
that it is employed in production, fabrication, manufacturing, or other 2
processing in the state or to the extent that a patented product is produced 3
in the state. If the basis of receipts from patent royalties does not permit 4
allocation to states or if the accounting procedures do not reflect states of 5
utilization, the patent is utilized in the state in which the taxpayer's 6
commercial domicile is located. 7
(c) A copyright is utilized in a state to the 8
extent that printing or other publication originates in the state. If the 9
basis of receipts from copyright royalties does not permit allocation to 10
states or if the accounting procedures do not reflect states of utilization, 11
the copyright is utilized in the state in which the taxpayer's commercial 12
domicile is located. 13
9. For the tax year beginning January 1, 2021, all 14
business All apportionable income shall be apportioned to this state by 15
multiplying the income by a fraction, the numerator of which is the total 16
sales receipts of the taxpayer in this state during the tax period and the 17
denominator of which is the total sales receipts of the taxpayer everywhere 18
during the tax period. 19
10. [Repealed.] 20
11. [Repealed.] 21
12. [Repealed.] 22
13. [Repealed.] 23
14. [Repealed.] 24
15. [Repealed.] 25
16. Sales Receipts from the sale of tangible personal 26
property are in this state if: 27
(a) The property is delivered or shipped to a 28
purchaser within this state regardless of the f.o.b. point or other 29
conditions of the sale; or 30
(b) The property is shipped from an office, store, 31
warehouse, factory, or other place of storage in this state and the taxpayer 32
is not taxable in the state of the purchaser, in which case the sales 33
receipts shall be sourced as follows: 34
(1) For the tax year beginning on January 1, 35
2024, sales receipts shall be sourced eighty -five and seventy-one hundredths 36 SB567
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percent (85.71%) within this state and fourteen and twenty -nine hundredths 1
percent (14.29%) outside this state; 2
(2) For the tax year beginning on January 1, 3
2025, sales receipts shall be sourced seventy -one and forty-two hundredths 4
percent (71.42%) within this state and twenty -eight and fifty-eight 5
hundredths percent (28.58%) outside this state; 6
(3) For the tax year beginning on January 1, 7
2026, sales receipts shall be sourced fifty -seven and thirteen hundredths 8
percent (57.13%) within this state and forty -two and eighty-seven hundredths 9
percent (42.87%) outside this state; 10
(4) For the tax year beginning on January 1, 11
2027, sales receipts shall be sourced forty -two and eighty-four hundredths 12
percent (42.84%) within this state and fifty -seven and sixteen hundredths 13
percent (57.16%) outside this state; 14
(5) For the tax year beginning on January 1, 15
2028, sales receipts shall be sourced twenty -eight and fifty-five hundredths 16
percent (28.55%) within this state and seventy -one and forty-five hundredths 17
percent (71.45%) outside this state; 18
(6) For the tax year beginning on January 1, 19
2029, sales receipts shall be sourced fourteen and twenty -six hundredths 20
percent (14.26%) within this state and eighty -five and seventy-four 21
hundredths percent (85.74%) outside this state; and 22
(7) For tax years beginning on or after 23
January 1, 2030, sales receipts shall be sourced one hundred percent (100%) 24
outside this state. 25
17. Sales, other than sales of tangible personal 26
property, are in this state if: 27
(a) The income-producing activity is performed in 28
this state; or 29
(b) The income-producing activity is performed both 30
in and outside this state and a greater proportion of the income -producing 31
activity is performed in this state than in any other state, based on costs 32
of performance. 33
(a) Receipts, other than receipts described in 34
subsection 16 of this section, are in this state if the taxpayer’s market for 35
the sales is in this state. The taxpayer’s market for sales is in this state: 36 SB567
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(1) In the case of sale, rental, lease, or 1
license of real property, if and to the extent the property is located in 2
this state; 3
(2) In the case of rental, lease, or license 4
of tangible personal property, if and to the extent the property is located 5
in this state; 6
(3) In the case of sale of a service, if and 7
to the extent the service is delivered to a location in this state; and 8
(4) In the case of intangible property: 9
(A) That is rented, leased, or licensed, 10
if and to the extent the property is used in this state, provided that 11
intangible property utilized in marketing a good or service to a consumer is 12
used in this state if that good or service is purchased by a consumer who is 13
in this state; and 14
(B) That is sold, if and to the extent 15
the property is used in this state, provided that: 16
(i) A contract right, government 17
license, or similar intangible property that authorizes the holder to conduct 18
a business activity in a specific geographic area is used in this state if 19
the geographic area includes all or part of this state; 20
