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2023-2024 Regular Session Introduced by Mike Chapman and 1 co-sponsor

Arkansas HB 1822 would exempt overtime pay from Arkansas state income tax starting in 2026, boosting take-home for overtime earners and requiring payroll withholding changes.

House Rules "X" file.

Overview / Main purpose

HB 1822 would exempt compensation for overtime work from Arkansas state individual income tax. The bill is titled the "Overtime but not Overtaxed Act" and seeks to exclude overtime pay (as defined by the federal Fair Labor Standards Act) from taxable Arkansas income beginning with tax years on or after January 1, 2026.

Note: The materials provided appear to conflate multiple, unrelated items (including an Arkansas overtime exemption bill, an Illinois bill numbered HB1822 concerning interchange fees, and a separate appropriation title referencing Yazoo County). This summary focuses on the Arkansas overtime-exemption provisions contained in the bill text attributed to Representative Underwood.

Key provisions

Adds Arkansas Code section 26-51-317 to Subchapter 3 (Income Tax) of Title 26.

Defines "overtime" as time worked in a workweek that:

Exceeds forty (40) hours for the workweek; and
Is required to be compensated under the Fair Labor Standards Act of 1938 (29 U.S.C. §201 et seq.) as it existed on January 1, 2025.

Declares that compensation for overtime is exempt from the Arkansas individual income tax levied under Title 26.

Effective date: The exemption applies to tax years beginning on or after January 1, 2026.

Who would be affected

Primary beneficiaries: Arkansas wage earners who receive overtime pay (hourly employees and others entitled to FLSA overtime) — their taxable income for state tax purposes would exclude overtime amounts.

Employers/payroll administrators: would need to adjust payroll reporting and withholding practices to reflect the exemption for state income tax purposes.

State government: reduced individual income tax base and therefore lower state income tax revenues (no fiscal estimate is provided in the bill text).

Fiscal and administrative impacts (expected)

Revenue: Likely a reduction in individual income tax collections proportional to total overtime wages paid in the state. The bill text contains no fiscal note or estimated dollar impact.

Compliance/administration: Tax forms, withholding tables, and employer payroll reporting would require changes to distinguish overtime pay from regular wages for state tax withholding and filing. Using the FLSA definition as of a fixed date could simplify some aspects, but may create issues if federal overtime rules change after Jan 1, 2025.

Procedural status

Sponsor: Representative Underwood (co-sponsor added: Rep. Travis Weaver on 2025-04-09 per the record).

Introduced: January 13, 2025.

Effective date in text: tax years beginning on or after January 1, 2026.

Final status in provided materials: "Died In Committee" / "Died in House Committee at Sine Die adjournment" — the bill did not become law in the 2025 session.

Important caveats

The provided document bundle mixes text and legislative action from multiple jurisdictions and different bills sharing the same bill number. Confirm the jurisdiction (Arkansas) and obtain an official bill version or fiscal note for authoritative details and revenue estimates before relying on this summary for policymaking or legal purposes.

Bill