Arkansas Administrative Code
Agency 168 - Arkansas Economic Development Commission
Rule 168.00.01-007 - Manufacturer's Investment Tax Credit Act - Paper / Allied
Universal Citation: AR Admin Rules 168.00.01-007
Current through Register Vol. 49, No. 2, February 2024
I. Introduction
The Manufacturer's Investment Tax Credit Act of 2001 is a program designed to stimulate the expansion and modernization of facilities and equipment of Arkansas companies with a federal Standard Industrial Classification (SIC) Code 26 and engaged in the production of paper and allied products. The incentive provided by this act offers a credit against the income tax liability of the eligible company for making an investment, before December 31, 2004 of more than one hundred million dollars ($100,000,000).
If approved to participate in the Manufacturer's Investment Tax Credit Act of 2001, a company may not receive benefits under Advantage Arkansas (Arkansas Enterprise Zone Act of 1993, as amended) or InvestArk (Economic Investment Tax Credit Act) for the same project.
For additional information contact:
Arkansas Department of Economic Development
Business Development Section
One Capitol Mall
Little Rock, Arkansas 72201
(501) 682-7675
II. Definitions
A.
"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.
B.
"Department"
means the Arkansas Department of Economic Development.
C.
"Director" means
the director of the Arkansas Department of Economic Development.
D.
"Eligible
business" means any person engaged in a business classified as
manufacturing paper and allied products in federal Standard Industrial
Classification Code 26, that has been in continuous operation in Arkansas for
at least two (2) years prior to the initial application to the Director of the
Department of Economic Development for income tax credits as provided for in
Act 1661 of 2001.
E.
"In continuous operation in Arkansas for at least two
years" means the business applying for the tax credit shall have
on file with the Employment Security Division, employment reports dated at
least two years (8 reporting quarters) prior to the date of application for the
tax incentive.
F.
"Ineligible items" shall include any expenditure which
cannot be attributed to the project or expenditures that are incurred more than
twelve (12) months prior to submission of an application unless otherwise
approved by the Director of the Department of Economic Development and the
Commissioner of Revenues.
G.
"Modernization" means to increase efficiency or to
increase productivity of the business through investment in machinery and/or
equipment. Modernization does not include costs for routine maintenance,
defined as the replacement of existing machinery parts with like
parts.
H.
"No retail
sales to the general public" means no walk-in "point of sale"
service.
I.
"Person" means a person as defined by Arkansas Code
26-18-104.
J.
"Pre-construction costs" shall mean the cost of
eligible items incurred prior to the start of construction, including project
planning costs, architectural fees, deposits and process payments on eligible
machinery and equipment, rights-of-way purchases, land, and purchase of mineral
rights.
K.
"Project" means any construction, expansion or
modernization in Arkansas by an eligible business and the investment by the
eligible business shall exceed one hundred million dollars ($100,000,000)
between the effective date of Act 1661 of 2001 and December 31, 2004 for
projects involving either single or multiple locations within the State of
Arkansas, including the cost of the land, buildings, and equipment used in the
construction, expansion, or modernization and which construction, expansion, or
modernization has been approved by the Arkansas Department of Economic
Development as a construction, expansion, or modernization project which
qualifies for the credit under the provisions of Act 1661 of 2001.
L.
"Routine
maintenance" means the replacement of existing machinery parts
with like parts.
M.
"Start of Construction" shall mean any activity which
causes a physical change to the building and/or property identified as the site
of the approved project, excluding engineering surveys, soil tests, land
clearing, and extension of roads and utilities to the job site.
III. To Qualify for the Program a Business Must:
A. Be engaged in the manufacturing of paper
and allied products with a federal Standard Industrial Classification Code
26.
B. Have had continuous
operations in the state of Arkansas for at least two years prior to the initial
application to the Director.
C.
Invest more than one hundred million dollars ($100,000,000) in the
construction, expansion or modernization at one or more locations within the
State of Arkansas before December 31, 2004.