(ii) Receipts from intangible 21
property sales that are contingent on the productivity, use, or disposition 22
of the intangible property shall be treated as receipts from the rental, 23
lease, or licensing of such intangible property under subsection 24
17(a)(4)(B)(i) of this article; and 25
(iii) All other receipts from a 26
sale of intangible property shall be excluded from the numerator and 27
denominator of the receipts factor. 28
(b) If the state or states of assignment under 29
subsection 17(a) of this article cannot be determined, the state or states of 30
assignment shall be reasonably approximated. 31
(c) If the taxpayer is not taxable in a state to 32
which a receipt is assigned under subsection 17(a) or subsection 17(b) of 33
this article, or if the state of assignment cannot be determined under 34
subsection 17(a) of this article or reasonably approximated under subsection 35
17(b) of this article, such receipt shall be excluded from the denominator of 36 SB567
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the receipts factor. 1
(d) The Secretary of the Department of Finance and 2
Administration may prescribe rules as necessary or appropriate to carry out 3
the purposes of this article. 4
(e)(1) Notwithstanding subsection 17(a) of this 5
article, a person that is principally engaged in the sale of 6
telecommunications service, mobile telecommunications service, internet 7
access service, cable television service, community antenna television 8
service, or direct-to-home satellite television programming service, or a 9
combination of these services, may elect to source sales under this 10
subsection 17(e) for tax years beginning on or after January 1, 2026, but 11
before December 31, 2035. 12
(2) An election under this subsection 17(e) 13
shall be made on the taxpayer’s return for the first tax year for which the 14
taxpayer is eligible for the election, and once made, an election under this 15
subsection 17(e) cannot be changed for subsequent years without approval in 16
writing by the secretary. 17
(3) Under this subsection 17(e), sales, other 18
than sales described in subsection 16 of this article, are in this state if: 19
(A) The income-producing activity is 20
performed in this state; or 21
(B) The income-producing activity is 22
performed both in and outside this state and a greater proportion of the 23
income-producing activity is performed in this state than in any other state, 24
based on costs of performance. 25
18.(a) If the allocation and apportionment provisions of 26
this Article do not fairly represent the extent of the taxpayer's business 27
activity in this state, the taxpayer may petition for or the tax 28
administrator secretary may require, in respect to all or any part of the 29
taxpayer's business activity, if reasonable: 30
(a)(1) Separate accounting; 31
(b)(2) The inclusion of one (1) or more 32
additional factors which will fairly represent the taxpayer's business 33
activity in this state; or 34
(c)(3) The employment of any other method to 35
effectuate an equitable allocation and apportionment of the taxpayer's 36 SB567
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income. 1
(b)(1) If the allocation and apportionment 2
provisions of this article do not fairly represent the extent of business 3
activity in this state of taxpayers engaged in a particular industry or in a 4
particular transaction or activity, the secretary, in addition to the 5
authority provided in subsection 18(a) of this article, may establish 6
appropriate rules for determining alternative allocation and apportionment 7
methods for the taxpayers. 8
(2) A rule adopted under this subsection 18(b) 9
shall be applied uniformly, except that with respect to any taxpayer to which 10
the rule applies, the taxpayer may petition for or the secretary may require 11
an adjustment under subsection 18(a) of this article. 12
(c) The party petitioning for or the secretary 13
requiring the use of any method to effectuate an equitable allocation and 14
apportionment of the taxpayer’s income under subsection 18(a) of this article 15
shall prove that the: 16
(1) Allocation and apportionment provisions of 17
this article do not fairly represent the extent of the taxpayer’s business 18
activity in this state; and 19
(2) Alternative to the allocation and 20
apportionment provisions of this article is reasonable. 21
(d) The same burden of proof shall apply whether the 22
taxpayer is petitioning for or the secretary is requiring the use of any 23
reasonable method to effectuate an equitable allocation and apportionment of 24
the taxpayer’s income. 25
(e) Notwithstanding subsection 18(d) of this 26
article, if the secretary demonstrates that in any two (2) of the prior five 27
(5) tax years, the taxpayer used an allocation or apportionment method at 28
variance with the allocation or apportionment method or methods the taxpayer 29
used for the other tax years, then the secretary shall not bear the burden of 30
proof in imposing a different allocation or apportionment method under 31
subsection 18(a) of this article. 32
(f) If the secretary requires a different allocation 33
or apportionment method under subsection 18(a) of this article to effectuate 34
