An act TO AMEND THE CONSOLIDATED INCENTIVE ACT OF 10 2003, the official text

Stricken language would be deleted from and underlined language would be added to present law.

1 State of Arkansas         As Engrossed: H4/8/25
2 95th General Assembly
                                 A Bill

3 Regular Session, 2025                                            HOUSE BILL 1935

4

5 By: Representative Eaves

6 By: Senator Gilmore

7

8                           For An Act To Be Entitled

9               AN ACT TO AMEND THE CONSOLIDATED INCENTIVE ACT OF

10              2003; TO CREATE A MODERNIZATION AND AUTOMATION TAX

11              CREDIT TO ENCOURAGE INVESTMENT BY EXISTING BUSINESSES

12              WITHIN THE STATE; AND FOR OTHER PURPOSES.

13

14

15                          Subtitle

16                       TO CREATE A MODERNIZATION AND AUTOMATION

17                       TAX CREDIT TO ENCOURAGE INVESTMENT BY

18                       EXISTING BUSINESSES WITHIN THE STATE.

19

20 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:

21

22  SECTION 1. Arkansas Code � 15-4-2703(29)(C), concerning the definition

23 of "project costs" under the Consolidated Incentive Act of 2003, is amended

24 to read as follows:

25                       (C) Eligible project costs must be incurred within:

26                          (i) Four (4) years from the date a financial

27 incentive agreement was approved by the commission; or

28                          (ii) Six (6) years from the date a financial

29 incentive agreement was approved by the commission in connection with a

30 project qualifying for retention tax credits under � 15-4-2706(c)(1)(A) and

31 approved on or after June 22, 2017 a modernization and automation tax credit

32 under � 15-4-2706(c);

33

34  SECTION 2. Arkansas Code � 15-4-2706(c), concerning investment tax

35 incentives under the Consolidated Incentive Act of 2003, is amended to read

36 as follows:

    *JLL164*                                                       04-08-2025 09:40:08 JLL164
    As Engrossed: H4/8/25                                                  HB1935

1   (c)(1)(A) An application for a retention modernization and automation

2 tax credit under this subsection shall be submitted to the commission.

3   (B)(i) The application shall be submitted to the

4 commission before incurring any project costs are incurred.

5                          (ii) With the exception of preconstruction costs,

6 only those project costs incurred after the commission's approval of the

7 application are eligible for the modernization and automation tax credit.

8   (C) Upon the approval of the application, the commission

9 shall execute a financial incentive agreement with the applicant that shall:

10                         (i) Require that the project forming the basis of

11 the application be completed within six (6) years from the date of the

12 execution of the financial incentive agreement;

13                         (ii) Require that the applicant maintain within the

14 state the current yearly average level of payroll and employment during the

15 course of the project and for twenty-four (24) months after the termination

16 of the project; and

17                         (iii) Contain a forfeiture provision that requires

18 an applicant to return any modernization and automation tax credits claimed

19 for the project if the applicant is found to have breached the financial

20 incentive agreement.

21  (2) The modernization and automation tax credit against the

22 qualified business's sales and use tax liability under this subsection is

23 available only to Arkansas businesses that:

24  (A) Have been in continuous operation in the state for at

25 least two (2) years;

26  (B) Invest Incur a minimum of five twenty-five million

27 dollars ($5,000,000) ($25,000,000) in a project costs, including land,

28 buildings, and equipment used in the construction, expansion, or

29 modernization; and

30  (C) Hold a direct-pay sales and use tax permit from the

31 department before submitting an application for incentives; and

32  (D) Have received a positive cost-benefit analysis from

33 the commission for the project that forms the basis of the businesses'

34 financial incentive agreement.

35  (3)(A) If allowed, the modernization and automation tax credit

36 shall be a percentage up to five percent (5%) of the eligible project costs.

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    As Engrossed: H4/8/25                                                   HB1935

1             (B) The amount of the credit shall be five-tenths percent

2 (0.5%) above the state sales and use tax rate in effect at the time a

3 financial incentive agreement is signed with the commission The maximum

4 modernization and automation tax credit that may be used in a fiscal year by

5 an applicant is two million dollars ($2,000,000).

6             (C) In any one (1) year following the year of the

7 expenditures, credits taken cannot exceed fifty percent (50%) of the direct

8 pay sales and use tax liability of the qualified business for taxable

9 purchases.

