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HB 1687

TO PROVIDE THAT A WATER AUTHORITY IS EXEMPT FROM ALL EXCISE TAXES.

2025 Regular Session Introduced by Bart Hester and 1 co-sponsor

House Bill 1687 aimed to exempt Arkansas water authorities from excise taxes, boosting their service capacity but risking $21 million in state tax revenue by FY2027.

Died in House Committee at Sine Die adjournment.
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Bill Summary · HB 1687

Summary of House Bill 1687 (HB 1687)

Purpose and Intent

House Bill 1687 (HB 1687) was introduced to amend the existing Water Authority Act in Arkansas. The primary intent of the bill was to expand tax exemptions for water authorities, specifically by exempting them from all excise taxes. This change aimed to alleviate the financial burden on water authorities, thereby potentially enhancing their capacity to provide essential water services.

Key Provisions

  • Tax Exemptions:

    • The bill proposed that all property owned by a water authority and all income generated from its projects would be exempt from ad valorem taxation.
    • Additionally, it aimed to exempt water authorities from all forms of excise taxes.

  • Effective Date:

    • The provisions of the bill were set to take effect on the first day of the calendar quarter following the act's effective date.

Fiscal Impact

The fiscal impact of HB 1687 was significant, with estimates indicating a loss of state sales and use tax revenue:
- FY2026: Approximately $13.65 million in total state sales and use tax loss.
- Breakdown:
- General Revenue: $9.17 million
- Property Tax Relief: $1.02 million
- Other funds (Conservation Fund, Educational Adequacy Fund, etc.): Remaining amounts totaling approximately $3.46 million.

  • FY2027: Estimated total state sales and use tax loss increased to approximately $21.09 million.

Local city and county sales and use tax losses were also projected to be significant, amounting to approximately $6.93 million in FY2026 and $10.71 million in FY2027.

Affected Parties

  • Water Authorities: The primary beneficiaries of this bill would be water authorities formed under Arkansas law, which would gain substantial tax relief.
  • State and Local Governments: The bill would result in reduced tax revenue for state and local governments, impacting various funds, including education and infrastructure.

Procedural Aspects

  • Legislative Journey:
    • HB 1687 was filed on March 5, 2025, and was referred to the House Committee on Revenue & Taxation.
    • The bill ultimately died in the House Committee at Sine Die adjournment on May 5, 2025, meaning it did not progress to a vote.

Conclusion

While HB 1687 aimed to provide significant tax relief to water authorities in Arkansas, its failure to advance through the legislative process means that the proposed changes will not be implemented. The fiscal implications of the bill highlighted the potential impact on state and local revenue, raising questions about the balance between supporting public utilities and maintaining tax revenue for essential services.

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

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