Form AR1100PET — Pass-Through Entity Tax Instructions (AR-PTET master)

# ARKANSAS

Pass-Through Entity Tax

# Instructions

Due Date: On or before the 15th day of the 4th month follow­ ing the close of the tax year. For calendar year filers, the due date is April 15th. Mailing Address: Physical Address: State of Arkansas

Pass-Through Entity Tax

# Pass-Through Entity Tax

1816 W 7th St, Room 2250 P.O. Box 919 Ledbetter Building Little Rock, Arkansas 72203-0919 Little Rock, AR 72201-1030

# TAX HELP AND FORMS

 Internet ATAP

You can access the Department of Finance and Administration's Arkansas Taxpayer Access Point (ATAP) allows taxpayers or website at www.dfa.arkansas.gov. their representatives to log on to a secure site and manage their account online. Get current year forms and instructions  Access latest income tax info and archived news Access ATAP at www.atap.arkansas.gov to:  You can e-mail questions to:   Make Tax Payments passthrough.entitytax@dfa.arkansas.gov  Make Estimated Tax Payments  Make name and address changes  View account letters (Registration is not required to make payments or to check refund status.)  Phone

 Mail General Information.................................................(501) 371-7692

State of Arkansas Representatives are available to assist callers at the number

# Pass-Through Entity Tax

above during normal business hours (Monday through

P. O. Box 919 Friday from 8:00 a.m. to 4:30 p.m.) with:

Little Rock, Arkansas 72203-0919  Taxpayer Assistance  Notices Received Be sure to apply sufficient postage or your return will not be  Forms  Amended Returns delivered by the U.S. Postal Service.  Audit and Examination  Payment Information Other useful phone numbers:

Corporation Income Tax.................. (501) 682-4775 Walk-In

Tax Credits...................................... (501) 682-7106

Withholding Tax............................... (501) 682-7290

Collections....................................... (501) 682-5000 Representatives are available to assist walk-in taxpayers

Revenue Legal Counsel.................. (501) 682-7030

Individual Income Tax...................... (501) 682-1100 with pass-through entity tax questions, but are not available to prepare your return.

Sales and Use Tax.......................... (501) 682-7104

Problem Resolution and.................. (501) 682-7751

Tax Information Office (Offers In Compromise) No appointment is necessary, but plan to arrive before 4:00 p.m. to allow sufficient time for assistance.

Internal Revenue Service................ (800) 829-1040

Social Security Administration......... (800) 772-1213 The Pass-Through Entity Tax Office is located at: 1816 W. 7th Street, Room 2250 Ledbetter Building, Little Rock, AR 72201

Forms Office hours are Monday through Friday from 8:00 a.m. to 4:30 p.m.

To obtain a booklet or forms you may:

1. Access our website at: https://www.dfa.arkansas.gov/office/taxes/income-tax-administration/pass-through-entity-tax/

2. Call: (501) 371-7692

# CONTENTS

Tax Help and Forms ..........................................................................................................2

Arkansas Elective Pass-Through Entity Tax.......................................................................4

What's New for 2025...........................................................................................................5

Important Reminders for 2025.........................................................................................6-8 Instructions:

General Information on filing Pass-Through Entity Return........................................9-10

Specific Line Instructions, AR1100PET....................................................................11-17

Schedule D - Arkansas Capital Gains...........................................................................18

Special Industry Apportionment Rules..............................................................................19

Allocated Income...............................................................................................................20

Financial Institutions..........................................................................................................21

# Arkansas Elective Pass-Through Entity Tax

What is the Pass-Through Entity Tax The Elective Pass-Through Entity Tax or PET Tax allows a partnership, Sub-S corporation or limited liability compa­ ny to file a single income tax return on behalf of the entity and pay the income tax on behalf of all owner members. The PET tax is not available to C corporations, qualified subchapter S subsidiaries, trusts, sole proprietorships or limited liability companies taxed as C corporations for federal income tax purposes. The PET tax is effective for tax years beginning on or after January 1, 2022. The PET tax rate for all taxpayers will be the same for all owner members and will be equal to the highest income tax rate for individuals. The tax rate on capital gains will be one half of the rate of tax on other types of income of an entity subject to the PET tax. For tax years beginning in 2024, the tax rate on income other than capital gains will be 3.9% and the tax rate for capital gains will be 1.95%. The due date for the PET tax will be the same as other income taxes and will be April 15 for calendar year filers. The PET tax is subject to all provisions of the Arkansas Tax Procedure Act. All penalty and interest provisions, statute of limitation for refunds and assessments, and other provisions apply. The PET tax must be paid in quarterly in­ stallments if the tax exceeds $1,000 in order to avoid the penalty for underpayment of estimated taxes. Payments for estimated taxes, extension payments, return payments, etc., may be made by check or through the Arkansas Taxpayer Access Point (ATAP). The election to be subject to the PET tax must be made by owner members representing more than 50% of the voting power of the pass-through entity. The election is due before the due date for filing a return as extended. The election may be made by filing Form AR362-E on paper or by registering for the PET tax in ATAP or by filing a PET tax income tax return before the due date. DFA encourages taxpayers wishing to make estimated or extension payments before the filing of a return to file an election so that payments can more easily be associated with a specific taxpayer account. For entities wishing to elect to be subject to the PET tax, a federal employer identification number (FEIN) must be provided. Each entity wishing to elect PET status must have a unique FEIN so that their returns and payments may be separated from other entities that may be owned by a single owner member and so that payments and returns can be separated from the owner members. FEIN numbers are issued by the Internal Revenue Service which can be reached at 800-829-4933 or at https://www.irs.gov/businesses/small-businesses-self-employed/applyfor-an-employer-identification-number-ein-online When filing a PET tax return on Form AR1100PET, a copy of the federal income tax return must be included for entities taxed as Sub-S corporations or partnerships for federal purposes. Single member Limited Liability Compa­ nies must include a copy of the federal income tax return of the single member owner.

