Arkansas Administrative Code
Agency 168 - Arkansas Economic Development Commission
Rule 168.00.01-003 - Arkansas Biotechnology and Development Act
Universal Citation: AR Admin Rules 168.00.01-003
Current through Register Vol. 49, No. 2, February 2024
I. Introduction
In order to qualify for this incentive, a company must be an Arkansas taxpayer engaged in qualified research in biotechnology or a company engaged in the manufacturing of advanced biofuels. The Arkansas Department of Economic Development will certify to the Department of Finance and Administration that a company is engaged in qualified research in biotechnology or in the manufacturing of biofuels. See Arkansas Code Annotated 2-8-101 et seq.
For additional information contact:
Arkansas Department of Economic Development
Business Development Section
One Capitol Mall
Little Rock, AR 72201
(501) 682-7675
II. Definitions
A.
"Advanced
biofuels" means ethanol, methanol, or any derivatives thereof,
which are produced through biological means other than direct fermentation of a
food crop.
B.
"Advanced
biofuels facilities" means the buildings and equipment necessary
to produce advanced biofuels.
C.
"Base year qualified research costs" means the costs
of qualified research for the 1996 tax year. For any new taxpayer not required
to file an Arkansas tax return in 1996, the base year qualified research costs
will be zero dollars ($0).
D.
"Biomass" means any organic material, including solid
waste, but excluding oil, natural gas, coal and lignite or any other product
thereof.
E.
"Biotechnology" means the uses of biochemistry,
molecular biology, genetics, and bioengineering to meet the needs of
agriculture, aquaculture, forestry, energy, and environmental industries, as
well as developing products useful for modern medicine, veterinary science, and
pharmaceuticals.
F.
"Biotechnology Facilities" means facilities and
equipment required to carry out Qualified Research.
G.
"Costs" means
expenditures on or after the tax year beginning January 1, 1997, and following
the certification by the director that the business qualifies for incentives
offered by this program.
1. In the case of
biotechnology facilities and advanced biofuels facilities, all activities and
costs associated with site, construction, expansion, improvement, renovation,
or purchase of such facilities, including costs incurred in the purchase and
installation of equipment, and support infrastructure;
2. For the purpose of "Higher Education
Partnerships," costs and expenses of conducting qualified research through a
cooperative research project with one or more state-supported institutions of
higher education in Arkansas for the conduct of qualified research;
3. For the purpose of "Training," costs shall
be limited to:
(a) A six-month period of
training at the facility; or
(b)
The cost of tuition, books, and fees for a program of secondary, undergraduate,
or post-graduate education in an accredited institution of higher
learning.
(c) Training costs
eligible for the income tax credit shall not include salaries and wages of the
employees being trained. Total costs for training shall not exceed ten thousand
dollars ($10,000) per employee.
4. In the case of transfer of title or
finance lease, the amount of the purchase price; or
5. In the case of a lease which is not a
finance lease but which otherwise qualifies as a purchase, the amount of the
lease payments due to be paid during the term of the lease after deducting any
portion of the lease payments attributable to interest, insurance, and
taxes.
6. Costs must be incurred
within four (4) years of the date of the certification by the Department in
order to qualify for tax credits.
H.
"Credit year"
means the tax year in which costs are incurred.
I.
"Department"
means the Arkansas Department of Economic Development
J.
"Director" means
the executive director of the Department.
K.
"Finance lease"
means a lease agreement which is treated as a purchase by a lessee for Arkansas
income tax purposes.
L.
"Higher Education Partnerships" means any cooperative
research project defined by terms of a written agreement whereby companies
engaged in the business of biotechnology contract with state-supported
institutions of higher learning in Arkansas for the conduct of qualified
research or for contracts between institutions of higher learning in Arkansas
and companies involved in the manufacturing of advanced biofuels, where the
purpose of the contract is to obtain rights to intellectual property or for
specific research needs associated with the production of advanced
biofuels.
M.
"Intellectual property" means patents, trade secrets,
copyrights, and trademarks used in biotechnology; with respect to patents and
trade secrets, this includes inventions, technology and know-how of a type
protectable at some time under the law of patents or trade secrets; with
respect to copyrights or trademarks, this includes works of art or indicia of
origin, respectively, of a type protectable at some time under the law of
copyrights or trademarks.
N.
"Program" means the Arkansas Biotechnology Development
and Training Act of 1997, as amended.
O.
"Purchase" means
a transaction under which title to an item is transferred for consideration or
a lease contract for a period of at least three (3) years regardless of whether
title to the item is transferred at the end of such period.
P.
"Qualified
Research" means scientific research and development in the field
of biotechnology, including experimental or laboratory activity to develop new
products, improve existing products, or develop new uses of products, but only
to the extent that activity is conducted in Arkansas, or is required by federal
regulatory authorities to be conducted elsewhere. Qualified research must be
performed primarily under laboratory, clinical, or field experimental
conditions for the purpose of reducing a concept or idea to practice, or to
advance a concept or idea or improvement thereon to the point of practical
application. Qualified research does not include tests or inspection of
materials or products for quality control, efficiency surveys, management
studies, or other market research, or any other ordinary and necessary expenses
of conducting business.