D. Submit an application and a project plan
for approval to the Director of the Department at least 30 days prior to the
start of construction and prior to incurring any costs, other than
pre-construction costs as defined herein. In the event a project does not
involve construction, the application must be received at least 30 days prior
to the company taking delivery of the eligible project machinery or equipment
at the project site.
E. Following
the Department's approval of the Company's application and project plan, the
Department of Finance & Administration will be responsible for monitoring
and administering the program.
IV. Powers and Duties of the Department of Economic Development
A. Determine that both the project and the
applicant meet minimum qualifications.
B. The Director shall use any resources
necessary to review the application to determine eligibility for the tax
credit. However, any portion of the project plan clearly identified as taxpayer
information under the Arkansas Tax Procedure Act is confidential and privileged
as is all other taxpayer information. Following review and approval, the
Department will forward all documents to DF&A with an approval letter. The
date of approval by the Director shall be the date the application is signed by
the Director. DF&A will contact the company and provide the forms and
instructions needed for the company to receive the credits. The Department will
also forward a copy of the approval letter and approved application to the
company contact.
C. The Arkansas
Department of Economic Development's approval of any application is for content
only. It does not constitute approval of all items listed on the application or
the project plan. These items will be reviewed and either approved or ruled
ineligible by an audit by the Revenue Division of the Department of Finance and
Administration (DF&A) .
D.
DF&A is authorized to conduct an audit to determine the eligibility of
expenses. This audit may be conducted after credits have been approved and
used. If expenditures upon which credits have been calculated, awarded, and
used are found to be ineligible, the taxpayer will be liable for payment of all
taxes determined to be due.
E. If a
company is determined to be ineligible, the Department will forward a letter to
the company stating the reasons why they are ineligible for benefits. In the
event the company disagrees with the decision on qualification rendered by the
Department Director, the company shall within fifteen (15) days of receipt of
notification of ineligibility from the Director, give notice of said
disagreement and request a meeting to review the project plan. The Director
shall 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 these parties, the company (applicant) has the right to further
appeal through the Arkansas Administrative Procedures Act.
V. Terms of the Incentive Agreement
A. Project Plan
As part of the application, and at least thirty (30) days prior to the start of construction, the company must submit a project plan to the Director of the Department. The project plans shall address the following:
1.
Total project
cost - the plan should estimate expenditures for each category of
expenditures listed on the annual reporting form required by the Commissioner
of Revenue.
2.
Construction period - the plan should address the time
frames involved in the project indicating start dates and expected completion
dates. In no event should construction begin on the project prior to approval
by the Department.
3.
Contractors -it is encouraged that Arkansas based
contractors be used whenever possible.
4.
Employment - the
plan should address any changes in the number of employees resulting from the
planned project.
5.
Benefits, products, or services - the plan should
include a description of the benefits, product(s), or service(s) that will
result from the construction, modernization, or expansion.
B. The project plan must contain the
signature of the Chief Executive Officer, or the officer primarily responsible
for the Arkansas plant operations of the company applying for the tax
credits.
C. The project plan shall
be submitted to the following address:
Director
Arkansas Department of Economic Development
One Capitol Mall
Little Rock, AR 72201
D. Eligible Items for Calculation of Income
Tax Credits
1.
"Eligible
Items" shall include, but is not limited to: project planning
costs, construction labor costs (including on-site direct labor and
supervision, whether employed by a contractor or the project owner);
architectural/engineering fees; right-of-way purchases; utility extensions;
site preparation; parking lots; disposal or containment systems; water and
sewer treatment systems; rail spurs; streets and roads; purchase of mineral
rights; land; building renovation; production, processing, and testing
equipment; freight charges; building demolition; material handling equipment,
drainage systems; water tanks and reservoirs; storage facilities; equipment
rental; contractor's cost plus fees; builders risk insurance; original spare
parts; job administrative expenses; office furnishings and equipment; rolling
stock (does not include motor vehicles); capitalized start-up costs as
recognized by generally accepted accounting principals; construction material,
and other costs related to the construction and expansion.
2.
