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HB 1538

TO AMEND THE LAW CONCERNING THE NET OPERATING LOSS INCOME TAX DEDUCTION; AND TO INCREASE THE CARRY-FORWARD PERIOD FOR THE NET OPERATING LOSS INCOME TAX DEDUCTION.

2025 Regular Session Introduced by David Ray

HB 1538 extends the net operating loss carry-forward period to 20 years for businesses, boosting competitiveness and job creation in Arkansas, but reduces revenue significantly.

Died in House Committee at Sine Die adjournment.
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Bill Summary · HB 1538

Summary of House Bill 1538 (HB 1538)

Purpose and Intent

House Bill 1538 (HB 1538) was introduced to amend the existing laws regarding the net operating loss (NOL) income tax deduction in Arkansas. The primary intent of the bill was to extend the carry-forward period for net operating losses, allowing businesses to offset future taxable income with losses incurred in previous years. This change aimed to enhance the competitiveness of Arkansas businesses, promote job creation, and provide fairness in the tax system.

Key Provisions

HB 1538 proposed the following significant changes to the net operating loss carry-forward provisions:

  • Extension of Carry-Forward Period:

    • For steel manufacturers: Extend the carry-forward period from 10 years to 20 years.
    • For qualified medical companies: Extend the carry-forward period from 15 years to 20 years.
    • For all other taxpayers: Extend the carry-forward period from 10 years to 20 years.

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

Fiscal Impact

The fiscal impact of HB 1538 was projected as follows:
- FY2037: $13 million reduction in general revenue
- FY2038: $26 million reduction in general revenue
- FY2039: $37 million reduction in general revenue
- FY2040: $48 million reduction in general revenue
- FY2041: $59 million reduction in general revenue
- FY2042: $68 million reduction in general revenue
- FY2043: $77 million reduction in general revenue
- FY2044: $85 million reduction in general revenue
- FY2045: $93 million reduction in general revenue
- FY2046: $100 million reduction in general revenue

Affected Parties

The bill would have benefited:
- Steel manufacturers and qualified medical companies that incur net operating losses.
- Other taxpayers eligible under specific Arkansas tax codes, allowing them to carry forward losses for up to 20 years.

Implementation Considerations

  • Resources Required: The implementation of the bill would necessitate updates to computer programs, tax forms, and instructions, with estimated programming costs of $10,000.
  • Education and Training: Department employees and the tax community would require education on the new provisions.

Legislative Status

  • Introduced: February 20, 2025
  • Died in House Committee: May 5, 2025, at Sine Die adjournment.

Despite its potential benefits for businesses, HB 1538 did not advance beyond the committee stage and ultimately did not become law.

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

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