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HB 1708

THE KEEP THE BONUS, AXE THE TAX: THE NO-TAX BONUS ACT.

2025 Regular Session Introduced by Alyssa Brown and 5 co-sponsors

HB 1708 exempts certain employee bonuses from state income tax, benefiting about 650,000 taxpayers and encouraging employers to offer bonuses without tax concerns.

Died in House Committee at Sine Die adjournment.
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WeVote Research Nonpartisan
Bill Summary · HB 1708

Summary of HB 1708: The Keep the Bonus, Axe the Tax: The No-Tax Bonus Act

Purpose and Intent

House Bill 1708, titled "The Keep the Bonus, Axe the Tax: The No-Tax Bonus Act," was introduced to provide a state income tax exemption for certain types of employee bonuses. The primary goal of the bill is to alleviate the tax burden on employees receiving bonuses, thereby encouraging employers to offer such incentives without the added tax implications.

Key Provisions

  • Definition of Bonus: The bill defines a "bonus" as a payment that:

    • Is in addition to regular or overtime wages.
    • Is nonrecurring.
    • Does not increase the employee's base rate of pay.
    • Does not include a commitment for payment in subsequent years.

  • Tax Exemption: Bonuses as defined in the bill would be exempt from Arkansas individual income tax.

  • Effective Date: The provisions of the bill would take effect for tax years beginning on or after January 1, 2026.

Fiscal Impact

  • The bill is projected to reduce general revenue by:

    • $16.3 million in FY2026.
    • $32.6 million in FY2027.

  • This fiscal impact estimate is based on the average income in Arkansas ($51,250) and an average bonus percentage of 2.8%, resulting in an average bonus of approximately $1,435. It is estimated that around 650,000 Arkansas taxpayers would be affected, including those receiving longevity bonuses, hiring bonuses, and performance bonuses.

Affected Parties

  • Employees: Approximately 650,000 Arkansas taxpayers who receive various types of bonuses would benefit from the tax exemption.
  • Employers: The bill may encourage employers to provide bonuses without the concern of tax implications for their employees.

Procedural and Implementation Aspects

  • Resources Required: Implementation would require updates to computer programs, tax forms, and instructions, with estimated programming costs of $4,000.
  • Education and Training: Department employees and the tax community would need to be educated about the new provisions to ensure proper implementation.

Legislative Status

  • Introduced: March 6, 2025
  • Status: The bill died in the House Committee at Sine Die adjournment on May 5, 2025.

This summary provides an overview of HB 1708, detailing its intent, provisions, fiscal implications, and the parties affected. Despite its potential benefits, the bill did not progress through the legislative process.

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

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