§ 26-51-504 - Arkansas Statutes

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Credit for Taxes Paid to Another State

26-51-504. Income from sources outside Arkansas.

(a) (1) For the purpose of ascertaining the income tax due by an individual resident of Arkansas whose gross income includes income derived from property located outside the State of Arkansas, or from business transacted outside the State of Arkansas, the tax shall first be computed as if all of the income of the resident were derived from sources within the State of Arkansas, but a credit shall then be given on the tax as so computed, for the amount of income tax actually owed by the resident for the year to any other state or territory on account of income from property owned or business transacted in the other state or territory. However, credit shall not exceed what the tax would be on the outside income, if added to the Arkansas income, and calculated at Arkansas income tax rates.

(2) (A) For purposes of subdivision (a)(1) of this section, the amount of income tax owed to any other state or territory by a resident shareholder of an S corporation shall be considered to include an amount equal to the shareholder's pro rata share of any net income tax owed by the S corporation to a state which does not recognize S corporations.

(B) For purposes of subdivision (a)(2)(A) of this section, the term "net income tax" means any tax imposed on or measured by a corporation's net income.

(b) Before a resident of Arkansas may claim the credit allowed under this section, he shall file with his income tax return any such additional information as the Director of the State Income Tax Division or the Director of the Department of Finance and Administration may by regulation require showing in detail the amount of gross and net income derived from property owned or business transacted without this state, together with the amount of tax actually owed on the income to another state or territory.

(c) The credit against Arkansas income tax afforded individual residents of Arkansas under this section shall also be available to fiduciaries and partnerships residing or domiciled in Arkansas which are subject to Arkansas income tax or which have to report income for purposes of Arkansas income tax.