Summary — HB 1904 (95th Gen. Assembly, 2025) — Amendment to Tax Penalties
Status: Died in committee (House) — introduced January 16, 2025
Note on source materials
- The materials supplied contain conflicting metadata (an initial title about tax credits for student scholarship organizations) but the bill text and DFA fiscal analysis clearly concern changes to tax penalties under the Arkansas Tax Procedure Act. This summary reflects the actual bill language and fiscal analysis provided (amendments to Arkansas Code § 26-18-208).
Purpose and intent
- HB 1904 would reduce the statutory maximum aggregate penalties that may be imposed for failure to file or failure to pay state taxes under the Arkansas Tax Procedure Act. The bill is intended to lower financial penalties imposed on late filers/payers.
Key provisions
- Amends Arkansas Code § 26-18-208(1)–(3) to change penalty caps:
- Failure to file: maintains the monthly addition (5% for first month + 5% per additional month or fraction), but lowers the maximum aggregate cap from 35% to 10%.
- Failure to pay (non-individual returns): likewise retains the 5% per-month structure but reduces maximum aggregate cap from 35% to 10%.
- Failure to pay (individual income tax): retains the separate 1% per-month addition but lowers the cap from 35% to 10%.
- Interaction rules unchanged: filing and payment penalties remain mutually exclusive in many cases; when both apply to an individual income return the additions can be combined up to the new 10% cap.
Who would be affected
- Taxpayers statewide: individuals and businesses who file or pay Arkansas taxes late would face substantially lower maximum penalty exposure (10% vs. current 35%).
- Arkansas Department of Finance and Administration (DFA): administrative changes required to implement and apply the new rates.
- State finances: lower collections from penalties would reduce General Revenue.
Fiscal and administrative impact (from DFA fiscal impact statement)
- Estimated General Revenue reduction: $11.9 million in FY2026.
- One-time IT cost: ~ $22,000 to update Arkansas Integrated Revenue System (AIRS); no ongoing maintenance cost noted.
- Other requirements: updates to tax forms/instructions, modifications to tax-processing software and internal procedures, and staff/tax-community education.
Procedural / timeline notes
- Introduced January 16, 2025.
- DFA analysis dated April 4, 2025.
- Legislative history in the supplied materials indicates the measure ultimately died in House committee at sine die adjournment (May 5, 2025).
- No effective date is specified in the provided text.
Bottom line
- HB 1904 would have substantially reduced the statutory cap on late-filing and late-payment penalties from 35% to 10%, lowering taxpayer exposure and producing an estimated ≈$11.9 million reduction in FY2026 General Revenue while requiring modest one-time IT and administrative updates. The bill did not advance to enactment.
