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Bill Summary · HB 1501

Summary of House Bill 1501 (HB 1501)

Purpose and Intent

House Bill 1501 (HB 1501) was introduced to align Arkansas state income tax law with federal income tax law regarding the depreciation and expensing of business property. The primary goal of the bill was to increase the amount allowed for the expensing of certain depreciable business assets to match the federal standards, thereby providing tax relief to businesses in Arkansas.

Key Provisions

  • Adoption of Federal Law: The bill proposed to amend Arkansas Code § 26-51-428 to adopt the bonus depreciation provisions outlined in 26 U.S.C. § 168(k) as effective on January 1, 2024. This provision allows businesses to take an additional first-year depreciation deduction for qualifying property.

  • Effective Date: The changes would apply to tax years beginning on or after January 1, 2025.

  • Increased Expensing Limits: The bill aimed to increase the expensing limits for certain depreciable business assets to the amounts permitted under federal law, thus allowing businesses to deduct a larger portion of their investments in property in the year the property is placed into service.

Fiscal Impact

The fiscal impact of HB 1501 was significant:
- Projected Revenue Reduction:
- FY2026: $104 million reduction in general revenue
- FY2027: $35 million reduction in general revenue
- FY2028 and beyond: No expected general revenue impact

This estimate was based on federal projections for bonus depreciation.

Taxpayer Impact

If enacted, the bill would allow Arkansas taxpayers to utilize bonus depreciation in a manner consistent with federal tax law, potentially reducing their taxable income and tax liability in the year they acquire qualifying business assets.

Implementation Considerations

  • Resources Required: The Arkansas Department of Finance and Administration would need to update computer programs, tax forms, and instructions to accommodate the changes, with estimated programming costs of $10,000.

  • Education and Training: Department employees and the tax community would require education on the new provisions to ensure proper implementation.

Legislative Status

  • Introduced: February 17, 2025
  • Legislative Actions: The bill was read for the first time, rules were suspended, and it was referred to the Committee on Revenue & Taxation. However, it ultimately died in the House Committee at Sine Die adjournment on May 5, 2025.

Conclusion

While HB 1501 aimed to provide significant tax benefits to Arkansas businesses by aligning state tax law with federal provisions on depreciation and expensing, it did not progress beyond the committee stage and therefore did not become law.

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

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