an equitable allocation and apportionment of the taxpayer’s income, the 35
secretary shall not impose a civil or criminal penalty with reference to the 36 SB567
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tax due that is attributable to the taxpayer’s reasonable reliance solely on 1
the allocation and apportionment provisions of this article. 2
(g) A taxpayer that has received written permission 3
from the secretary to use a reasonable method of allocation or apportionment 4
to effectuate an equitable allocation and apportionment of the taxpayer’s 5
income shall not have that permission revoked with respect to transactions 6
and activities that have already occurred unless there has been a material 7
change in or a material misrepresentation of the facts provided by the 8
taxpayer upon which the secretary reasonably relied. 9
10
SECTION 2. Arkansas Code § 26 -51-202, concerning the income taxation of 11
nonresidents, is amended to add an additional subsection to read as follows: 12
(f) The income of a nonresident corporation or partnership with no 13
physical presence in the state through real or personal property, employees, 14
agents, representatives, or otherwise shall be subject to tax under this 15
chapter if the nonresident's Arkansas receipts under §§ 26 -51-701 — 26-51-718 16
exceed two hundred fifty thousand dollars ($250,000) for the current or the 17
immediately preceding tax year. 18
19
SECTION 3. Arkansas Code § 26 -51-701 is amended to read as follows: 20
26-51-701. Definitions. 21
As used in this Act, unless the context otherwise requires: 22
(a) “Business income” means income arising from transactions and 23
activity in the regular course of the taxpayer's trade or business and 24
includes income from tangible and intangible property if the acquisition, 25
management, and disposition of the property constitute integral parts of the 26
taxpayer's regular trade or business operations "Apportionable income" means: 27
(1) All income that is apportionable under the United 28
States Constitution and is not allocated under the laws of this state, 29
including: 30
(A) income arising from transactions and activity in 31
the regular course of the taxpayer's trade or business; and 32
(B) income arising from tangible and intangible 33
property if the acquisition, management, employment, development, or 34
disposition of the property is or was related to the operation of the 35
taxpayer’s trade or business; and 36 SB567
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(2) Any income that would be allocable to this state under 1
the United States Constitution, but that is apportioned rather than allocated 2
pursuant to the laws of this state . 3
(b) “Commercial domicile” means the principal place from which 4
the trade or business of the taxpayer is directed or managed. 5
(c) “Compensation” means wages, salaries, commissions, and any 6
other form of remuneration paid to employees for personal services. 7
(d) [Repealed.] 8
(e) “Nonbusiness Nonapportionable income” means all income other 9
than business apportionable income. 10
(f) “Public utility” means any business entity which owns or 11
operates for public use any plant, equipment, property, franchise, or license 12
for the transmission of communications, transportation of goods or persons, 13
or the production, storage, transmission, sale, delivery, or furnishing of 14
electricity, water, steam, oil, oil products, or gas. 15
(g) “Sales” "Receipts" means all gross receipts of the taxpayer 16
not allocated under §§ 26 -51-704 — 26-51-708 and that are received from 17
transactions and activity in the regular course of the taxpayer’s trade or 18
business; except that receipts of a taxpayer from hedging transactions and 19
from the maturity, redemption, sale, exchange, loan, or other disposition of 20
cash or securities shall be excluded . 21
(h) “State” means any state of the United States, the District 22
of Columbia, the Commonwealth of Puerto Rico, any territory or possession of 23
the United States, and any foreign country or political subdivision thereof. 24
(i) "This state" means the State of Arkansas. 25
26
SECTION 4. Arkansas Code § 26 -51-704 is amended to read as follows: 27
26-51-704. Nonbusiness Nonapportionable income. 28
Rents and royalties from real or tangible personal property, capital 29
gains, interest, dividends, or patent or copyright royalties, to the extent 30
that they constitute nonbusiness nonapportionable income, shall be allocated 31
as provided in §§ 26 -51-705 — 26-51-708. 32
33
SECTION 5. Arkansas Code § 26 -51-709 is amended to read as follows: 34
26-51-709. Business Apportionable income. 35
For the tax year beginning January 1, 2021, all business All 36 SB567
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apportionable income shall be apportioned to this state by multiplying the 1
income by a fraction, the numerator of which is the total sales receipts of 2
the taxpayer in this state during the tax period and the denominator of which 3
is the total sales receipts of the taxpayer everywhere during the tax period. 4
5
SECTION 6. Arkansas Code §§ 26 -51-716 — 26-51-718 are amended to read 6
as follows: 7
26-51-716. Sales Receipts from sales of tangible personal property. 8
