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HB 1116

HIGHER ED-STU-ATH ENDORSEMENT

104th Regular Session Introduced by David Friess

HB 1116 exempts remote workers earning $2,500 or less from Arkansas income tax, easing employer withholding and aiming to attract more remote talent to the state.

Referred to Rules Committee
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Bill Summary · HB 1116

Summary of HB 1116: Remote and Mobile Work Modernization and Competitiveness Act

Purpose and Intent

House Bill 1116 (HB 1116) aims to modernize Arkansas's tax code to better accommodate remote and mobile workers. The bill seeks to provide income tax and withholding exemptions for certain employees and nonresidents who perform work in multiple states, thereby enhancing the state's competitiveness in attracting remote workers.

Key Provisions

  1. Income Tax Exemption:

    • Individuals earning $2,500 or less from work performed in Arkansas during a tax year are exempt from state income tax if they also work in more than one state.

  2. Withholding Exemptions for Employers:

    • Employers are exempt from withholding Arkansas income tax for employees who:
      • Perform employment duties in Arkansas for 15 days or fewer during the year.
      • Work for the employer in multiple states.
      • Are not compensated as professional athletes, entertainers, or public figures.

  3. Employer Liability:

    • Employers who fail to withhold taxes from employees working in multiple states will not face penalties if they:
      • Maintain a time and attendance system.
      • Rely on reasonable records or employee statements regarding work performed in Arkansas.

  4. Reciprocal Agreements:

    • The Department of Finance and Administration (DFA) is authorized to enter into reciprocal agreements with other states to exempt residents of those states from Arkansas income tax, provided those states offer similar exemptions for Arkansas residents.

  5. Implementation Timeline:

    • The provisions of HB 1116 would be effective for tax years beginning on or after January 1, 2026.

Fiscal Impact

  • The bill is projected to reduce general revenue by:
    • $515,000 in FY2026 (half-year impact).
    • $775,000 in FY2027 (full-year impact).
  • The fiscal impact does not account for potential revenue losses from reciprocal agreements with other states.

Affected Parties

  • Taxpayers: Individuals working remotely or in multiple states may benefit from the income tax exemption.
  • Employers: Businesses employing remote workers will have reduced withholding obligations and potential liability for tax penalties.
  • State Revenue: The state may experience a decrease in income tax revenue due to the exemptions provided.

Legislative Actions

  • Introduced: January 14, 2025
  • Died in House Committee: May 5, 2025, at Sine Die adjournment.
  • Amendments: An amendment was adopted on March 13, 2025, adding additional cosponsors and clarifying provisions.

Conclusion

HB 1116 represents an effort to adapt Arkansas's tax framework to the evolving nature of work, particularly in light of the growing trend of remote and mobile employment. While the bill did not progress past the committee stage, it highlights ongoing discussions about tax policy and workforce competitiveness in the state.

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

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