WHAT'S NEW FOR 2025 NOTE: The following is a brief description of Acts affecting Arkansas Corporation Income Tax and is not intended to replace a careful reading of each Act in its entirety. On April 16, 2025, Arkansas Gov. Sarah Huckabee Sanders signed Senate Bill 567 into law as Act 719 of 2025, modernizing the state's corporate income tax. This Corporation Income Tax reform legislation will align Arkansas with 34 other states with the adoption of Market-Based Sourcing for Sales of Services and Intangibles, which is based on the location where they are delivered to the customer. It reduces the risk of double taxation and makes the state more competitive for jobs and investments in services and technology by making sourcing rules more consistent and competitive for Arkansas service providers. Market-Based Sourcing - adopting market-based sourcing (MBS) to replace the current cost-of-performance (COP) sourcing methodology. Apportionable Income - amended the provisions related to business income. Nexus Threshold - the bill also adopts an economic corporate income tax nexus by establishing a $250,000 re­ ceipts threshold for non-resident corporations or partnerships without a physical presence in the state. Updates to Alternative Apportionment: section 26-51-718 to follow the MTC model for UDITPA section 18 relat­ ed to alternative apportionment provisions that are expanded/clarified concerning cases where standard methods do not fairly represent a taxpayer's business activity. Apportionable Income: Replaces business and nonbusiness income definitions with apportionable and nonapportionable income. Apportionable income includes all income that is apportionable under the United States Constitution and is not otherwise allocable under the laws of this state. Telecommunications 10-Year Option - the bill allows providers of telecommunications services, internet ser­ vices, and some television services to elect to use the COP sourcing method until Dec. 31, 2035. The Corporate Income Tax changes in Act 719 of 2025 are effective for tax years beginning on or after January 1, 2026. Tax rate and other important changes Act 696 of 2025. Provides an income tax exemption for USDA relief payments from the American Relief Act of 2025. Act 701 of 2025. Amends the Wood Energy Products and Forest Tax Credit incentive. Act 719 of 2025. Adopts market-based sourcing for Corporation Income Tax apportionment of multistate services and intangibles and updates other provisions to modernize Arkansas's adoption of the MTC compact. Act 838 of 2025. Amends the Natural State Initiative Opportunity Zone tax incentive. Act 881 of 2025. Creates an income tax credit incentive for relocation of a Corporate Headquarters to Arkansas. Act 882 of 2025. Creates an income tax credit incentive for modernization and automation.

# IMPORTANT REMINDERS

Act 4 of the Second Extraordinary Session of 2024 amends Arkansas Code Annotated 26-51-205 to reduce the maximum corporation tax rate to 4.3% for all taxable income exceeding $11,000 for tax years beginning on or after January 1, 2024, and the maximum individual income tax rate for individuals to 3.9% for tax years beginning on or after January 1, 2024. For years 2024 and after, the capital gains tax rate is 1.95%. Arkansas Code Annotated 26-51-428 was amended to adopt Internal Revenue Code Annotated 26-51-428 as in effect on January 1, 2022 for tax years beginning on or after January 1, 2024. The adoption of Internal Code Section 179 will result in the Arkansas Section 179 deduction being raised from $25,000 per year to $1,250,000 for tax years beginning in 2022 and for the dollar-for-dollar phaseout being raised from $200,000 to $3,130,000. The lower limits will remain in place for years beginning prior to 2022, including any carryforward of Section 179 that could not be claimed in earlier years. Please refer to the line-item instructions for Depreciation and the instructions for Form AR1100REC for further details. Act 362 of 2021 was passed and signed into law to allow Arkansas businesses to reduce their Federal Tax burden by electing Entity-level taxation. The Tax Cuts and Jobs Act of 2017 imposed a cap of $10,000 on the State and Local Tax deductions (SALT deduction) for itemized deductions for individuals for tax years 2018 through 2025. However, amounts paid by a Partnership, Limited Liability Company or an S Corporation to a state to satisfy a li­ ability for income taxes are not subject to the cap on the SALT deduction as they are considered to be a business expense paid by the business. Act 362 of 2021 creates a voluntary tax that pass-through entities would pay if owners of more than 50% of the voting rights of a pass-through entity elect to do so. Income of a member that is subject to the pass-through entity tax would be excluded from Arkansas income tax. Taxes paid by the pass-through entity will decrease the amount of taxes considered in computing the SALT deduction available for Federal income tax purposes of the members and thus reduce their Federal tax liability. Act 362 of 2021 is effective for tax years beginning on or after Janu­ ary 1, 2022.

