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HB 1500

TO ENHANCE ECONOMIC COMPETITIVENESS BY REPEALING THE THROWBACK RULE.

2025 Regular Session Introduced by Howard Beaty and 1 co-sponsor

HB 1500 aimed to boost Arkansas's economy by repealing the throwback rule, reducing tax burdens on multistate corporations and encouraging investment and job creation.

Died in House Committee at Sine Die adjournment.
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Bill Summary · HB 1500

Summary of House Bill 1500 (HB 1500)

Title

To Enhance Economic Competitiveness by Repealing the Throwback Rule

Status

  • Current Status: Died in House Committee at Sine Die adjournment
  • Introduced: February 17, 2025

Purpose and Intent

House Bill 1500 aimed to enhance Arkansas's economic competitiveness by accelerating the repeal of the "throwback rule," which affects how multistate corporations calculate their income tax in Arkansas. The bill sought to encourage investment and job creation by eliminating a tax burden that was perceived to hinder economic growth.

Key Provisions

  • Repeal of the Throwback Rule:

    • The bill proposed to repeal the throwback rule for tax years beginning on or after January 1, 2025.
    • Under the current law, multistate corporations must include some out-of-state sales in their Arkansas income tax calculations, which could lead to "nowhere" income being taxed.
    • The repeal would mean that only sales of tangible personal property delivered to purchasers within Arkansas would be considered "in this state" for tax purposes.

  • Amendments to Tax Code:

    • The bill would amend Arkansas Code §§ 26-5-101 and 26-51-716 to reflect the changes in how sales are sourced for tax purposes.
    • The previous phase-out schedule established by Act 485 of 2023, which planned for the complete elimination of the throwback rule by 2030, would be accelerated to 2025.

Fiscal Impact

  • Estimated Revenue Reduction:
    • The repeal was projected to result in a general revenue reduction of approximately $63.5 million for FY2026.
    • This figure accounts for the overall cost of the phase-out, which was initially estimated at $74 million, minus the $10.5 million impact from the first year of the phase-out in 2024.

Taxpayer Impact

  • Beneficiaries:
    • Multistate corporations shipping tangible property from Arkansas to other states where they are not taxable would benefit from reduced tax liabilities due to the removal of the throwback rule.

Implementation Considerations

  • Resources Required:
    • Updates to computer programs, tax forms, and instructions would be necessary, with estimated programming costs of $8,000.
  • Timeframe for Implementation:
    • Adequate time was provided for the implementation of these changes.
  • Education and Training:
    • Department employees and the tax community would require education on the new provisions.

Legislative Actions

  • Key Dates:
    • February 17, 2025: Bill filed and referred to the Committee on Revenue & Taxation.
    • May 5, 2025: Bill died in House Committee at Sine Die adjournment.

Conclusion

HB 1500 represented an effort to streamline Arkansas's tax code for multistate corporations by repealing the throwback rule, thereby aiming to foster a more favorable business environment. However, the bill ultimately did not progress beyond the committee stage.

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

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