Arkansas Administrative Code
Agency 168 - Arkansas Economic Development Commission
Rule 168.00.05-002 - Non-Profit Incentive Act
Universal Citation: AR Admin Rules 168.00.05-002
Current through Register Vol. 49, No. 2, February 2024
I. Introduction
The primary purpose of the Non-Profit Incentive Program is to encourage the location or expansion of national or regional non-profit headquarters in Arkansas. This incentive program may only be offered at the discretion of the Director of the Department of Economic Development. Eligible non-profit organizations must create a payroll for new full-time permanent employees of at least one million dollars ($1,000,000) and pay an average wage in excess of one hundred and ten percent (110%) of the state or county average wage (whichever is less) in the county in which the organization locates or expands. In addition, the non-profit must receive seventy-five percent (75%) of its income from out-of-state sources.
For additional information contact:
Incentives Manager
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, AR 72201
(501) 682-5277
II. Definitions
(a) "Average hourly wage" means the weekly
earnings, excluding overtime, bonuses, and company paid benefits, of all new
full-time permanent employees hired after the date of the signed financial
incentive agreement, divided by the number of new full-time permanent
employees, divided by forty (40);
(b) "County or state average hourly wage"
means the weighted average weekly earnings for Arkansans in all industries,
both statewide and county wide, as calculated by the Arkansas Employment
Security Department in their most recent Annual Covered Employment and Earnings
publication, divided by forty (40);
(c) "Department" means the Department of
Economic Development;
(d)
"Director" means the Director of the Department of Economic
Development;
(e) "Financial
incentive agreement" means an agreement entered into by an eligible non-profit
organization and the Department of Economic Development to provide the
organization an incentive to locate in Arkansas;
(f) "Governing authority" means the quorum
court of a county or the governing body of a municipality;
(g) "Income" means the monies received by a
non-profit organization for operations of the organization and shall include
donations, revenue from sales or memberships, grants or legislative
appropriations;
(h)
(1)
(A)
"New full-time permanent employee" means a position or job which was created
pursuant to the signed financial incentive agreement and which is filled by one
(1) or more employees or contractual employees who were Arkansas taxpayers
during the year in which the tax credits or incentives were earned.
(B) The position or job held by such employee
or employees must have been filled for at least twenty-six (26) consecutive
weeks with an average of at least thirty (30) hours per week.
(2) Provided, however, in order to
qualify for the provisions of this act, a contractual employee must be offered
a benefits package comparable to a direct employee of the non-profit
organization seeking incentives under this subchapter;
(i) "Non-profit organization" means an entity
which has filed papers with and been approved by the Arkansas Secretary of
State as having met the qualifications for a non-profit organization in
Arkansas and which has also received a 501(c) designation from the United
States Internal Revenue Service prior to applying for the benefits afforded
under this subchapter;
(j)
"Payroll" means the total taxable wages, including overtime and bonuses, paid
during the preceding tax year of the eligible non-profit organization to new
fulltime permanent employees hired after the date of the signed financial
incentive agreement;
(k)
(1) "Project" means:
(A) Preconstruction costs, including project
planning costs, architectural/engineering fees, right-of-way purchases, utility
extensions, site preparations, purchase of mineral rights, building demolition,
builders risk insurance, capitalized start-up costs, deposits and process
payments on eligible machinery and equipment and other costs necessary to
prepare for the start of construction;
(B) Costs associated with the construction of
a new plant or facility; including, but not limited, to land, building,
production equipment or support infrastructure; or
(C) Costs associated with the expansion of an
established plant or facility by adding to the building, production equipment,
or support infrastructure; or
(D)
Cost associated with modernization of an established plant or facility through
the replacement of production or processing equipment or support infrastructure
that improves efficiency or productivity.
(2) "Project" does not include:
(A) Expenditures for routine repair and
maintenance that do not result in new construction or expansion;
(B) Routine operating expenditures;
or
(C) Expenditures incurred at
multiple facilities.
(3)
In order to receive credit for, or refunds related to project costs, the costs
must be incurred within four (4) years from the date the financial incentive
agreement was signed by the Department.
(l) "Project plan" means the plan submitted
to the Department containing such information as may be required by the
Director to determine eligibility for benefits. If approved, the project plan
becomes a supplement to the financial incentive agreement; and
(m) "Start of construction" means 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 project
site.
III. To Qualify for the Program a Non-Profit Organization Must
(a) Have a payroll of
new full-time permanent employees in excess of one million dollars ($1,000,000)
annually.
