Arkansas State Tax Credits

More ways to save your hard-earned money from the tax man!

Arkansas has some great State Tax Credits for you....

Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.

We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!

It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).

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Arkansas

Arkansas Job-Creation Tax Credit

Overview:
The Arkansas Job-Creation Tax Credit rewards businesses for creating new, full-time, permanent jobs and meeting specific payroll thresholds. The amount of credit is tiered based on the location of the business and incentivizes higher wages with bonus credits, offering a long carryforward period to maximize tax planning flexibility.

Who It’s For:
Arkansas businesses expanding their workforce with new full-time, permanent employees and willing to meet specific wage and payroll thresholds based on their county’s economic tier.

Four Key Highlights:

  1. Payroll and Wage Requirements Vary by County Tier

    • Minimum annual payroll thresholds range from $50,000 to $125,000, depending on county tier (Tier 4 to Tier 1).

    • Minimum wage requirement: $12.50/hour or the county's average hourly wage, whichever is higher.

  2. Credit Percentage Based on County Tier

    • Credit equals 1%–4% of new payroll, depending on tier.

    • An additional 1% bonus is available for companies paying 125% above the average wage.

  3. Flexible Usage with Long Carryforward

    • Credit can offset up to 50% of a business’s annual tax liability.

    • Unused credits carry forward for up to nine years, offering significant flexibility.

  4. Strict Compliance Rules

    • Businesses must meet payroll thresholds within two years or risk repayment.

    • Annual payroll certification is required, and a signed financial incentive agreement must be executed before job creation begins.

 

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ArkPlus Program Income Tax Credit

Overview:
The ArkPlus Program offers Arkansas businesses an income tax credit for creating full-time, permanent jobs and making qualified investments. The program requires a formal agreement with the Arkansas Economic Development Commission (AEDC) and strict annual reporting to maintain eligibility, with credits tied directly to payroll and investment performance.

Who It’s For:
Arkansas businesses entering into a financial incentive agreement with the AEDC, planning to expand operations by creating new jobs and making significant capital investments.

Four Key Highlights:

  1. Investment and Job Creation Are Both Required

    • Businesses must create new, full-time, permanent jobs and make a qualified investment within four years of the agreement date.

  2. Credit Usage and Carryforward Flexibility

    • Credits can offset up to 50% of annual income tax liability.

    • Unused credits can be carried forward for up to nine (9) years, maximizing long-term value.

  3. Detailed Annual Reporting Is Mandatory

    • Businesses must submit an Annual Incentive Plan Expenditure Report, Employee Payroll Certification, and a New Employee Worksheet each year.

    • Documentation must be audit-ready for Department of Finance & Administration (DFA) verification.

  4. Audits and Ongoing Compliance Are Key

    • A field tax audit is required before credit issuance.

    • Failure to meet ongoing compliance requirements under the Consolidated Incentive Act of 2003 can lead to revocation of credits.

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Arkansas Apprenticeship Tax Credit

Overview:
The Arkansas Apprenticeship Tax Credit encourages businesses to invest in workforce development by offering a credit for hiring apprentices in certified programs. Employers can receive up to $2,000 per apprentice, supporting skill-building initiatives while reducing their state tax liability.

Who It’s For:
Arkansas businesses (including corporations, S corporations, partnerships, and LLCs) that hire apprentices into certified apprenticeship or work-based learning programs meeting national or industry standards.

Four Key Highlights:

  1. Credit Amount and Annual Limits

    • Employers can claim $2,000 or 10% of wages per apprentice, whichever is less.

    • Maximum claim: $10,000 per employer, per year.

  2. Certification Is Mandatory

    • Programs must be certified by either the U.S. Office of Apprenticeship or the Arkansas Office of Skills Development, depending on program type.

  3. Carryforward for Unused Credits

    • If the full credit isn't used in a tax year, it can be carried forward for up to two years.

  4. Simple Claiming Process

    • Employers must enroll apprentices, secure program certification, maintain wage and participation records, and submit documentation to the Arkansas Department of Finance and Administration with their tax return.

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Arkansas Equity Investment Incentive Act

Overview:
This Arkansas program offers a 33 1/3% tax credit to investors who provide cash equity investments to approved early-stage and start-up businesses that create higher-paying jobs in the state. The goal is to fuel entrepreneurial growth, technology development, and regional economic expansion through targeted capital support.

Who It’s For:
Investors seeking tax incentives for supporting high-growth Arkansas businesses, and early-stage businesses aiming to attract capital investment through approved channels under the Arkansas Economic Development Commission (AEDC).

Four Key Highlights:

  1. Generous Tax Credit for Cash Investments

    • Investors receive a 33 1/3% tax credit on approved equity investments.

    • The credit can offset up to 50% of Arkansas income tax liability per year and can be carried forward for nine years.

  2. Strict Business Eligibility and Approval Process

    • Businesses must be approved by AEDC, pay at least 150% of the average wage, and meet additional criteria (e.g., sector focus, economic plan inclusion, or business incubator support).

  3. Transferable Credits with AEDC Approval

    • Credits can be sold or transferred within one year of issuance, but the buyer inherits the original carryforward timeline.

    • All transfers must be documented and reported to the Department of Finance and Administration (DFA).

  4. Important Investment and Credit Limitations

    • Investments must occur between 2007 and 2028.

    • There is an annual state cap of $6.25 million in total available credits.

    • Direct equity investments are prioritized over convertible financings if caps are exceeded.

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