Act 362 provides the following provisions: • Amends Arkansas Code §26-51-404(b) to add an exemption for a member that is subject to the tax imposed by the Elective Pass-through Entity Tax so that the income is not subject to Arkansas income tax for the member owner(s) of the business. Income subject to a similar tax in other states is also exempted by Act 362. • Adds an additional Chapter 65 to the Arkansas Code titled the "Elective Pass-Through Entity Tax Act" to create the Pass-through entity tax. • Act 362 of 2021 defines "Business entity" as a general partnership, limited partnership, limited liability company, or for federal income tax purposes, a Subchapter S Corporation, that:

• (A) Is engaged in a business for profit; and

• (B) Is required to file a return under this title. • Adds §26-51-404(b)(31)(B)(i)(a) which provides: A member that is subject to the elective pass-through entity tax as a resident or part-year resident and that is a member of an affected business entity may exclude from the taxable income the member's pro rata share of income subject to a tax paid to another state or DC on income of any affected business entity of which the person is a member, if the taxes paid result from a tax that is substantially similar. Substantially Similar Tax - means a tax that is levied on the aggregate taxable income of each of the members that have an ownership interest in an entity that is engaged in business for profit. Non-resident members of an entity subject to the pass-through entity tax are not required to file an Arkansas income tax return if all income earned in Arkansas comes from pass-through entities that the member has an ownership interest in pay the pass-through entity tax in Arkansas. • Creates a voluntary tax that pass-through entities would pay at a flat rate of 3.9% on net taxable income for tax years beginning on or after January 1, 2024. The flat tax will be equal to the highest personal income tax rate in Arkansas in effect for that year in future years.

• Limits the rate of tax on net capital gains to 50% of the flat 3.9% rate or 1.95% for net capital gains for tax years beginning in 2024 and will be reduced to 50% of the highest personal income tax rate in future years. • Provides that the business entity can elect to receive a credit against its liability for the voluntary tax for any Arkansas income tax credit that the business entity has received. If the business does not elect to use a tax credit, that credit may be passed on to the members to offset their Arkansas income tax as allowed under the relevant Arkansas laws for each credit. Tax credits earned by members may not be used to offset the pass-through entity tax. • Provides that entities subject to the pass-through entity tax would be allowed the same provisions for net operating loss deductions as provided in Arkansas Code §26-51-427. Net operating losses that occur in 2024 and after may be carried forward up to 10 tax years. • The pass-through entity tax is due before the 15th day of the fourth month after the end of the taxable year. It must be paid in quarterly installments to avoid underpayment penalties if the pass-through entity tax was elected in the previous year. • The pass-through entity tax would be subject to all interest and penalty provisions of the Arkansas Tax Procedure Act (ATPA). • The pro-rata interest of each member of a pass-through entity shall be reported to each member on forms prescribed and furnished by the DFA. The form for reporting the member information to DFA is on page 2 of Form AR1100PET. Form AR K-1 is used to report earnings to each member. • The elective pass-through entity tax is NOT the same as filing a composite return which allows pass-through entities to file and pay the individual tax on behalf of nonresident members who elect to be included. If the pass-through entity tax is elected, all Arkansas income of the entity is subject to the PET tax and all owner members must participate. Owner members may not opt out of participating in the PET tax if the entity makes the election. • The election or revocation to the pass-through entity tax must be made before the due date for filing the return or before the extended due date for filing the return if applicable. The election may be made by filing Forms AR362-E for election and AR362-R for revocation or by completing the desired forms on ATAP. Forms AR362-E and AR362-R are now available on our DFA website at: https://www.dfa.arkansas.gov/office/taxes/ income-tax-administration/pass-through-entity-tax/forms/ • Form AR1100PET is the form for filing the Arkansas pass-through entity tax. The form is 4 pages. The first page calculates the PET tax. Schedule K Page 2 is the calculation of income and deductions for entities that only operate in Arkansas or that have received prior written permission from DFA to file using the direct accounting method for an entity operating in more than 1 state. Page 3 is the apportionment schedule for entities operating in more than 1 state and are required to apportion income. All entities must apportion their income using only the sales factor unless they are included in an industry that is required to use a modified 3 factor apportionment method by the special industry regulations. Page 4 is a summary of each member's share of income and of the taxes paid on their behalf and multiple page 4 forms may be necessary. Act 822 amends Arkansas Code Annotated 26-51-427 to allow net operating losses occurring in tax years be­ ginning on or after January 1, 2020 to carry forward for 8 tax years and losses occurring in tax years beginning on or after January 1, 2021 to carry forward 10 years. Net operating losses that occur in tax years beginning before January 1, 2020 carry forward 5 tax years. Act 143 of 2021 amends Arkansas Code Annotated 26-51-102 to include a definition for tax practitioner and Arkansas Code Annotated 26-51-806 to require a tax practitioner who files federal income tax returns electronically to also file Arkansas returns electronically and allows DFA to waive the requirement if the requirement would cause an undue hardship on the practitioner.

