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HB 1687

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2025 Regular Session

HB 1687 would shield water authorities from all excise taxes and broaden property tax exemptions, reducing state/local revenues if enacted.

Second Reading referred to Health and Human Services
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Bill Summary · HB 1687

Summary — HB 1687 (Arkansas, 95th General Assembly, 2025)

Status: Died in committee (House)
Introduced: December 20, 2024
Primary sponsors: Rep. K. Moore; Sen. Hester

Main purpose

HB 1687 would expand the tax exemptions available to water authorities created under Ark. Code § 4-35-101 et seq. Specifically, the bill would (1) clarify/expand the existing ad valorem (property) tax exemption to cover “all property of a water authority” and (2) add an explicit exemption from “all excise taxes of any kind or nature” for water authorities.

Key provisions

  • Amends Ark. Code § 4-35-108 to:
    • Declare all property of a water authority and all income from projects to be public property used exclusively for a public purpose and exempt from ad valorem taxation by all taxing authorities (expansion/clarification of current law).
    • Add a new sentence stating a water authority formed under the chapter is exempt from all excise taxes of any kind or nature.
  • Effective date: the first day of the calendar quarter following the act’s effective date (DFA estimated an assumed effective date of 10/1/2025 for fiscal projections).

Who would be affected

  • Directly affected: water authorities formed under Ark. Code § 4-35-101 et seq. — these entities would no longer be subject to excise taxes and would have broader property-tax immunity.
  • Indirectly affected: state and local taxing entities and funds that receive sales/use and excise tax revenues, and businesses selling goods/services to water authorities (tax treatment may change), and ratepayers to the extent utility costs or revenues shift.

Fiscal impact (Department of Finance and Administration estimates)

  • FY2026 (estimated 8 months of effect if effective 10/1/2025): approximate reduction in state sales and use tax revenue of $13,650,000 and local city/county loss of $6,930,000.
    • State GR (4.5%): -$9,166,500
    • Property Tax Relief (0.5%): -$1,018,500
    • Conservation Fund (0.125%): -$254,625
    • Educational Adequacy (0.875%): -$1,782,375
    • Highway Fund (0.5%): -$1,050,000
    • Other small reductions noted for central services and constitutional officers.
  • FY2027 (full year): approximate state sales and use tax loss of $21,089,250 and local loss of $10,706,850, with detailed fund-by-fund breakdown included in the DFA statement.
  • DFA notes fiscal impact calculations are based on estimates of average water bills and the share dedicated to infrastructure/operating costs.

Implementation, administration, and legal notes

  • DFA: no additional state resources required; websites and staff manuals would need updating.
  • DFA Legal Analysis: recommends adding an explicit exemption in the Gross Receipts Tax Act (Ark. Code § 26-52-101 et seq.) to clarify that gross receipts from sales to a water authority are exempt—this would aid tax administration and public research.

Procedural history / final disposition

  • Filed: December 20, 2024.
  • Committee activity: considered in public hearing; committee reported favorably at one point, but legislative records indicate the bill ultimately “Died in House Committee at Sine Die adjournment” (did not become law).

Bottom line

HB 1687 sought to broaden existing property-tax exemption language for water authorities and to establish a blanket excise-tax exemption for such entities. If enacted, the measure would reduce state and local sales/use and excise tax revenues (multi‑million dollar annual impact per DFA estimates) while lowering the tax burden on water authorities. The bill did not advance to enactment.

Compiled from official sources — confirm details with the bill’s official record.

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