Q.
"Service Contracts" means written agreements to
perform services in the future for a specified period and at a fixed
price.
R.
"Solid
waste" means any garbage, or sludge from a wastewater treatment
plant, water supply treatment plant or air pollution control facility and other
discarded material, including solid, liquid, semi-solid, or contained gaseous
material resulting from industrial, commercial, mining, agricultural,
residential and other community activities, but does not include solid or
dissolved materials in domestic sewage, or solid or dissolved materials in
irrigation return flows or industrial discharges that are point sources subject
to permit under 33 U.S.C. 1342, or source, special nuclear, or by-product
materials as defined by the Atomic Energy Act of 1954, as amended (68 Stat.
923).
S.
"Training" means employer-paid training within
Arkansas that is necessary to prepare employees to work in
biotechnology.
T.
"Undeveloped land" means land without the required
infrastructure (access to utilities such as water, sewer, electricity, natural
gas) to begin the construction of a biotechnology facility.
III. To Qualify for the Program a Business Must
A. Be an Arkansas taxpayer engaged in
qualified research in biotechnology or be a company engaged in the
manufacturing of advanced biofuels;
B. Be certified by the Department as being
engaged in a qualified biotechnology project or in the production of advanced
biofuels; and
C. Pay a
nonrefundable application fee to the Department as described in section III
below.
IV. Powers and Duties of the Department of Economic Development
A. Within 90
days of the receipt of an application, with all required supporting documents,
the Department will notify the Company of approval or denial of the
application. If the Company is approved, the Department will forward all
documentation to the Department of Finance and Administration (DF& A)
.
B. For applications involving a
biotechnology facility, the Director will certify to the Commissioner of
Revenues, DF&A, that the Company meets the eligibility
requirements.
C. For applications
involving the manufacture of advanced biofuels, the Director will certify to
the Commissioner of Revenues, DF&A, that the company meets the eligibility
requirements. DF&A will provide the company with the necessary forms upon
which to report expenditure estimates. Actual project expenditures will be
verified by DF&A in accordance with established audit procedures.
D. In the event the Company disagrees with
the decision on qualification rendered by the Department, the Company may,
within fifteen (15) days of receipt of notification of ineligibility, give
notice of the disagreement and request a meeting to review the
decision.
E. The Department will
arrange for a meeting to discuss the disagreement within fifteen (15) days of
the Company's notification of the disagreement.
F. In the event the disagreement cannot be
resolved by the Department and the Company, the applicant has the right to
further appeal through the Arkansas Administrative Procedures Act.
G. Any qualified research that is required by
a federal regulatory authority to be conducted outside the State of Arkansas
must be approved by the Department. In the event the company is notified of
this requirement after their application to the program has been approved, the
company can request to amend the original project plan to include this
expenditure. Any request for approval of such expense must be accompanied by
documentation from the federal authority explaining the need to conduct the
activity. As with all claimed expenditures, qualified research conducted
outside the state will be subject to verification by the DF&A to insure
only those expenditures directly attributable to the federal regulatory
requirement are allowed in accordance with established audit
procedures.
V. Terms of the Incentive Agreement
In order for an Arkansas taxpayer to benefit from the provisions of this incentive, the taxpayer must:
A.
Complete an application on a form prescribed by the Department;
B. Include information on the form, or
attached to the form, which clearly identifies:
1. The name, address, physical location,
company contact and telephone number of the business applying for the
incentive;
2. A detailed project
plan that fully explains the costs of facility, equipment, training costs,
qualified research and Higher Education Partnership costs and all other
expenditures pertaining to the project;
3. Employers Federal I.D. number and Arkansas
sales and use tax number;
4.
Present and projected employment numbers;
5. SIC classification;
6. A copy of the agreement between the
company and an institution of higher education for any Higher Education
Partnership which may be a part of the project;
7. A description of the biotechnology related
activities to be pursued;
8.
Information on the ownership of the company applying for benefits;
and
9. A certification that the
information contained in the application that the information contained in the
application is true and correct.
C. The Company shall pay to the Department a
fee of $500. (This fee may be waived by the Director of the Arkansas Department
of Economic Development.)
1. The application
fee is to obtain a qualified expert's certification that the biotechnology
facility, and its listed activities named in the application, is a qualified
biotechnology facility, or advanced biofuels facility, meeting the requirements
specified in the Act. The Department must approve the qualified
expert.
2. The fee shall be paid to
the Department at the time an application is submitted. Applications will not
be processed without the payment of the fee.
3. The fee will be used to verify the
qualification of the Company for this program. In the event the Company does
not qualify for the program, the fee will not be refunded.