Act 362 of 2021 creates A new Chapter 65 to Arkansas Code Title 26 and creates the Elective Pass-Through Entity Tax for tax years beginning on or after January 1, 2022. Act 362 allows members holding 50% or more of a pass-through entity to elect to have the pass-through entity pay Arkansas income taxes itself instead of passing the income through to the members to pay income tax on their personal income tax returns or on a composite return. Act 362 also amends Arkansas Code Annotated 26-51-404 to exempt income subject to similar taxes in other states from Arkansas income tax for residents and part-year residents for tax years beginning in 2022 and after. The Pass-through Entity Tax (PET) election must be made by the extended due date of the income tax return but may be made at any time prior by registering for the tax on combined registration forms or by completing Form AR362-E, or by registering for the tax on ATAP. Form AR362-E for registration, Form AR1100PET, the income tax return and vouchers for estimated payments for the Pass-through Entity Tax are available on the DFA Web site. The election to be taxed at the entity level and the exemption from income tax of income subject to similar taxes in other states is not available for 2021. The tax rate for tax years beginning in 2022 was set at 5.9% on income and 2.95% capital gains for the Pass-through Entity Tax. However, Acts 1 and 2 of the Third Extraordinary Session of 2021 amended the tax rate to be equal to the maximum income tax rate for individual income taxes. Therefore, the tax rate for income other than capital gains for tax years beginning in 2022 is 4.9% and the tax rate for capital gains is 2.45%. The tax rate for tax years beginning in 2023 was set to 4.7% on income and 2.35% for capital gains. An S corporation should not file Form AR1100S for any tax year in which it files an AR1100PET return. Act 629 of 2021 amends Arkansas Code Annotated 26-51-807(a) to allow taxpayers an extension to file of one month after the extended due date for a federal income tax return for tax years beginning on or after January 1, 2021. The one month extended due date does not apply to returns for which a federal extension is not requested and does not extend the original due date. As a reminder all tax payments are due on the original return due date and interest at 10% per annum and failure to pay penalties at 5% per month will be assessed on all taxes unpaid after the original due date which is April 15 for calendar year filers and the 15th day of the fourth month after the end of a tax year that does not end in December. ATAP - Arkansas Taxpayer Access Point ATAP is available to make most types of Pass-Through Entity tax payments and to file returns electronically where supported. Federal returns and other required schedules must be attached with the ATAP filing or mailed sepa­ rately to the Pass-through Entity Tax Section. They may be provided on CD, in PDF, or in paper form. The secure online filing, managing, and payment options of ATAP are available at www.atap.arkansas.gov. Taxpayers and their authorized representatives will be able to view and manage their Pass-through Entity Tax activity including other tax activity such as Individual Income Tax, Sales Tax, Withholding Tax, and other taxes administered by DFA. Accountants and attorneys must obtain permission from their clients to access and view their client's accounts. ATAP is a web-based service that will give taxpayers, or their designated representative, online access to their tax accounts, and offers the following services: Register a business, file a return online, file a return using XML return upload, change a name, change an address, amend a return, make a payment, store banking information for use during payment submission, view tax period financial information (tax, penalty, interest, credits, balance, etc.), view payment received, view recent account activity, view correspondence from the department. If you are currently enrolled with our online systems to either make payments or file a return electronically, you will need to sign up in ATAP to take advantage of the enhanced services. To correctly process payments on ATAP, make sure you are choosing the correct type of payment and applying it to the correct tax year.

General Information on Filing close of the taxpayer's tax year. Attach your check to Pass-Through Entity Return the Extension Voucher attached to Form AR1155PET if requesting an Arkansas extension. Time/Filing as a Pass-Through Entity Period Covered/Accounting Method The election to be subject to the PET tax must be made A Pass-Through Entity must calculate its Arkansas Tax­ by owner members representing more than 50% of the able Income using the same income year and account­ voting power of the pass-through entity. The election is ing method for Arkansas tax purposes as used for Fed­ due before the due date for filing a return as extended. eral income tax purposes. For tax years beginning after The election may be made by filing Form AR362-E 1986, all pass-through entities are required to have a on paper or by registering in ATAP, or by filing a PET permitted tax year. A permitted tax year is a tax year income tax return before the due date. DFA encourages ending December 31st or any other tax year for which taxpayers wishing to make estimated or extension the entity established a business purpose. payments before the filing of a return to file an election so that payments can more easily be associated with a The entity must provide to the Commissioner a copy of specific taxpayer account. Form AR1100PET is due on any certification or approval from the Internal Revenue or before the 15th day of the 4th month following the Service authorizing the pass-through entity to change close of the entity's tax year. its accounting method or income year. When filing a PET tax return on Form AR1100PET, a Signatures and Verification copy of the federal income tax return must be included for entities taxed as Sub-S corporations or partnerships ACA 26-51-804 (b) provides, the President, Vice-Presi­ for federal purposes. Single member Limited Liability dent, Treasurer, or other principal officer shall certify the Companies must include a copy of the federal income return. Such agent may certify the return of a foreign tax return of the single member owner. pass-through entity having an agent in the state. If re­ ceiver, trustee in bankruptcy, or assignee are operat­ Extension of Time for Filing ing the property or business of the pass-through entity, such receiver, trustee, or assignees shall execute the If you have received an automatic Federal extension return for such pass-through entity under certification. (Form 7004), the time for filing your Arkansas Pass- Through Entity Tax Return shall be extended until one Report of Change in Federal Taxable Income month after the extended due date of your Federal Return for a US domestic entity. When filing the Arkansas Revenue Agent Reports (RARs) must be reported to AR1100PET, check the box at the top indicating that this state within 180 days after the receipt of the RAR or the Federal Extension Form 7004 and/or Arkansas supplemental report reflecting correct net income of tax­ Extension Form AR1155PET has been filed and file payer. Amended returns must be filed with payment of the Arkansas return on or before one month after the any additional tax due. ACA 26-18-306(b)(3)(B) states Federal due date. It is not necessary to include a copy that a refund shall not be paid if the amended return is of the Federal Form 7004. To request an initial Arkansas filed on or after the 181st day following receipt of the extension of 180 days from the original Arkansas return final notice from the IRS. Any additional tax and interest due date or an Arkansas extension of 60 days beyond must be paid with the amended return or a refund must the Automatic Federal extension due date, complete and be requested on an amended return if applicable. Stat­ mail Arkansas Form AR1155PET Request for Extension ute of Limitations will remain open for three (3) years of Time for Filing Income Tax Returns by the due date for assessment of tax if the taxpayer fails to disclose or, if applicable, the extended due date of the Arkansas Federal Revenue Agent Reports. return to the Pass-Through Entity Tax Section.

