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HB 1657

Sales tax; exempt.

2025 Regular Session

HB 1657 tightens Arkansas wood energy credits: cuts rate to 20%, raises min investment to $1B and 400 new jobs, narrowing who qualifies while expanding eligible byproducts.

Died In Committee
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Bill Summary · HB 1657

Summary — HB 1657 (Arkansas): Amendment to Wood Energy Products & Forest Maintenance Income Tax Credit

Purpose / Intent

HB 1657 would amend the Arkansas Wood Energy Products and Forest Maintenance Income Tax Credit (Act 594 of 2021) to broaden incentives for facilities that convert low‑value wood and wood byproducts (including bark) into energy or energy‑related products, while changing investment, job, and credit-rate thresholds. The stated goals are to increase use of sawmill residuals and wood byproducts, support the timber industry, encourage capital investment, and preserve healthy forests.

Key provisions

  • Expands the definition of a “qualified wood energy products and forest maintenance project” to explicitly include facilities that use wood byproducts (including bark) to produce energy or energy‑use products.
  • Broadens qualifying machinery (“wood energy products equipment”) to include equipment that converts wood byproducts (including bark) into raw materials, productive energy use, or feedstock for other manufacturing; excludes highway‑licensed vehicles/trailers.
  • Reduces the credit rate from 30% to 20% of the costs of qualifying wood energy equipment purchased for use in Arkansas.
  • Raises the minimum required project investment from $50,000,000 to $1,000,000,000 (the statute permits use of a projected investment).
  • Raises required net new full‑time permanent jobs from 100 to 400, with an average annual wage requirement of at least $60,000.
  • Extends the project “closing date” deadline for certification from December 31, 2023 to June 30, 2028.
  • Updates annual reporting/notice dates (shifts certain “beginning July 1, 2021” references to beginning July 1, 2026).
  • Retains existing program features: credits may be sold, may carry forward indefinitely, annual redemptions limited (statute cap referenced elsewhere at up to $5,000,000 redeemed per year), and certification requires a positive cost‑benefit analysis and an incentive agreement with performance/clawback terms.

Who is affected

  • Private sector: sawmills, timber/wood product companies, energy producers using wood byproducts, and taxpayers purchasing qualifying equipment (manufacturers/investors who meet the higher investment and job thresholds).
  • State agencies: Arkansas Economic Development Commission (AEDC) and Department of Finance & Administration (DFA) — responsible for certification, incentive agreements, cost‑benefit review, and tax administration.
  • Public retirement systems (if they hold credits) — reporting and possible sale provisions remain in statute.

Fiscal and administrative impact

  • DFA fiscal note: estimated to be revenue neutral.
  • Administrative cost: Arkansas Integrated Revenue System (AIRS) programming and updates estimated at ~$20,000; forms and guidance would need revision and staff/community education.
  • Program specifics retained: credits limited to lesser of $5,000,000 or tax liability per taxpayer per year; state may purchase credits from public retirement systems (statutory mechanism described in Act 594).

Effective date & deadlines

  • Effective for tax years beginning on or after January 1, 2026.
  • Projects must have a certified closing date no later than June 30, 2028.
  • Construction commencement for eligible projects may not be earlier than January 1, 2020 (per statutory language carried forward).

Procedural status / note on records

The provided materials include the bill text, DFA fiscal statements, and a legislative action log that contains conflicting entries (some indicating engrossment and Act numbers, others indicating referral and “Died In Committee”). The header supplied with your request lists the bill status as “Died In Committee.” Because the record excerpts contain inconsistencies, please verify the bill’s final procedural status with the Arkansas Legislature’s official bill tracking or the legislature’s website before relying on enactment or current law.

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

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