Arkansas Tax Changes - December 2024
Week Of 12.09.2024
Corporate Income Tax
- Court Ruling: The Arkansas Supreme Court upheld a corporate taxpayer's claim for a substantial income tax refund.
- Background: The taxpayer, involved in selling retail motor-fuel products and convenience-store items, underwent a spin-off funded by a $650 million distribution from its new parent company, which was financed through borrowed funds.
- Interest Expense Allocation: The taxpayer allocated 100% of the interest expenses from these borrowed funds to Arkansas, its domicile state, and sought a refund.
- Court's Decision: The court determined that the spin-off transactions were not part of the taxpayer's regular business activities, thus not qualifying as "business income" under Arkansas law (Ark. Code Ann. 26-51-701). The case is documented as Hudson v. Murphy Oil USA, Inc., Ark. S. Ct., Dkt. No. CV-24-8, dated December 12, 2024.
Personal Income Tax Updates
- Withholding Tax Instructions: The Arkansas Department of Finance and Administration released updated employer withholding tax instructions, effective January 1, 2025. This publication outlines:
- Employer tax responsibilities
- Requirements for withholding, depositing, reporting, and correcting withholding taxes
- Termination of business responsibilities
- Tax form and record-keeping requirements
- Regular Income Tax Tables: The withholding tax regular income tax tables have been updated, effective January 1, 2025. These tables provide information based on:
- Weekly, biweekly, semimonthly, and monthly payroll periods
- Wages and the number of exemptions
- Low-Income Tax Tables: The withholding tax low-income tax tables have also been updated, effective January 1, 2025. These tables reflect:
- Withholding information for various payroll periods
- Filing status (single, head of household/qualifying widow(er), or married)
- The number of dependents
Week Of 12.09.2024
Arkansas Corporate Income Tax—Arkansas Supreme Court upholds corporate income tax refund claim.
The Arkansas Supreme Court has affirmed the circuit court's grant of summary judgment to a corporate taxpayer, resulting in a substantial income tax refund. The taxpayer's business was selling retail motor-fuel products and convenience-store items. To fund a spin-off of the taxpayer, the taxpayer's new parent made a $650 million distribution to the existing parent using the proceeds from borrowed funds received from the taxpayer. The taxpayer then paid the interest expense on these borrowed funds. The taxpayer had allocated 100% of these interest expenses to Arkansas, its domicile state, and requested a refund. Because existing Arkansas law adopted the standard UDITPA definition of "business income" and "nonbusiness income" (Ark. Code Ann. 26-51-701), the court focused on the nature of the taxpayer's business when determining whether activity is "business income" under the traditional transactional and functional tests. The court decided that the spin-off transactions and activity were not made in the regular course of the taxpayer's business and the spin-off was not the acquisition, management, and disposition of property that constituted integral parts of the taxpayer's regular business. (Hudson v. Murphy Oil USA, Inc., Ark. S. Ct., Dkt. No. CV-24-8, 12/12/2024.)
Arkansas Personal Income Tax—Arkansas releases 2025 withholding tax instructions.
The Arkansas Department of Finance and Administration has released the withholding tax employer's instructions, effective January 1, 2025. The publication explains employer tax responsibilities; the requirements for withholding, depositing, reporting, paying, and correcting withholding taxes; termination of business responsibilities; tax form requirements; and record keeping requirements. (Withholding Tax Employer's Instructions, Arkansas Department of Finance and Administration, 12/10/2024.)
Arkansas Personal Income Tax—Arkansas updates withholding tax regular income tax tables for 2025.
The Arkansas Department of Finance and Administration has updated the employer Withholding Tax Regular Income Tax Tables, effective January 1, 2025. The tables reflect the weekly, biweekly, semimonthly, and monthly payroll periods based on wages and the number of exemptions. (Withholding Tax Regular Income Tax Tables, Arkansas Department of Finance and Administration, 12/10/2024.)
Arkansas Personal Income Tax—Arkansas 2025 withholding tax low-income tax tables updated.