# Penalties and Interest

Arkansas extension(s) must be attached to the Arkan­ sas income tax return. Interest at 10% per annum is due The following penalties shall be imposed: on all returns (including those with extensions) if the tax is not paid by the original return due date. Interest will be • Failure to file timely - 5% per month not to exceed 35%. computed on a daily rate of .00027397. To avoid inter­ • Failure to make timely remittance - 5% per month est and/or penalty, any tax due payment must be made not to exceed 35%. on or before the 15th day of the 4th month following the

• Underestimate penalty - 10% of the amount of the underestimate. • Failure to file return - $50.00. • Failure to make required EFT payment - 5% of the tax due. • Incomplete electronic payment -10% of the amount of the draft or $20.00, whichever is greater. • Failure to Comply - $50.00. If any part of any deficiency or tax liability is due to neg­ ligence or intentional disregard of rules and regulations, a penalty of 10% of the total amount shall be added. Any part of any deficiency determined to be due to fraud shall be subject to a 50% penalty. Interest at the rate of 10% per annum shall be assessed on all tax defi­ ciencies. Interest will be computed using a daily rate of .00027397 from the 15th day of the 4th month after the close of the tax year until the date the tax is paid. Liability for Filing Returns Every entity organized or registered under the laws of this State or having income from Arkansas sources as defined in ACA 26-51-205, must file an income tax return. Balance Sheet The balance sheet submitted with the return should be prepared from the books and should agree therewith, or any difference should be reconciled. All taxpayers en­ gaged in an interstate trade or business and reporting to the Surface Transportation Board and to any national, state, municipal, or other public office, may submit cop­ ies of their balance sheets prescribed by said Board, or state and municipal authorities, as of the beginning and end of the taxable year. If the balance sheet as of the beginning of the current taxable year does not agree in every respect with the balance sheet which was submit­ ted as of the end of the previous taxable year, a recon­ ciliation schedule should be submitted with the return. Balance sheets as of the beginning and close of the year and a reconciliation of surplus must be attached to the return.

General Instructions

# Line 6 - Excess Net Passive Income Tax

Specific Line Instructions for S Corporations are subject to Arkansas income tax on Page 1 of AR1100PET excess net passive income in the same manner that such items are taxed federally. Enter the tax on Line 6 of AR1100PET and attach a schedule showing the com­ Return Type putation of the tax. Whether the Entity is filing an Initial Return (first time Enter the excess net passive income tax due. If the cor­ filing), an Amended Return (making changes to an poration has always been a Subchapter S corporation, original return), a Final Return (going out of business), P1 Line 6 tax does not apply. If the corporation has Cclearly mark the AR1100PET by checking the applicable corporation earnings and profits at year-end, passive in­ box at the top of the form. vestment income exceeding 25% of gross receipts, and taxable income, determine liability using the worksheet Income (P1) (complete lines 1-3 and 9); if line 2 exceeds line 3, the tax applies. Compute the tax on a separate schedule Line 1 - Taxable Income using the worksheet format (lines 1-11). The 2024 rate Report the taxable income from doing business in Ar­ is 4.3%. kansas or derived from sources within this state and dis­ tributed to members included on this return, excluding Excess Net Passive Income Tax Worksheet capital gains. The amount must equal the total amount 1. Enter Arkansas gross receipts for the tax shown on page 2 (Schedule K) line 21, Total Under Ar­ year (See IRC Section 1362 (d)(3)(B) for kansas Law column for Filing Status 1 Pass-through gross receipts from the sale of capital Entity operating only in arkansas, or page 3 (P3) line C4 assets.)* ..................................................... for Filing Status 2 - Multistate Pass-Through Entity - Ap­ portionment. 2. Enter Arkansas passive investment income as defined in IRC* Section 1362 (d)(3)(C) ...

