Arkansas COVID-19 Tax Extensions - Individuals & Passthroughs Delayed; Corporations Not (Except for Franchise Tax)

So far Arkansas is taking a limited approach to tax deadline extensions, with the relief focused on individuals and small businesses:

  • 2019 individual, passthrough, and fiduciary/estate income tax returns and payments extended to July 15.
  • 2019 corporate income tax returns not extended.
  • 2020 income tax estimated payments not extended (including estimated payments for individuals).
  • Sales tax or excise tax reporting and payment deadlines not extended.
  • Franchise tax late payment penalties and interest waived if filed and paid by July 15.
  • Property tax payment deadline of October 15 and personal property rendition due May 31 have not been extended.

The income tax extensions are set out by Executive Order 20-09 (Mar. 23, 2020) and are also echoed in the Department of Finance and Administration COVID-19 Frequently Asked Questions (Mar. 24, 2020)(Update: Here is a March 27 DFA news release providing additional detail.)  In addition to individuals, the extension includes 2019 returns of S corporations, fiduciaries and estates, partnerships, and composite returns.

C corporations are not getting the Arkansas income tax return and payment extension.  As a practical matter, many C corporations request and receive extensions on their federal and Arkansas return filing deadlines anyway.  But the deadline for any amounts owed with the return will continue to be April 15, 2020.  On the other hand, for the franchise tax (a separate capital stock tax), Secretary of State John Thurston is effectively providing an extension to July 15 by waiving any penalties and interest on the return and payment that is due May 1.

Another departure from the federal tax relief is that Arkansas estimated payments are not being extended.  Individuals may still wish to work up their 2019 Arkansas returns, despite the filing and payment extension, so as to better calculate 2020 estimated payment obligations.

Beyond income and franchise tax, we have not seen any other extensions.  Sales tax monthly reports and payments are still due.  Employee wage withholding is still due.  The October 15 property tax payment deadline and the May 31 personal property rendition have not budged.  A&P Commissions may be considering extensions of "hamburger tax" deadlines.  (Update: Little Rock is providing penalty and interest waivers and deferrals / payment plans.)  (Also, a reminder: for trust fund taxes like sales tax or wage withholding, responsible persons face personal liability if they collect tax and fail to pay it over to the taxing authority.  A business should prioritize paying these taxes.)

Given the revenue constraints and balanced budget requirements that the state is under, this approach of limited tax extensions is appropriate.  Arkansas is facing a $353 million revenue shortfall because of the COVID-19 epidemic, and about $190 million of that gap is a result of the individual income tax extension.  This gap will be closed with rainy day funds and budget cuts.  Additional tax extensions would exacerbate that gap.  Unlike the federal government, Arkansas has a balanced budget requirement and cannot run a deficit to stimulate the economy.

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