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HB 1750

TO REPEAL THE ARKANSAS CORPORATE FRANCHISE TAX ACT OF 1979; AND TO MAKE CONFORMING CHANGES.

2025 Regular Session Introduced by Fran Cavenaugh and 1 co-sponsor

HB 1750 aimed to repeal Arkansas' corporate franchise tax, easing financial burdens on businesses but potentially cutting state revenue by $36 million for FY2026.

Died in House Committee at Sine Die adjournment.
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Bill Summary · HB 1750

Summary of HB 1750: Repeal of the Arkansas Corporate Franchise Tax Act of 1979

Bill Overview

  • Bill Number: HB 1750
  • Title: To Repeal the Arkansas Corporate Franchise Tax Act of 1979; and to Make Conforming Changes.
  • Introduced: March 12, 2025
  • Status: Died in House Committee at Sine Die adjournment on May 5, 2025.
  • Sponsors: Representative Cavenaugh and Senator Crowell

Purpose and Intent

The primary purpose of HB 1750 is to repeal the Arkansas Corporate Franchise Tax Act of 1979, which imposes an annual franchise tax on corporations and limited liability companies (LLCs) operating within the state. The bill aims to alleviate the financial burden on businesses, particularly new and low-profit-margin enterprises, by eliminating a tax that is levied regardless of profitability.

Key Provisions

  • Repeal of Franchise Tax: The bill proposes the complete repeal of the Arkansas Corporate Franchise Tax Act, which requires corporations and LLCs to file annual franchise tax returns and pay a minimum tax of $150 for corporations and LLCs, and $300 for certain insurance companies.
  • Conforming Changes: The bill includes amendments to various sections of the Arkansas Code to remove references to the franchise tax, ensuring that all related legal requirements are updated to reflect the repeal.
  • Fiscal Impact:
    • Estimated reduction in General Revenue of $8 million for FY2026.
    • Estimated reduction in the Educational Adequacy Fund of $28 million for FY2026.
    • The fiscal impact is based on franchise tax collections from FY2024 and assumes the repeal would take effect for taxes due on May 1, 2026.

Impact on Stakeholders

  • Taxpayers: Corporations and LLCs would no longer be required to report and pay the franchise tax, potentially increasing their financial flexibility.
  • State Revenue: The repeal would significantly reduce state revenue from franchise taxes, impacting funding for state programs, particularly education through the Educational Adequacy Fund.
  • Administrative Changes: The Department of Finance and Administration would need to update computer programs, tax forms, and instructions to reflect the repeal. Additionally, education for department employees and the tax community would be necessary to implement the changes.

Procedural Aspects

  • The bill underwent several legislative actions, including being placed on second reading for amendment and being reported correctly engrossed. However, it ultimately did not progress past the House Committee stage and was declared dead at Sine Die adjournment on May 5, 2025.

Conclusion

HB 1750 aimed to eliminate the Arkansas Corporate Franchise Tax, reflecting a shift towards reducing the tax burden on businesses in the state. While it garnered initial support, the bill ultimately did not advance through the legislative process. The potential fiscal implications of such a repeal would have required careful consideration by lawmakers, particularly regarding the impact on state revenue and funding for essential services.

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

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