# Line 2 - Compute Tax

3. Enter 25% of Line 1 (If Line 2 is less than Line 3, stop here. You are not liable for this Compute tax at 3.9% (.039) of the amount listed on tax.) ............................................................ Line 1. 4. Excess Arkansas passive investment Line 3 - Capital Gains or (Loss) From Schedule K income (Subtract Line 3 from Line 2.) ......... lines 7, 8, and 9 (net short-term, net long-term, and net 5. Arkansas expenses directly connected §1231 gains), or from Schedule D, Part A, line 6 (if us­ with the production of income on Line 2 ing P3) [See IRC* Section 1375(b)(2)] .................... Enter gains or losses from the sale, exchange, or invol­ 6. Net passive income (Subtract Line 5 untary conversion of assets used in trade or business from Line 2.) ............................................... activity. If the corporation is also a partner in a partner­ ship, include the partner's share of gains (losses) from 7. Divide amount on Line 4 by amount sales or exchanges, involuntary or compulsory (other on Line 2. ................................................... than casualties or thefts), of the entity's trade or busi­ 8. Excess net passive income (Multiply ness assets. Do not include any recapture of expense Line 6 by Line 7.) ........................................ deduction for any section 179 deduction passed on to members prior to the election to be subject to the PET 9. Enter taxable income (See instructions tax. for taxable income below.) .......................... 10. Enter the smaller of Line 8 or 9 ...................

# Line 4 - Arkansas Capital Gains Tax

11. Excess net passive income tax: Enter Compute tax at 1.95% (.0195) of the amount listed on 4.3% of Line 10. Enter here and on Line 6, Line 3. P1, Form AR1100PET................................. *Income and expenses on Lines 1, 2, and 5 are from Line 5 - Pass-Through Entity Election Tax total Arkansas operations for the tax year. This includes Enter the Pass-Through Entity Election Tax; add lines applicable income and expenses from P2, Form 2 and 4. AR1100PET.

Line 7 - Income Tax on Capital Gains/Built-in Gains

# Line 18 - Interest on Tax due

Enter the interest on tax due. For entities with tax imposed on certain capital gains/ built-in gains, complete Page 3, Schedule D, B. and/or

# Line 19 - Penalty on Late Filing or Payment

C. Enter the amount from B7 and/or C6. Enter the penalty for late filing or late payment. Line 8 - Business Incentive Credits (BIC)

# Line 20 - Penalty for Underpayment of Estimated Tax

Enter the Business Incentive Credits from Form AR­ 1100BIC. The BIC incentives cannot exceed the total Enter the penalty for underpayment of Estimated tax, tax reported on lines 5 through 7. attach AR2220 or enter exception checked in part 3.

Line 9 - Total Liability Tax

# Line 21 - Amount Due

Enter the amount of tax reported. Add lines 5 through Enter the amount due (add lines 17 through 20). 7, less line 8.

# Line 10 - Estimated Payments

Enter Estimated Tax paid from Form AR1100ESPET/ or estimate carryforward, if applicable.

Line 11 - Payment with Extension Request Enter payment(s) made with an extension request.

# Line 12 - Withholding Payments

Enter amount of withholding from an Entity, if applica­ ble, attach Form AR1100WH and/or AR1099PT.

# Line 13 - Amended Return

Enter Net tax paid as a positive number on previous return(s) for this tax year. If the net tax return of the pre­ vious return(s) resulted in a refund or increased over­ payment carried forward, enter the net amounts as a negative number.

Line 14 - Overpayment Enter Overpayment amount (Lines 10 - 12 plus or mi­ nus 13; less line 9)

Line 15 - Amount of Overpayment Applied to Next Tax Year Enter amount to be applied to next tax year

Line 16 - Overpayment to be Refunded Enter amount to be refunded.

Line 17 - Tax Due Enter tax due (Line 9 less lines 10 through 12; add or subtract line 13).

SCHEDULE K - DISTRIBUTIVE SHARE ITEMS

# Line 5 - Dividends

Schedule K summarizes all the members' shares of the Enter taxable dividends including any qualified dividends. entity's income, credits, deductions, etc. Schedule K is used to report the totals of these and other amounts.

# Line 6 - Royalties

The Schedule K is required. Enter royalties received by the partnership. NOTE: A completed AR K-1 for each member of the entity is required to be attached to this return. Line 7 - Net short-term capital gain (loss) Total/Arkansas Column Instructions Enter the short-term gain (loss) and attach federal Schedule D (Form 1065/1120-S). "Total Under Arkansas Law" column refers to the total federal items of income, deductions, etc. as adjusted Line 8 - Net long-term capital gain (loss) under Arkansas Law. Enter the portfolio capital gain or loss. Attach federal "Arkansas Source Amount" column refers to Arkansas Schedule D (Form 1065/1120-S). Note: Capital gains apportioned or allocated items of income, deductions, from collectibles are taxed at the ordinary income rates etc. Pass-through entities operating only in Arkansas in Arkansas. will complete both the Total and Arkansas columns. Line 9 - Net section 1231 gain (loss) IMPORTANT: For entities operating only in Arkansas,

