Corporate Taxes
Domestic corporations and all foreign corporations doing business in Arkansas are subject to tax on net income at the following rates:
| First $3,000 |
1% |
| Next $3,000 |
2% |
| Next $5,000 |
3% |
| Next $14,000 |
5% |
| Next $75,000 |
6% |
| Over $100,000 |
6.5% |
The portion of income that exceeds each category is taxed at the next higher rate. For example, if a business has corporate net income of $125,000, the first $3,000 is taxed at 1 percent, the next $3,000 is taxed at 2 percent and so on. Thus, only the $25,000 in excess of $100,000 is taxed at the maximum rate of 6.5 percent.
If business income is derived from activity inside and outside the state of Arkansas, it is apportioned for taxation according to the percentage of property and payrolls utilized in the state and sales attributable to Arkansas pursuant to the multi-state compact.
A corporation doing business in Arkansas and sustaining a net operating loss may carry forward the loss to the next succeeding taxable year and annually thereafter for a total period of five years succeeding the year of such loss and deduct it from Arkansas taxable income. Operating steel mills may carry forward the loss for ten years.
Corporations that are members of an affiliated group that file a federal consolidated corporate income tax return may elect to file an Arkansas consolidated corporate income tax return. However, only those corporations in the federal affiliated group that have gross taxable income from sources within Arkansas are eligible.
Arkansas has adopted the provisions of Subchapter S of the Federal Internal Revenue Code of 1986 (Title 26, U.S.C., Sections 1361 through 1379).
Subject to specific conditions, income tax credits are offered through certain incentives, which are described in the "Incentives" section of the web site.
Definitions
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Domestic - When applied to any corporation or association, including partnership, means created or organized in the state of Arkansas.
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Foreign - When applied to any corporation or association, including partnership, means created or organized outside the state of Arkansas.
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Net Income - Income reported on the federal return, with certain additions and deductions prescribed by Arkansas law, such as adjustments for state income tax deductions, adjustments for capital gains and losses and deductions for energy devices purchased for use by the corporation.
Corporate Franchise Tax
The Arkansas Franchise Tax is an annual tax imposed on Arkansas corporations for the grant of charter privileges and on non-Arkansas corporations for the privilege of doing business. The taxes are due June 1 in the calendar year following the year of incorporation or qualification and each June 1 thereafter.
For a corporation incorporated under the laws of the state of Arkansas, the franchise tax is calculated by multiplying the number of outstanding capital shares by the par value (if no par stock, $25 is used) of those shares, then multiplying by 0.0027.
For a corporation incorporated outside of Arkansas but authorized to do business in the state, the number of issued and outstanding capital shares is multiplied by the par value to obtain the total value. This value is multiplied by the percentage of assets applicable to Arkansas (Arkansas assets divided by total assets) to obtain the Arkansas capital stock. The resulting figure is multiplied by 0.0027 to obtain the franchise tax.
| Number of issued and outstanding capital shares |
x |
Par value;$25 if no par value |
= |
Total value of issued and outstanding capital stock |
| Total value of issued and outstanding capital stock |
x |
Percentage of assets applicable to Arkansas |
= |
Arkansas capital stock |
| Arkansas capital stock |
x |
0.0027 |
= |
Franchise tax due |
Businesses locating in Arkansas do not have to disclose the total assets of their parent corporations. If a business is a U.S.-based corporation and is simply applying for authorization to do business in Arkansas, it need only supply a balance sheet of that U.S. corporation.
Corporations without authorized capital stock shall pay an annual tax of $109 regardless of valuation. No corporation shall pay a tax of less than $59 or more than $1,075,000.