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Arkansas Tax and Incentives Update

Retirements and Reshuffling at Arkansas DFA

Posted On: Tuesday, August 23, 2016

John Theis, Assistant Commissioner – Policy & Legal, retired at the end of June, as did Roberta Overman, the Sales & Use Tax Manager. The departure of two well-regarded DFA leaders is a loss to the agency, particularly where John Theis’s role is not exactly being replaced: Instead of hiring or promoting a new Assistant Commissioner, Paul Gehring will become the new Assistant Commissioner—Policy & Legal while also retaining his Chief Counsel role. At the same time, some of the duties that John Theis historically had undertaken, including review of DFA hearing decisions, will be assumed by Walter Anger who is now the Lead Revenue Assistant Commissioner for all offices within DFA Revenue. Walther was previously the Assistant Commissioner – Operations & Administration.
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Arkansas DFA "Vodafones" Taxpayer's Refund Claims

Posted On: Sunday, July 10, 2016

Make sure that you get your apportionment right on the original return:  In a Department of Finance and Administration hearing decision, nos. 16-202 and 16-203 (May 27, 2016), the administrative law judge upheld the use of alternative apportionment to deny a refund claim.  The facts unfortunately resemble the unfairness of Tennessee's Vodafone case: The taxpayer realized that the wrong sourcing methodology had been used on the original returns and filed refund claims claiming the benefit of the statutory methodology. The tax administrator invoked alternative apportionment (Ark. Code Ann.§ 26-51-718) to require the original return methodology and thereby deny the claims. Read More

Arkansas Supreme Court: Drinking Water Treatment Is Not Manufacturing

Posted On: Thursday, May 19, 2016

The Supreme Court of Arkansas rejected allowing the sales and use tax manufacturing exemption to water purification equipment in Walther v. Carrothers Construction Company of Arkansas, LLC, 2016 Ark. 209 (May 19, 2016).  This decision restricts the application of the exemption where the taxpayer is engaged in cleaning or purifying a product. Read More

InvestArk Safe for Now

Posted On: Friday, May 06, 2016

In a win for Arkansas manufacturing competitiveness, Governor Hutchinson has announced that cuts to the InvestArk investment incentive will not be a part of his highway funding proposal. As we had previously covered, InvestArk was at risk of being cut to raise revenue in a political climate that is increasingly critical of incentives. InvestArk is a vital tool in encouraging growth and investment by existing Arkansas businesses. Read More

Big Thaw: DFA Reverses Opinion and Treats Freezer as Manufacturing

Posted On: Thursday, April 28, 2016

The Department of Finance and Administration (DFA) recently published a letter opinion, no. 20151008-S (Apr. 4, 2016), allowing a poultry blast freezer to obtain the reduced rate of sales tax on electricity used in manufacturing. This letter opinion was a reversal of a previously issued opinion, no. 20151008 (Feb. 9, 2016), which had wrongly denied the low rate on the basis that blast freezing was not actual manufacturing. (See our prior post criticizing the opinion.) This about-face demonstrates a benefit of tax transparency: The taxpayer community can identify erroneous legal interpretations and get them corrected. Read More

AACF Issues Progressive Tax Policy Proposals

Posted On: Saturday, April 16, 2016

Arkansas Advocates for Children and Families (AACF), has published a whitepaper with progressive tax policy proposals for Arkansas.  "A Tax and Budget Blueprint for a Better Arkansas" (Apr. 2016).  The tax policy changes appear to be inspired by the Center on Budget and Policy Priorities.  AACF recommends using the additional revenue primarily to fund education and social services. The proposed tax policy changes are unlikely in the current political environment, but they do provide a window into potential revenue raisers that the state could consider in the future, particularly with respect to the sales tax. Read More

Op-Ed: Arkansas Needs Incentives to Attract and Retain Jobs

Posted On: Friday, April 15, 2016

Incentives have recently (and wrongly) been scrutinized and criticized as a drain on state revenue and as bad public policy.  In an op-ed published today in the Democrat-Gazette, DDH attorney Matthew Boch and Arkansas State Chamber of Commerce President/CEO Randy Zook explain why the state needs incentives for economic growth, particularly in manufacturing and services.  The op-ed responds to a prior op-ed criticizing incentives, which had been published last week. Read More

Businesses Need to Carefully Consider NAICS Classifications

Posted On: Thursday, March 10, 2016

Arkansas, like many other states, bootstraps NAICS industrial classification codes for use in tax and incentive classifications. Having the right NAICS code is a threshold for Arkansas incentives eligibility. It also is used in determining eligibility for the low rate of tax on electricity purchases by manufacturers. Businesses need to carefully think through the NAICS code(s) they use, particularly when operating under novel business models.  Read More

Arkansas Tax Traps & Found Money Seminars June 9, 16 & 21 in Bentonville, Ft. Smith & Jonesboro

Posted On: Saturday, March 05, 2016

Working with local chambers of commerce, the Arkansas State Chamber of Commerce / Associated Industries of Arkansas (ASCC/AIA) and Dover Dixon Horne are sponsoring three half-day seminars in June 2016 in Northwest Arkansas, the River Valley region, and Northeast Arkansas. The programs will highlight often-overlooked traps and opportunities in Arkansas taxes and incentives. The DDH tax team of Mike Parker, Matt Boch, and T.J. Lawhon will present the seminars. Read More

Ice Cold: DFA Tells Manufacturer That It Is Not Engaged in "Actual Manufacturing"

Posted On: Monday, February 29, 2016

The Arkansas Department of Finance and Administration has published a ruling that narrowly interpreted eligibility for the reduced rate of tax on sales of electricity for use by a manufacturer in the actual manufacturing process.  Opinion no. 20151008 (Feb. 9, 2016).   Read More


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