VI. Administration of Benefits
A. A qualified Arkansas taxpayer will be
entitled to:
1. An income tax credit equal to
five percent (5%) of the cost of a biotechnology facility;
(a) Service contracts costs, sales tax, and
acquisition of undeveloped land cannot be included in determining the amount of
the credit;
(b) No income tax
credit can be claimed by any taxpayer for any facility or equipment which is in
use on or before the certification of the company for tax credits, or for which
a tax credit was previously claimed by any other taxpayer for any other tax
year. The provisions of this subdivision will not apply if any entity is sold
and the entity is entitled to an income tax credit under this
program.
2. An income
tax credit equal to thirty percent (30%) of the cost of employee training or of
Higher Education Partnerships for any Arkansas taxpayer engaged in the business
of biotechnology;
3. An income tax
credit for qualified research in biotechnology equal to twenty percent (20%) of
the amount of the cost of qualified research which exceeds the cost of such
research in the base year.
4. An
income tax credit equal to thirty percent (30%) of the costs of buildings,
equipment, higher education partnerships and intellectual property associated
with the production of advanced biofuels.
B. In case of a proprietorship, partnership,
or S Corporation, the amount of credit determined will be apportioned to each
proprietor, partner, or S Corporation shareholder in proportion to the amount
of income from the entity which the proprietor, partner, or S Corporation
shareholder is required to include as gross income.
C. In case of an estate or trust, the amount
of the credit determined for any taxable year will be apportioned between the
estate or trust and the beneficiaries on the basis of the income of the estate
or trust allocable to each; and 1. Any beneficiary to whom any amount has been
apportioned under this subsection will be allowed, subject to limitations
contained in the program, to a credit for that amount.
D. The income tax credits will be used to
offset the first fifty thousand dollars ($50,000) of income tax liability
arising during the credit year and fifty percent (50%) of any remaining income
tax liability for the year. Each year after the credit year in which the credit
originated, any carry-forward amount should be first applied to offset the
first $50,000 of income tax liability during the year and fifty percent (50%)
of any remaining income tax liability for the year. Any unused credit may be
carried forward and applied against the income tax for the next succeeding tax
year and annually thereafter for a total of fourteen (14) years succeeding the
year in which the credit originated or until the credit is exhausted, whichever
occurs first.
E. The approved
company will file an annual expenditure report each year until the project is
complete. The annual project report form, with instructions, will be provided
by the DF&A.
F. An Income Tax
Credit Memorandum will be issued by the DF&A to the Company after the
determination of the amount of credit. This credit memorandum must be attached
to the tax return for the tax year in which the credit was earned. The issuance
of this credit does not imply the eligibility of expenditures. If DF&A
determines that the credit has been issued for ineligible expenditures,
appropriate adjustments will be made.
G. To determine eligibility for the credit or
to insure that the facility or equipment is being utilized in the required
manner, each agency, or their representative, will have the right to inspect
facilities and records of a taxpayer requesting or receiving a credit under
this act.
H. The taxpayer will be
required to refund the amount of the income tax credit utilized, if, within
fourteen (14) years of the taxable year for which the credit is originated, the
Department and the Department of Finance and Administration find that the
taxpayer has ceased to qualify for tax credits under this program.
I. In the event any taxpayer receiving the
benefits of this program fails to comply with the conditions of the program,
that taxpayer will be liable for:
1. The
payment of any additional income taxes as may be due after the income tax
credits provided for are disallowed, plus penalty and interest.
2. The original tax due plus a penalty of
five percent (5%) of the additional tax due for not more than one (1) month,
with an additional five percent (5%) for each additional month or fraction of,
from the original due date of the tax year in question until date of payment
not to exceed thirty-five percent (35%) in the aggregate.
3. Interest will be assessed at ten percent
(10%) per year from the date the original tax would have been due until date of
payment.
J. Accurate and
up-to-date records of all expenditures for the approved project shall be
maintained by the Company and available for inspection and audit by the
Commissioner of Revenues pursuant to the Arkansas Tax Procedure Act. A taxpayer
who receives a credit under this program shall maintain all documents and
records relating to the biotechnology income tax credit for a minimum time
period of three (3) tax years after the expiration of the fourteen (14) tax
year carry-forward period.
VII. Restrictions
A. A taxpayer may not use the benefits of
this incentive under the following circumstances:
1. When benefits are claimed under the
InvestArk program (ACA § 26-52-701 et seq.);
2. When benefits are claimed under the
Arkansas Economic Development Act (ACA § 15-4-1901 et seq.);
3. When benefits are claimed under the
Arkansas Emerging Energy Technology Development Act (ACA 15-4-2101 et seq.);
and,
4. When benefits are claimed
under the Arkansas Economic Development Incentive Act (ACA 15-4-1601 et
seq.)
B. A taxpayer that
receives a credit under this program for any purchase of machinery or equipment
will not be entitled to claim any other state or local tax credit or deduction
based on the value of the purchase of machinery and equipment, except the
deduction for normal depreciation.
Disclaimer: These regulations may not be the most recent version. Arkansas may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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