10            (D) Unused modernization and automation tax credits may be

11 carried forward for a period of up to five (5) years beyond the year in which

12 the modernization and automation tax credit was first earned.

13            (E) Retention tax credits earned between forty-nine (49)

14 and seventy-two (72) months after the commission approved the financial

15 incentive agreement may be taken only:

16                         (i) On and after July 1, 2023;

17                         (ii) After the director has determined, based on

18 evidence provided by the applicant, that the applicant's investment in the

19 part of the qualified project to be completed between forty-nine (49) and

20 seventy-two (72) months after the commission approved the financial incentive

21 agreement will generate a return that will likely be equal to or greater than

22 the amount of retention tax credits under this subdivision (c)(3)(E); and

23                         (iii) For an application filed with the commission

24 between June 22, 2017, and June 28, 2017.

25            (F) The maximum amount of retention tax credits under

26 subdivision (c)(3)(E) of this section that may be used in any fiscal year by

27 a qualified applicant is seven hundred fifty thousand dollars ($750,000).

28            (4)(A) Upon determination by the director determining that the a

29 project qualifies is eligible for a modernization and automation tax credit

30 under this subsection, the director shall certify to the Secretary of the

31 Department of Finance and Administration that the project qualifies and shall

32 transmit with his or her certification the documents or copies of the

33 documents upon which the certification was based.

34            (B) The secretary department shall provide forms to the

35 qualified business on which to claim the modernization and automation tax

36 credit.

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    As Engrossed: H4/8/25                                                   HB1935

1               (C) At the end of the calendar year in which the

2 application is made and at the end of each calendar year thereafter until the

3 project is completed, the qualified business shall certify on the form forms

4 provided by the secretary department the amount of expenditures on the

5 project costs incurred during the preceding calendar year.

6               (D) Upon receipt of the form certifying expenditures the

7 project costs, the secretary department shall determine the amount due as a

8 credit for the preceding calendar year and issue a memorandum of credit to

9 the qualified business.

10              (E) The credit against the qualified business's sales and

11 use tax liability shall be a percentage of the eligible project costs equal

12 to five-tenths percent (0.5%) above the state sales and use tax rate in

13 effect at the time the financial incentive agreement was approved by the

14 commission.

15              (5) If a business plans to apply for incentives applies for a

16 modernization and automation tax credit under this subsection and also plans

17 to apply for incentives a job-creation tax credit under � 15-4-2705, the

18 financial incentive agreement under � 15-4-2705 agreements for the incentives

19 shall be approved within two (2) years after signing the financial incentive

20 agreement under this subsection one (1) year of each other.

21              (6) A qualified business that enters into a lease for leases a

22 building or equipment for a period of at least five (5) years may count the

23 lease payments for the first five (5) years as a qualifying expenditure for

24 the investment threshold required for this investment incentive.

25              (7)(A) A business may apply for the retention tax credit under

26 this subsection through June 30, 2017.

27              (B)(i) An application for the retention tax credit under

28 this subsection shall not be accepted on or after July 1, 2017.

29                         (ii) However, projects that qualify for a retention

30 tax credit based on an application filed through June 30, 2017, shall

31 continue to earn credits as provided in this section.

32                         (iii) Retention tax credits issued on a project that

33 qualifies for retention tax credits based on an application filed through

34 June 30, 2017, shall remain in effect and shall be taken and carried forward

35 as otherwise provided in this section.

36

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    As Engrossed: H4/8/25                                                 HB1935

1   SECTION 3. Arkansas Code � 15-4-2712(b)(6), concerning restrictions on

2 the use of incentives under the Consolidated Incentive Act of 2003, is

3 amended to read as follows:

4            (6) The investment tax credit authorized under � 15-4-2706(b)

5 shall not be combined with the sales and use tax credit modernization and

6 automation tax credit authorized under � 15-4-2706(c) for the same project.

7

8   SECTION 4. Arkansas Code � 15-4-3501(g), concerning the increased tax

9 refund for major maintenance and improvement projects, is amended to read as

10 follows:

11  (g) An expenditure shall not qualify for both the increased refund for

12 major maintenance and improvement projects under this section and the

13 retention modernization and automation tax credit provided for in � 15-4-

14 2706(c).

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16  SECTION 5. EFFECTIVE DATE. Sections 1-4 of this act are effective on

17 and after October 1, 2025.

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19                             /s/Eaves

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