§ 15-4-1906 - Refund of sales and use tax -- Income tax credit. - Arkansas Statutes

15-4-1906. Refund of sales and use tax -- Income tax credit.

(a) (1) The Revenue Division of the Department of Finance and Administration shall authorize a refund of sales and use taxes imposed by the state and a municipality or county if the municipality or county authorized the refund of its local tax on the purchases of the material used in the construction of a building or buildings or any addition or improvement thereon for housing any legitimate business enterprise and machinery and equipment to be located in or in connection with such a building.

(2) A refund shall not be authorized for routine operating expenditures.

(3) (A) (i) A refund shall not be authorized for the purchase of replacements of items previously purchased as part of a project under this subchapter unless the items previously purchased will not enable the project to function as originally intended.

(ii) In order to qualify for a refund under this subchapter, the replacement of an item previously purchased must be necessary for the implementation or completion of the project.

(B) However, a program participant may make changes in a project by amendment to the financial incentive plan entered into with the Arkansas Economic Development Commission.

(4) (A) All claims for sales and use tax refunds under this subchapter shall be filed with the division within three (3) years from the date of the qualified purchase or purchases.

(B) Claims filed after three (3) years from the date of the qualified purchase or purchases shall be disallowed.

(5) (A) The time limitation in this section for filing claims shall be tolled if:

(i) A program participant fails to pay sales or use tax on an item that was taxable; and

(ii) The applicable tax is subsequently assessed as a result of an audit by the division.

(B) All claims for sales and use tax refunds relating to an audited purchase shall be filed with the division within one (1) year after payment of the assessed tax or the date of a final administrative or judicial order, whichever is later.

(6) A program participant that files a claim for a sales or use tax refund relating to an audited purchase shall be entitled to a refund of interest paid on the amount of tax assessed on the audited purchase if a refund is approved for the purchase.

(b) (1) A sales and use tax refund as provided for in subsection (a) of this section shall be authorized, provided that:

(A) The company is an eligible business as defined in 15-4-1902;

(B) The business and its contractors give preference and priority to Arkansas manufacturers, suppliers, contractors, and labor, except when it is not reasonably possible to do so without added expense, substantial inconvenience, or sacrifice in operational efficiency; and

(C) (i) The business:

(a) Files an endorsement resolution with the commission and the Department of Finance and Administration; and

(b) Files with the department a copy of the financial incentive plan the business entered into with the commission.

(ii) The endorsement resolution must be approved by the governing body of a municipality or county in whose jurisdiction the facility is located and must:

(a) Approve the specific entity's participation in the program; and

(b) (1) Specifically state whether the municipality or county authorizes the commission to refund local sales and use taxes to the entity under the program.

(2 ) A municipality or county can authorize the refund of all or part of a tax levied by it but cannot authorize the refund of any tax not levied by it.

(2) (A) The requisite number of net new full-time permanent employees must be employed by the business within twenty-four (24) months following the date the financial incentive plan was signed.

(B) In the event that the requisite number of net new full-time permanent employees cannot be employed within the twenty-four-month period, the business can file a written application with the commission explaining why additional time is necessary. The business can be afforded up to twenty-four (24) more months to hire the requisite number of employees if the Director of the Arkansas Economic Development Commission and the Chief Fiscal Officer of the State determine that the need for additional time is due to:

(i) Unanticipated and unavoidable delay in the construction of a facility that must be completed before the employees can be hired;

(ii) The project as originally planned will require more than twenty-four (24) months to complete; or

(iii) A change in the business ownership or business structure due to a merger or acquisition.

(c) (1) (A) The division shall authorize an income tax credit based on the total investment in land, buildings, and equipment divided by the term of the financial incentive plan for each tax year.

(B) (i) The amount of income tax credit taken during any tax year shall not exceed the Arkansas income tax liability resulting from the project plant or facility.

(ii) The income tax liability of the project plant or facility shall be determined by adding the sales factor, the payroll factor, and the property factor of the plant or facility and dividing the sum by three (3) to arrive at the project apportionment percentage. The total Arkansas corporate income tax liability of the corporation shall be multiplied by the project apportionment percentage to arrive at the income tax liability arising from the project.

(iii) The income tax credit available may then be used to offset the income tax liability arising from the project as agreed upon in the financial incentive plan.

(2) However, if the entire credit cannot be used in the year earned, the remainder may be applied against the income tax for the succeeding nine (9) tax years or until the financial incentive plan expires, whichever occurs first.

(d) An income tax credit as provided for in subsection (c) of this section shall be authorized, provided that:

(1) The request for such a credit is accompanied by an endorsement resolution approved by the governing body of the appropriate municipality or county in whose jurisdiction the establishment is to be located and a copy of the financial incentive plan the business entered into with the commission;

(2) All of the net new full-time permanent employees are employed at the facility; and

(3) Benefits for the same project are not being claimed under the Arkansas Economic Development Incentive Act of 1993, 15-4-1601 et seq.

(e) (1) (A) If the number of net new full-time permanent employees drops below one hundred (100) after twenty-four (24) months from the date the financial incentive plan is signed, all benefits under the financial incentive plan will be terminated unless the Chief Fiscal Officer of the State approves a written request filed by the business explaining why the number of net new full-time permanent employees fell below one hundred (100).

(B) The Chief Fiscal Officer of the State may grant the business up to twenty-four (24) months to bring the number of net new full-time permanent employees back up to at least one hundred (100) and may approve the continuation of the benefits during that period.

(2) In the event that a business fails to notify the department that the number of employees has fallen below one hundred (100) or that the average hourly wage has fallen below the amount specified in the financial incentive plan, the business will be liable for the repayment of all benefits which were received by the business, plus penalty and interest.

(f) (1) Any business receiving benefits under this program shall be liable for the repayment of any benefits received, plus penalty and interest, if it does not comply with:

(A) The terms of the financial incentive plan;

(B) The requirements of this subchapter; or

(C) Any rule or regulation promulgated pursuant to this subchapter.

(2) The Chief Fiscal Officer of the State may bring any lawful action to recover any amount for which the recipient is liable.