The Arkansas Department of Finance and Administration has updated the Withholding Tax Low-Income Tax Tables, effective January 1, 2025. The tables reflect withholding information for weekly, biweekly, semimonthly, and monthly payroll periods based on wages; filing status as single, head of household/qualifying widow(er), or married; and the number of dependents. (Withholding Tax Low Income Tax Tables, Arkansas Department of Finance and Administration, 12/10/2024.)
Arkansas Personal Income Tax—Arkansas updates formula method for calculating withholding tax for 2025.
The Arkansas Department of Finance and Administration has updated guidance on the Withholding Tax Formula Method, effective January 1, 2025. Employers having electronic systems are authorized to use the formula to compute the amount of withholding rather than use the withholding tables. The publication contains the applicable tax brackets as well as sample calculations to assist employers in making accurate computations based on monthly, semi-monthly, bi-weekly, weekly, and daily gross pay. (Withholding Tax Formula Method, Arkansas Department of Finance and Administration, 12/10/2024.)
Week Of 12.09.2024
Arkansas Corporate Income Tax—Arkansas Supreme Court upholds corporate income tax refund claim.
The Arkansas Supreme Court has affirmed the circuit court's grant of summary judgment to a corporate taxpayer, resulting in a substantial income tax refund. The taxpayer's business was selling retail motor-fuel products and convenience-store items. To fund a spin-off of the taxpayer, the taxpayer's new parent made a $650 million distribution to the existing parent using the proceeds from borrowed funds received from the taxpayer. The taxpayer then paid the interest expense on these borrowed funds. The taxpayer had allocated 100% of these interest expenses to Arkansas, its domicile state, and requested a refund. Because existing Arkansas law adopted the standard UDITPA definition of "business income" and "nonbusiness income" (Ark. Code Ann. 26-51-701), the court focused on the nature of the taxpayer's business when determining whether activity is "business income" under the traditional transactional and functional tests. The court decided that the spin-off transactions and activity were not made in the regular course of the taxpayer's business and the spin-off was not the acquisition, management, and disposition of property that constituted integral parts of the taxpayer's regular business. (Hudson v. Murphy Oil USA, Inc., Ark. S. Ct., Dkt. No. CV-24-8, 12/12/2024.)
Arkansas Personal Income Tax—Arkansas releases 2025 withholding tax instructions.
The Arkansas Department of Finance and Administration has released the withholding tax employer's instructions, effective January 1, 2025. The publication explains employer tax responsibilities; the requirements for withholding, depositing, reporting, paying, and correcting withholding taxes; termination of business responsibilities; tax form requirements; and record keeping requirements. (Withholding Tax Employer's Instructions, Arkansas Department of Finance and Administration, 12/10/2024.)
Arkansas Personal Income Tax—Arkansas updates withholding tax regular income tax tables for 2025.
The Arkansas Department of Finance and Administration has updated the employer Withholding Tax Regular Income Tax Tables, effective January 1, 2025. The tables reflect the weekly, biweekly, semimonthly, and monthly payroll periods based on wages and the number of exemptions. (Withholding Tax Regular Income Tax Tables, Arkansas Department of Finance and Administration, 12/10/2024.)
Arkansas Personal Income Tax—Arkansas 2025 withholding tax low-income tax tables updated.
The Arkansas Department of Finance and Administration has updated the Withholding Tax Low-Income Tax Tables, effective January 1, 2025. The tables reflect withholding information for weekly, biweekly, semimonthly, and monthly payroll periods based on wages; filing status as single, head of household/qualifying widow(er), or married; and the number of dependents. (Withholding Tax Low Income Tax Tables, Arkansas Department of Finance and Administration, 12/10/2024.)
Arkansas Personal Income Tax—Arkansas updates formula method for calculating withholding tax for 2025.
The Arkansas Department of Finance and Administration has updated guidance on the Withholding Tax Formula Method, effective January 1, 2025. Employers having electronic systems are authorized to use the formula to compute the amount of withholding rather than use the withholding tables. The publication contains the applicable tax brackets as well as sample calculations to assist employers in making accurate computations based on monthly, semi-monthly, bi-weekly, weekly, and daily gross pay. (Withholding Tax Formula Method, Arkansas Department of Finance and Administration, 12/10/2024.)