# Form AR-KREC MUST be attached reconciling

Enter any net section 1231 gain (loss) and attach fed­ differences between Total and Arkansas amounts. For eral Form 4797 multistate filers subject to apportionment/allocation,

# Schedule AR1100ADJ must be attached itemizing the

Line 10 - Other income (loss) appropriate add/deduct adjustments to apportionable income. If additional adjustments were made outside Enter any other item of income or loss that is not includ­ the scope of these schedules, attach a supplemental ed on lines 1-9. Identify the type of income in the space schedule. provided. If there is more than one type of income, at­ tach a statement that identifies each type and amount. Part I: Income (Loss)

Part II: Deductions Line 1 - Ordinary business income (loss)

# Line 11 - Section 179 deduction

Enter the income (loss) from normal business opera­ tions. Do not include rental activity income (loss) or Figure the partnership's section 179 expense deduc­ portfolio income (loss). tion. Report the allowable amount on the Arkansas col­ umn. Attach Form 4562. Line 2 - Net rental real estate income (loss)

# Line 12a - Cash charitable contributions

Enter the net income (loss) from rental real estate activi­ ties.Attach federal Form 8825. Enter any cash charitable contributions made by the entity. Line 3 - Other net rental income (loss)

# Line 12b - Non-cash charitable contributions

Enter net income from rental activities other than those Enter any non-cash charitable contributions made by reported on federal Form 8825. Attach statement show­ the entity. ing how you calculated net rental income (loss).

Line 12c - Other deductions

# Line 4 - Interest income

Enter any allowable deductions. Identify the type of de­ Enter taxable portfolio interest. Tax-exempt interest in­ duction in the space provided. If there is more than one come is not to be reported on this line. Report tax-ex­ type of deduction, attach a detailed schedule that identi­ empt interest income on line 16a or b of Part III. fies each by type and amount.

# Part III: Other Information

Lines 20 through 22 - Complete if filing status 1: pass-through entity operating only in Arkansas.

# Line 13 - Guaranteed payments

Entities operating only in Arkansas will report lines 21 Enter any guaranteed payments to partners. This line is and 22 (Arkansas Column) of Schedule K on AR1100PT, informational only and not to be included in the calcula­ page 1, lines 1 and 3. tion of net income (loss) on line 19 of Schedule K.

Line 20 - Net Operating Loss Deduction

# Line 14 - Credits

Enter the net operating loss deduction. Attach schedule If the entity has any applicable Arkansas-sourced cred­ AR1100NOL. its allocated to members, enter them here.

# Line 21 - Total

NOTE: Recent legislation may have amended, in­ creased, or extended some of the provisions for Tax Subtract line 20 - net operating loss deduction from line Credits. Use of any credit is subject to the limitations 19 - net income (loss). and carryover provisions provided by the respective Ar­ kansas statute. A summary of the Tax Credit Programs Line 22 - Net Capital Gains can be found at: www.dfa.arkansas.gov If you have any questions, please contact the Tax Credits/Special Re­ Enter the total net capital gains by adding lines 7 and 8 funds Section at (501) 682-7106. (also line 9 if a gain). Worksheet for Apportionment of

# Line 15 - Items affecting partners basis

Multistate Entities (P3) Enter any relevant items of information affecting the partner(s) basis as a result of activities from the part­ For Entities with income from sources within and with­ nership in the taxable year. out the State: In general, entities with income derived from activities Lines 16a-c - Tax-exempt interest income both within and outside the State are required to allo­ cate and apportion the net income under the following: Enter any interest income that is tax exempt on 16a, as Business and non-business income ACA 26-51-701(a) well as other tax-exempt income on 16b. Nondeductible defines "Business Income" as income arising from trans­ expenses are to be entered on 16c. actions and activities in the regular course of taxpayer's trade or business, and includes income from tangible Line 17a-b - Distributions of cash and marketable and intangible property if the acquisition, management, securities and disposition of the property constitute integral parts of the taxpayer's trade or business operation. Enter the amount of partnerships distributions of cash, marketable securities on 17a, and other property on In essence, all income which arises from the conduct 17b. of trade or business operations of a taxpayer is busi­ ness income. Income of any type or class, and from any Lines 18a-c - Investment income source, is business income if it arises from transactions and activities occurring in the regular course of a trade Enter the investment income, expenses, and other or business. In general, all transactions and activities of items and amounts. the taxpayer which are dependent upon or contribute to the operations of the taxpayer's economic enterprise as Analysis of Net Income (Loss) a whole constitute the taxpayer's trade or business and will be considered "Business Income" unless otherwise Line 19 - Net income (loss) excluded by statute. ACA 26-51-701(e) defines nonbusi­ ness income as all income other than business income. Combine Schedule K lines 1 through 6 & 10 (also line 9 if a loss). Subtract lines 11 through 12c from the result. For tax years beginning on or after January 1, 2021, all Net capital gains/losses are to be removed from the net multistate entities should use the single sales factor. taxable income calculation and reported separately on If a special industry three-factor apportionment rule ap­ line 22 of Schedule K. plies complete Special Industry and Alternative Appor­