Sales Receipts from sales of tangible personal property are in this 9
state if: 10
(a) the property is delivered or shipped to a purchaser within 11
this state regardless of the f.o.b. point or other conditions of the sale; or 12
(b) the property is shipped from an office, store, warehouse, 13
factory, or other place of storage in this state and the taxpayer is not 14
taxable in the state of the purchaser, in which case the sales receipts shall 15
be sourced as follows: 16
(1) For the tax year beginning on January 1, 2024, sales 17
receipts shall be sourced eighty -five and seventy-one hundredths percent 18
(85.71%) within this state and fourteen and twenty -nine hundredths percent 19
(14.29%) outside this state; 20
(2) For the tax year beginning on January 1, 2025, sales 21
receipts shall be sourced seventy -one and forty-two hundredths percent 22
(71.42%) within this state and twenty -eight and fifty-eight hundredths 23
percent (28.58%) outside this state; 24
(3) For the tax year beginning on January 1, 2026, sales 25
receipts shall be sourced fifty -seven and thirteen hundredths percent 26
(57.13%) within this state and forty -two and eighty-seven hundredths percent 27
(42.87%) outside this state; 28
(4) For the tax year beginning on January 1, 2027, sales 29
receipts shall be sourced forty -two and eighty-four hundredths percent 30
(42.84%) within this state and fifty -seven and sixteen hundredths percent 31
(57.16%) outside this state; 32
(5) For the tax year beginning on January 1, 2028, sales 33
receipts shall be sourced twenty -eight and fifty-five hundredths percent 34
(28.55%) within this state and seventy -one and forty-five hundredths percent 35
(71.45%) outside this state; 36 SB567
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(6) For the tax year beginning on January 1, 2029, sales 1
receipts shall be sourced fourteen and twenty -six hundredths percent (14.26%) 2
within this state and eighty -five and seventy-four hundredths percent 3
(85.74%) outside this state; and 4
(7) For tax years beginning on or after January 1, 2030, 5
sales receipts shall be sourced one hundred percent (100%) outside this 6
state. 7
8
26-51-717. Sales — Income-producing activity Receipts — Market for 9
sales. 10
Sales, other than sales of tangible personal property, are in this 11
state if: 12
(a) the income-producing activity is performed in this state; or 13
(b) the income-producing activity is performed both within and 14
without the state, in which event the portion of income allocable to this 15
state shall be the percentage that is used in the formula for allocating 16
income to Arkansas during the year of the sale. 17
(a) Receipts, other than receipts of sales of tangible personal 18
property, are in this state if the taxpayer’s market for the sales is in this 19
state. The taxpayer’s market for sales is in this state: 20
(1) in the case of sale, rental, lease, or license of real 21
property, if and to the extent the property is located in this state; 22
(2) in the case of rental, lease, or license of tangible 23
personal property, if and to the extent the property is located in this 24
state; 25
(3) in the case of sale of a service, if and to the extent the 26
service is delivered to a location in this state; and 27
(4) in the case of intangible property: 28
(A) that is rented, leased, or licensed, if and to the 29
extent the property is used in this state, provided that intangible property 30
utilized in marketing a good or service to a consumer is used in this state 31
if that good or service is purchased by a consumer in this state; and 32
(B) that is sold, if and to the extent the property is 33
used in this state, provided that: 34
(i) a contract right, government license, or similar 35
intangible property that authorizes the holder to conduct a business activity 36 SB567
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in a specific geographic area is used in this state if the geographic area 1
includes all or part of this state; 2
(ii) receipts from intangible property sales that 3
are contingent on the productivity, use, or disposition of the intangible 4
property shall be treated as receipts from the rental, lease, or licensing of 5
such intangible property under subdivision (a)(4)(B)(i) of this section; and 6
(iii) all other receipts from a sale of intangible 7
property shall be excluded from the numerator and denominator of the receipts 8
factor. 9
(b) If the state or states of assignment under subsection (a) of this 10
section cannot be determined, the state or states of assignment shall be 11
reasonably approximated. 12
(c) If the taxpayer is not taxable in a state to which a receipt is 13
assigned under subsection (a) or subsection (b) of this section, or if the 14
state of assignment cannot be determined under subsection (a) of this section 15
or reasonably approximated under subsection (b) of this section, such 16
receipts shall be excluded from the denominator of the receipts factor. 17
(d) The Secretary of the Department of Finance and Administration may 18
prescribe rules as necessary or appropriate to carry out the purposes of this 19
section. 20
(e)(1) Notwithstanding subsection (a) of this section, a person that 21