(b)
(1) Pay wages that average in excess of one
hundred and ten percent (110%) of the lesser of the county or state average
wage; and
(2) Receive a minimum of
seventy-five percent (75%) of its income from out-of-state sources.
(c) Hospitals, medical clinics,
accredited academic educational institutions and churches are specifically
excluded from receiving the benefits authorized by this subchapter.
(d) Non-profit organizations must meet the
payroll threshold and the average hourly wage threshold and invest a minimum of
five hundred thousand dollars ($500,000) in order to receive the sales and use
tax refund authorized by this program. A sales tax refund will be made only
after the audit of expenditures and payroll by the Revenue Division of the
Arkansas Department of Finance and Administration has determined the non-profit
organization is in compliance with all qualifications to receive benefits under
this act.
IV. Terms of Financial Assistance
Payroll rebate:
(a) The award of this incentive is at the
discretion of the Director of the Department of Economic Development.
(b) Benefits are conditioned upon the hiring
of new full-time permanent employees and certifying to the Department of
Finance and Administration that the requisite payroll thresholds have been
met.
(c) The requisite annual
payroll for new full-time permanent employees of one million dollars
($1,000,000) shall be reached within twenty-four (24) months of the signing of
the financial incentive agreement in order for the benefits of this section to
be approved.
(d) If the Director of
the Department of Economic Development and the Director of the Department of
Finance and Administration find that the non-profit organization has presented
compelling reasons for an extension of time, the Director of the Department of
Economic Development may grant an extension of time not to exceed twenty-four
(24) months to reach the requisite annual payroll.
(e) In addition to having an annual payroll
of one million dollars ($1,000,000) or more, the non-profit organization
applying for benefits under this act shall pay average hourly wages in excess
of one hundred and ten percent (110%) of the lesser of the state or county
average wage for the county in which the organization locates or
expands.
(f) Payments to non-profit
organizations with an annual payroll in excess of one million dollars
($1,000,000) shall be considered and may be authorized by the Director, after
having signed a financial incentive agreement with the non-profit organization.
The payment will be four percent (4%) of the annual payroll of the new
full-time permanent employees.
(g)
The Director may authorize this benefit for up to five (5) years.
Sales and Use Tax Refund:
(a)
(1) In
order to qualify for the sales and use tax refund authorized by this section, a
qualified non-profit organization must qualify for the payroll rebate program
and spend in excess of five hundred thousand dollars ($500,000) on buildings,
machinery and equipment in the new or improved facility.
(2) An eligible non-profit organization must
file and application with the Department before the start of construction. The
application shall include a project plan which clearly identifies the intent of
the project, the expenditures planned, the start and end date of the project
and an estimate of total project costs. In order to receive refunds related to
project costs, the costs must be incurred within four (4) years from the date
the financial incentive agreement was signed by the Department and;
(A) The application must include an
endorsement resolution from the governing authority of a municipality or county
in whose jurisdiction the nonprofit organization will be located.
(B) The resolution shall:
(i) Endorse the applicant's participation in
this sales and use tax refund program; and
(ii) Authorize the refund of any sales and
use tax levied by the municipality or county.
(b)
(1) A sales and use tax refund of state and
local sales and use taxes, excepting the sales and use tax dedicated to the
Educational Adequacy Fund, as authorized by Act 107 of the
2nd Special Session of 2004 and the Conservation Tax
Fund, as authorized by Arkansas Code Annotated 19-6-484, on the purchases of
the material used in the construction of a building or buildings or any
addition, modernization, or improvement thereon for housing any new or
expanding nonprofit organization, and machinery and equipment to be located in,
or in connection with, such a building, shall be authorized by the Director of
the Department of Finance and Administration.
(2) A refund shall not be authorized for:
(A) Routine operating expenditures;
or
(B) The purchase of items
previously purchased as part of a project under this subsection unless the
items previously purchased are necessary for the implementation or completion
of the project.
(c) Subject to the approval of the Department
of Economic Development, a program participant may make changes in a project by
written amendment to the project plan filed with the Department, provided that
the amendment complies with Arkansas Code Annotated 15-4-3207(h)(2).
(d) All claims for sales and use tax refunds
under this section shall be denied unless they are filed with the Revenue
Division of the Department of Finance and Administration within three (3) years
from the date of the qualified purchase or purchases.
V. Program Administration
(a)
(1) In order to qualify for a sales and use
tax refund, a non-profit organization must reach the five hundred thousand
dollar ($500,000) investment threshold within four (4) years from the date of
the signed financial incentive agreement.
(2) All claims for sales and use tax refunds
shall be filed annually with the Revenue Division of the Department of Finance
and Administration within three (3) years from the date of the qualified
purchase or purchases.
