Current through Register Vol. 49, No. 9, September, 2024
Pursuant to the authority provided in Ark. Code Ann. §
19-1-208
(1987), Ark. Code Ann. §
26-18-301
(1987) and Ark. Code Ann. §
25-15-201, et
seq. (1987) (the Arkansas Administrative Procedures Act), the Director of the
Arkansas Department of Finance and Administration and the Commissioner of
Revenue for the State of Arkansas do hereby promulgate the following
Regulation. This Regulation is to be read in conjunction with the previous
Regulations of the Department of Finance and Administration ("Department") and
laws of this State.
1) Definitions.
a) "Accredited institution of post-secondary
education" means a school currently accredited by the North Central Association
of Schools and Colleges or currently certified by the Arkansas Department of
Higher Education.
b) "Eligible
Company" means an entity currently operating in the state of Arkansas that is
classified in one of the following:
i)
Manufacturers classified in Federal Standard Industrial Classification (SIC)
codes 20-39, including semiconductor and microelectronic manufacturers;
ii) Computer businesses primarily
engaged in providing computer programming services; the design and development
of prepackaged software; businesses engaged in digital content production and
digital preservation; computer processing and data preparation services;
information retrieval services; computer and data processing consultants and
developers. All businesses in this group must derive at least sixty percent
(60%) of their revenue from out of state sales and have no retail sales to the
general public;
iii) Businesses
primarily engaged in commercial physical and biological research as classified
by SIC code 8731;
iv) Businesses
primarily engaged in motion picture production. All businesses in this group
must derive at least sixty percent (60%) of their revenue from out of state
sales and have no retail sales to the general public;
v) Distribution centers with no retail sales
to the general public;
vi) An
office sector business with no retail sales to the general public;
vii) A corporate or regional headquarters
with no retail sales to the general public and;
viii) A trucking/distribution terminal, as
classified by SIC code 4231, with no retail sales to the general
public.
c) "Computer
businesses" grouped into category (ii) above fall generally into the following
SIC codes with the additional conditions that they derive at least sixty
percent (60%) of their revenues from out of state sales and have no retail
sales to the general public: SIC 7371, 7372, 7374, 7375, and 7379.
d) "Corporate or regional headquarters" means
the home or center of operations, including research and development, of a
national or multinational corporation with no retail sales to the general
public.
e) "Digital Content
Production" - means companies engaged in the creation of a product that
includes acquiring, modeling, and manipulating video imagery, film and
animation. These products are created in digital form and are eligible for
copyrighting under the copyrighting laws of the United States. Outlets for
digital content products may include broadcast television, corporate
presentations, cable shows, advertising, video games, movies and themed
entertainment outlets. For companies engaged in digital content production to
be eligible for benefits under this program, they must derive at least sixty
percent (60%) of their revenue from out of state sales and have no retail sales
to the general public.
f) "Digital
Preservation" - means companies engaged in the transformation, storage,
archiving and/or distribution of various forms of media which have been
transferred into a digital format. Media transformation into digital content
may include film, video or written materials. For companies engaged in digital
preservation to be eligible for benefits under this program, they must derive
at least sixty percent (60%) of their revenue from out of state sales and have
no retail sales to the general public.
g) "Distribution center" means a facility for
the reception, storage, or shipping of a business' own products or products
which the business wholesales to retail businesses or ships to its own retail
outlets. Distribution centers can have no retail sales to the general
public.
h) "Full-time permanent
employee" - means a person working at an eligible company that has been
employed for at least twenty-six (26) consecutive weeks and that works at least
thirty (30) hours per week and is subject to the Arkansas individual income
tax.
i) "Motion picture production
company" means a company that produces any motion picture or portion thereof
for: display at theaters, video release, television shows, music videos and
special effects, titles and credits all of which are embodied on film or
prepared for digital presentation. Motion picture production companies are
generally a subset of those companies classified in SIC code 7812 and must
derive at least sixty percent (60%) of their revenue from out of state sales
and have no retail sales to the general public.
j) "No retail sales to the general public"
means no walk-in, "point of sale" service to the general public.
k) "Office sector business" means control
centers that influence the environment in which data processing, customer
service, credit accounting, telemarketing, claims processing, and other
administrative functions that act as production centers are performed. Office
sector businesses can have no retail sales to the general public.
1) "Trucking sector business" means a
business that is classified within the Federal Standard Industrial
Classification (SIC) Code number 4231. This SIC code includes companies that
operate terminal facilities used by highway-type property carrying vehicles and
includes terminals which provide maintenance and service for motor vehicles.
It does not include terminals operated by motor freight transportation
companies for their own use.
2) Intent.
It is the intent of the tuition reimbursement tax credit
program that the eligible company's arrangement with its employee require the
employee to complete the employee's financial arrangement with the school for
the payment of the employee's tuition, books, and fees at the beginning of the
course and that the company reimburse the employee after the employee completes
the course to the satisfaction of the company.
3) Qualifications
a) The program allows eligible companies to
claim an income tax credit equal to thirty percent (30%) of the cost of
tuition, books, and fees reimbursed by a company to a full-time permanent
employee of the company after the employee has satisfactorily completed one (1)
semester of undergraduate or post-graduate education at an accredited
institution of post-secondary education located in Arkansas. Courses taken by
an employee must be directly related to the company's business or
industry.
b) The program applies
only to reimbursements paid by eligible companies to their employees after July
30, 1999 for courses taken by such employees after July 3 0, 1999.
c) The tax credit claimed by the company
cannot exceed twenty-five percent (25%) of the company's income tax liability
for the tax year in which the credit is taken. Unused credits cannot be carried
forward, backward or refunded. The company's income tax credit must be claimed
for the tax year in which reimbursement was actually paid to the
employee.
d) A company cannot claim
both the tuition reimbursement tax credit under Act 1036 of 1999 and the
training tax credit under Act 1117 of 1997 (the Biotechnology Act) for the same
courses.
4)
Certification.
To qualify for the benefits of this Program, a company
must:
a) Complete Form AR1036 listing
each employees' name for which tuition reimbursement payments were made during
the tax year, the total amount reimbursed for tuition, fees, and books for each
employee, and the total amount of credit being claimed. Form AR1036 must be
fully completed and attached to the eligible company's tax return.
b) If the eligible company is a partnership,
limited liability company, or subchapter-S corporation, additional information
is required in Section C of Form AR1036. The total amount of the allowable
tuition reimbursement credit will "flow through" to the members of the income
tax "pass through" entity (partnership, limited liability company, or
subchapter-S corporation). The credit should then be allocated to each member
based upon that member's proportionate share of the entity's net income and
loss. A member's "proportionate share" is generally equivalent to the member's
percentage of ownership in the entity. A duplicate Form AR1036 must be produced
for each member and included with each members' tax return.
5) Verification.
Tuition Reimbursement Tax Credit claims, including information
relating to Form AR1036, are subject to verification by the Department of
Finance and Administration, including verification by audit. The employer is
responsible for maintaining records adequate to substantiate the employer's
tuition reimbursement tax credit claim. These record must include clear proof
that the employees for whom credit is being claimed actually paid for tuition,
books and fees and that such employees were actually reimbursed for those
expenses by the employer.
6) Additional Information.
Customized Training Incentives Team
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, AR 72201
(501) 682-7323
Arkansas Department of Finance and Administration
Income Tax Administration
Ledbetter Building
Seventh & Wolfe Streets
P. O. Box 1272
Little Rock, AR 72203
(501) 682-7225 (Individual Income Tax)
(501) 682-4775 (Corporation Income Tax)
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