is principally engaged in the sale of telecommunications service, mobile 22
telecommunications service, internet access service, cable television 23
service, community antenna television service, or direct -to-home satellite 24
television programming service, or a combination of these services, may elect 25
to source sales under this subsection for tax years beginning on or after 26
January 1, 2026, but before December 31, 2035. 27
(2) An election under subdivision (e)(1) of this section shall 28
be made on the taxpayer’s return for the first tax year for which the 29
taxpayer is eligible for the election, and once made, an election under 30
subdivision (e)(1) of this section cannot be changed for subsequent years 31
without approval in writing by the secretary. 32
(3) Under this subsection, sales, other than sales described in 33
§ 26-51-716, are in this state if: 34
(A) The income-producing activity is performed in this 35
state; or 36 SB567
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(B) The income-producing activity is performed both in and 1
outside this state and a greater proportion of the income -producing activity 2
is performed in this state than in any other state, based on costs of 3
performance. 4
5
26-51-718. Procedure when allocation does not fairly represent 6
taxpayer's business activity. 7
(a) If the allocation and apportionment provisions of this Act do not 8
fairly represent the extent of the taxpayer's business activity in this 9
state, the taxpayer may petition for or the Secretary of the Department of 10
Finance and Administration may require, in respect to all or any part of the 11
taxpayer's business activity, if reasonable: 12
(a)(1) separate accounting; 13
(b)(2) the inclusion of one or more additional factors 14
which will fairly represent the taxpayer's business activity in this state; 15
or 16
(c)(3) the employment of any other method to effectuate an 17
equitable allocation and apportionment of the taxpayer's income. 18
(b)(1) If the allocation and apportionment provisions of this Act do 19
not fairly represent the extent of business activity in this state of 20
taxpayers engaged in a particular industry or in a particular transaction or 21
activity, the secretary, in addition to the authority provided in subsection 22
(a) of this section, may establish appropriate rules for determining 23
alternative allocation and apportionment methods for the taxpayers. 24
(2) A rule adopted under this subsection shall be applied 25
uniformly, except that with respect to any taxpayer to which the rule 26
applies, the taxpayer may petition for or the secretary may require an 27
adjustment under subsection (a) of this section. 28
(c) The party petitioning for or the secretary requiring the use of 29
any method to effectuate an equitable allocation and apportionment of the 30
taxpayer’s income under subsection (a) of this section shall prove that the: 31
(1) Allocation and apportionment provisions of this Act do not 32
fairly represent the extent of the taxpayer’s business activity in this 33
state; and 34
(2) Alternative to the allocation and apportionment provisions 35
of this Act is reasonable. 36 SB567
16 03/26/2025 2:53:52 PM JLL351
(d) The same burden of proof shall apply whether the taxpayer is 1
petitioning for or the secretary is requiring the use of any reasonable 2
method to effectuate an equitable allocation and apportionment of the 3
taxpayer’s income. 4
(e) Notwithstanding subsection (d) of this section, if the secretary 5
demonstrates that in any two (2) of the prior five (5) tax years the taxpayer 6
used an allocation or apportionment method at variance with the allocation or 7
apportionment method or methods the taxpayer used for the other tax years, 8
then the secretary shall not bear the burden of proof in imposing a different 9
allocation or apportionment method under subsection (a) of this section. 10
(f) If the secretary requires a different allocation or apportionment 11
method under subsection (a) of this section to effectuate an equitable 12
allocation and apportionment of the taxpayer’s income, the secretary shall 13
not impose a civil or criminal penalty with reference to the tax due that is 14
attributable to the taxpayer’s reasonable reliance solely on the allocation 15
and apportionment provisions of this Act. 16
(g) A taxpayer that has received written permission from the secretary 17
to use a reasonable method of allocation or apportionment to effectuate an 18
equitable allocation and apportionment of the taxpayer’s income shall not 19
have that permission revoked with respect to transactions and activities that 20
have already occurred unless there has been a material change in or a 21
material misrepresentation of the facts provided by the taxpayer upon which 22
the secretary reasonably relied. 23
24
SECTION 7. Arkansas Code § 26 -51-722 is repealed. 25
26-51-722. Effective date. 26
The provisions of this Act shall be applicable to all income earned or 27
accrued in the income years, both calendar and fiscal, beginning on or after 28
January 1, 1961. 29
30
SECTION 8. EFFECTIVE DATE. This act is effective for tax years 31
beginning on and after January 1, 2026. 32
33
34
APPROVED: 4/16/25 35
36