(3) Claims
filed after three (3) years from the date of the qualified purchase or
purchases shall be disallowed except when:
(A)
A non-profit organization fails to pay sales tax on an item that was taxable;
and
(B) The applicable tax is
subsequently assessed as a result of an audit by the Revenue Division of the
Department of Finance and Administration.
(b) All claims for sales and use tax refunds
relating to an audited purchase shall be entitled to a refund of interest paid
on the amount of tax assessed on the audited purchase if a refund is approved
for the purchase.
(c)
(1) All claims for payroll rebates shall be
certified to the Department of Finance and Administration and shall be
recertified annually thereafter during the term of the financial incentive
agreement.
(2) Failure to certify
payroll figures and recertify those figures annually may result in a denial of
payments.
(3)
(A) If the annual payroll of the non-profit
organization applying for benefits under this subchapter is not met within
twenty-four (24) months after the signing of the financial incentive agreement,
the non-profit organization may request, in writing, an extension of time to
reach the required payroll threshold.
(B) If the Director of the Department of
Economic Development and the Director of the Department of Finance and
Administration find that the nonprofit organization has presented compelling
reasons for an extension of time, the Director of the Department of Economic
Development may grant an extension of time not to exceed twenty-four (24)
months.
(d)
(1) If the annual payroll of a non-profit
organization receiving benefits under this subchapter falls below the threshold
for qualification in a year subsequent to the one in which it initially
qualified for the incentive, the benefits outlined in the financial incentive
agreement will be terminated unless the non-profit organization files a written
application for an extension of benefits with the Department of Economic
Development explaining why the payroll has fallen below the level required for
qualification.
(2) The Director of
the Department of Economic Development and the Director of the Department of
Finance and Administration may approve the request for extension of time, not
to exceed twenty-four (24) months, for the nonprofit organization to bring the
payroll back up to the requisite payroll threshold amount and may approve the
continuation of benefits during the period the extension is granted.
(3) If a non-profit organization fails to
reach the payroll threshold before the expiration of the twenty-four (24)
months or the time period established by a subsequent extension of time, the
non-profit organization will be liable for repayment of all payroll benefits
previously received by the non-profit organization.
(e)
(1) If
a non-profit organization fails to maintain the average hourly wage
requirements for benefits under this subchapter, the non-profit organization
will be liable for the repayment of all payroll benefits previously received by
the nonprofit organization after the average hourly wage for new full-time
permanent employees fell below the required threshold.
(2) After a non-profit organization has
failed to maintain the average hourly wage requirements, the Department of
Finance and Administration shall have two (2) years to collect benefits
previously received by the non-profit organization or file a lawsuit to enforce
the repayment provisions.
(f)
(1) If
a non-profit organization fails to notify the Department of Finance and
Administration that the annual payroll of the non-profit organization has
fallen below the threshold for qualification for and retention of any incentive
authorized by this subchapter, that non-profit organization will be liable for
the repayment of all payroll benefits which were paid to the non-profit
organization after it no longer qualified for the benefits.
(2) After a non-profit organization has
failed to notify the Department of Finance and Administration that the
non-profit organization has fallen below the payroll threshold, the Department
of Finance and Administration shall have two (2) years to collect benefits
previously received by the non-profit organization or file a lawsuit to enforce
the repayment provisions.
(3)
Interest shall also be due at the rate of ten percent (10%) per
annum.
(g)
(1) For a qualified non-profit organization
taking advantage of the sales and use tax refund, if the project costs exceed
the initial project cost estimate included in the approved financial incentive
agreement, the non-profit organization shall submit an amended project plan, as
soon as the cost overrun is recognized, to include the updated cost
figures.
(2)
(A) Amendments that exceed twenty-five
percent (25%) of the original financial incentive agreement estimate will not
be considered and shall be submitted as a new project.
(B) An amendment shall not change the start
date as specified in the original project.
(h) The Department of Finance and
Administration may obtain whatever information is necessary from a
participating non-profit organization and from the Arkansas Employment Security
Department to verify that a non-profit organization that has entered into
financial incentive agreements with the Department of Economic Development is
complying with the terms of the financial incentive agreements and reporting
accurate information concerning investments and payrolls to the Department of
Finance and Administration.
(i) The
Department of Finance and Administration may file a lawsuit in the Circuit
Court of Pulaski County, or the circuit court in any county where a qualifying
non-profit organization is located, to enforce the repayment provisions of this
subchapter.
(j) The department may
promulgate rules and regulations, as needed, to administer the provisions of
this subchapter.
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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