"Production and Processing
equipment" includes machinery and equipment essential for the
receiving, storing, processing and testing of raw materials, and for the
production, storage, testing, and shipping of finished products. These include
facilities for the production of: steam, electricity, chemicals, and other
materials that are essential to the manufacturing process but which are
consumed in the manufacturing process and do not become essential components of
the finished product.
3.
"Excluded Costs" includes costs incurred at any
company location other than those specifically identified in the project plan.
Any costs incurred more than 30 days prior to the receipt of the application by
the Department will be excluded, with the exception of those pre-construction
costs as defined herein. All expenses which, upon examination by the Department
of Finance and Administration, are deemed to be regular maintenance costs, or
are deemed to be outside the scope of the project or the project plan, are
ineligible for computation of credits. The eligibility of questionable items
will be determined by the Department of Finance and Administration.
VI. Administration of Benefits
A. Each company seeking a credit shall apply
for and, if eligible, will receive a memorandum of credit issued by
DF&A.
B. The Director of the
Department of Economic Development shall certify to DF&A that the business
meets the eligibility requirements and shall advise DF&A of the estimated
amount of the project expenditures. Actual project expenditures and resulting
tax credits will be verified by DF&A in accordance with established audit
procedures. Credits issued prior to the audit, if found to be ineligible, may
be rescinded upon audit, and a tax liability to the applicant may
result.
C. Following approval of
the application, an eligible business shall file an Annual Project Expenditure
report (Form MIC 2000) on or before January 31 of each year until the project
is completed. The annual project report shall be mailed to:
Department of Finance & Administration
Tax Credits/Special Refunds Section
P.O. Box 1272
Little Rock, AR 72203-1272
D. A memo of credit not exceeding seven
percent (7%) of the annual qualifying project expenditures shall be issued by
the Commissioner of Revenue to the company annually for each project and shall
be used on when the eligible business submits its corporate income tax return.
The Commissioner of Revenue shall issue the credit memo by the tenth
(10th) day of the month following the month in which
the Annual Project Expenditure report is filed. The credit memo shall be
attached to and used by the company as a credit against the corporate income
tax liability as long as the credit does not exceed fifty percent (50%) of the
company's total income tax liability for each year.
E. The credit memo shall be reduced by the
amount of the income tax credits taken, if approved.
F. The credit shall be applied to corporate
income tax liability after all applicable deductions and other credits
available to the company have been utilized. Under no circumstances may the
credit be used for the payment of any penalties or interest assessed against a
company by the Commissioner of Revenue.
G. In no event shall the credit used on any
regular return be more than fifty percent (50%) of the eligible business' total
state income tax liability for the reporting period.
H. Accurate and up-to-date records of all
expenditures for all of the approved projects shall be maintained by the
company and made available for inspection and audit by the Commissioner of
Revenue pursuant to the Arkansas Tax Procedure Act.
I. The Commissioner of Revenue may examine
those records necessary and specific to the project to determine credit
eligibility. Any credits disallowed will be subject to payment in
full.
J. For all projects approved
after July 1, 2001, all expenditures toward the project cost must be incurred
within five (5) years from the date of the certification of the project plan by
the director.
K. The state income
tax credit provided by Act 1661 of 2001 may not be claimed on any income tax
return filed or required by law to be filed prior to July 1, 2003. State income
tax credits resulting from the provisions of Act 1661 of 2001 that would have
been available to claim on an income tax return required to be filed before
July 1, 2003, shall first be available on income tax returns due after July 1,
2003 and may be carried over to the next succeeding calendar year for a total
period of six (6) years following the year in which the credit was first
available to be claimed, or until the credit is exhausted, whichever occurs
first.
VII. Restrictions
No person or entity may take advantage of the income tax credit benefits of the Manufacturer's Investment Tax Credit Act of 2001 and receive benefits under Advantage Arkansas (Arkansas Enterprise Zone Act of 1993 - ACA § 15-4-1701 et seq.) for the same project. In addition, recipients of benefits from this incentive are precluded from receiving benefits under InvestArk (the Economic Investment Tax Credit Act - ACA 26-52-701 et seq.) for the same project
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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