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Arkansas Direct Financial Incentives 2011

Arkansas' economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include industrial revenue bonds, industrial revenue bond guarantees, and a Community Development Block Grant Program.

March 2011
(page 4 of 5)
Research and development incentives:
Arkansas provides a 33 percent income tax credit for taxpayers who pay for research performed at Arkansas universities. In addition, a 20 percent income tax credit is available for eligible businesses performing in-house research. Targeted businesses may also earn transferable income tax credits equal to 33 percent of approved expenditures for in-house research.

Equity Investment Incentive Act:
The Equity Investment Incentive Program is a discretionary incentive and is targeted toward new, technology-based businesses that pay wages in excess of the state or county average wage. If offered, this program allows an approved business to offer an income tax credit to investors purchasing an equity investment in the business. The income tax credits issued under this program are equal to 33 1/3 percent of the approved amount invested by an investor in an eligible business. Any unused credit may be carried forward for nine years.

Childcare facility tax incentives:
Companies can receive a sales and use tax refund on the initial cost for construction materials and furnishings purchased to build and equip an approved child-care facility.

A corporate income tax credit of 3.9 percent of the total annual payroll of the workers employed exclusively to provide childcare services, or a $5,000 income tax credit for the first year the business provides its employees with a day-care facility is also available.

Non-Profit Incentive Program:
Offered at the discretion of the executive director of the Arkansas Economic Development Commission, this incentive encourages the location or expansion of national or regional nonprofit headquarters in Arkansas. An eligible organization must create a payroll for new, fulltime, permanent employees of at least $500,000, pay an average wage in excess of 110 percent of the state or county average wage (whichever is less) in the county in which the organization locates or expands, and receive 75 percent of its income from out-of-state sources. This program provides a payroll rebate equal to four percent of the payroll of the new, full-time, permanent employees for a period of up to five years. For projects that invest a minimum of $250,000, it also provides a refund for sales and use taxes paid on construction materials, machinery and equipment.

Goods in transit:
New aircraft manufactured or substantially completed within the state and sold for use outside the state are exempt from the sales tax. An exemption from the use tax is allowed for aircraft and aircraft equipment, railroad cars, parts and equipment, and property leased by the railroad and aircraft companies if these items are brought into the state for refurbishing and removed from the state within 60 days, or if they are stored in the state for use outside the state.

Freeport law:
Raw materials and finished goods in transit or awaiting shipment to out-of-state customers are exempt from property tax.

Machinery and equipment:
An exemption from sales and use taxes is provided for machinery and equipment used directly in manufacturing and purchased for a new manufacturing facility or to replace existing machinery or equipment. Machinery and equipment required by Arkansas law to be purchased for air- or water-pollution control are also exempt.

Industrial fuels and raw materials:
Property that becomes a recognizable, integral part of property manufactured, compounded, processed, or assembled for resale is exempt from sales and use taxes.

Crude oil, electricity used in the production of aluminum metal by the electrolytic reduction process, and fuel for railroads are exempt from sales and use taxes.

Catalysts, chemicals, re-agents and solutions consumed or used in producing, manufacturing, fabricating, processing, or furnishing articles of commerce at manufacturing or processing plants or facilities and/or to prevent or reduce air, water and other contamination are also exempt from sales and use tax.