tionment Form AR-718. 2023. Requirements for apportionment formulas of the businesses listed in this paragraph (except for financial Apportionment Formula institutions) are contained in the Arkansas Corporation Income Tax Regulations which may be obtained from Act 822 of 2019 amends Arkansas Code Annotated 26-5-101, Article IV and 26-51-709 through 26-51-718 to provide for a single sales factor to apportion income Change of Method

from within and without Arkansas for tax years beginning Prior approval Required Before Deviation From the on or after January 1, 2021. For tax years beginning on Allocation and Apportionment Method: If the allocation or after January 1, 2021, all taxpayers with income from and apportionment provisions as set out above do not sources within and without Arkansas must use a single fairly represent the extent of the taxpayer's business sales factor to apportion income from Arkansas unless activity in this State, the taxpayer may petition for, or the the taxpayer is required or approved in advance for the Commissioner of Revenue, Department of Finance and use of an alternative apportionment method. Administration may require in respect to all or any part of the taxpayer's business activity, if reasonable: Industries required to use special industry apportionment methods under the special industry apportionment A) Separate accounting regulations should apportion income using a single

sales factor as modified using the special industry B) The inclusion of one or more additional factors which apportionment method in the regulation and exclude the

will fairly represent the taxpayer's business activity property and payroll factors.

in this State, or

1. Construction Contractors by Regulation 1.26-51-718(d) C) The employment of any other method to effectuate

an equitable allocation and apportionment of the tax- 2. Television and Radio Broadcasting by Regulation

payer's income. 2.26-51-718(d)

3. Publishing Companies by Regulation 3.26-51-718(d).

To "petition for" and approved by DFA shall mean a

formal written request submitted andapproved prior

4. Airlines by Regulation 4.26-51-718(d) to the filing of a return. 5. Bus Lines and Trucking Companies by Regulation 5.26-51-718(d) - Miles

# Schedule A-Apportionment of Income for

6. Pipelines by Regulation 6.26-51-718(d). Multistate Corporation 7. Railroads by Regulation 2.26-51-204. (3 factors or a Enter the FEIN in the box provided. single sales factor optional) Part A - Income To Apportion 8. Private Railcar Operators by Regulation 2.26-51-204. In general, taxpayers with income derived from activities Line 1: Enter federal ordinary business income/loss before any adjustments from Form 1120S/1065. both within and without the State are required to apportion Business Income and allocate the Nonbusiness and If federal Form 1120S or 1065 are not filed, use the appropriate line from the federal form that is filed Partnership income. For tax years beginning on or after January 1, 2021, all multistate corporations should that reflects total ordinary business income before use the single sales factor only, unless required to adjustments. use an approved alternative apportionment method. Line 2: Enter any Add Adjustments. Examples Include:

# Arkansas Corporation Income Taxes Deducted,Bonus

Financial Institutions must use the single sales factor as outlined in Arkansas Codes Annotated 26-51-1403. Depreciation, Federal Charitable Contributions, Construction companies, pipelines, private railcar and Partnership Loss. (Attach schedule AR1100ADJ) operators, bus lines and trucking companies, airlines, television and radio broadcasting companies, and Line 3: Enter any Deduct Adjustments. Examples include: Arkansas Depreciation, Arkansas Charitable publishers will use sales factor only as modified in the regulations. Railroads operating within and without Contributions, Partnership Income. (Attach schedule the State may use either single sales factor or AR1100ADJ) three-factor double-weighted sales apportionment method beginning tax years effective January 1,

Line 4: Enter Arkansas Total Apportionable Income. other place of storage in Arkansas to a taxpayer that is Line 1 + Total Amount from Line 2 - Total Amount from not taxable in the state of the purchaser. Line 3 = Line 4, Total Arkansas Apportionable Income.

Beginning January 1, 2024, a percentage of sales Note: Lines 2 and 3 are for reporting any adjustments to which the throwback rule applies as taxable to taxable income that result in differences between to Arkansas and a percentage as taxable to the Federal and Arkansas tax laws. The examples listed destination state, with the amount taxable to the above are not intended as an all-inclusive list of destination state increasing each year as the required adjustments.

amount taxable to Arkansas decrease.

Part B - Apportionment Factor The percentages will be as follows: • 2025: 71.42% to Arkansas and 28.58% to the Column A is for Amounts in Arkansas; Column B is destination state. the Total Everywhere; Column C is the Percentage of Column (A)÷(B). Calculate all percentages to six Line 3: Other Sales/Receipts (6) places beyond whole percentages. Example 26.123456%

Items such as d. capital & ordinary gains, e. dividends, f. interest, g. rents, h. royalties, and i. services will be Arkansas adopted a single sales factor formula reported in the appropriate boxes. For j. other business for the apportionment of multistate business gross receipts, attach schedule. income (Act 822 of 2019). As a result, Schedule A reflects single sales factor apportionment. If Gross receipts from transactions other than sales of the corporation is subject to special industry or tangible personal property are attributed to Arkansas if: alternative apportionment, please see instructions 1) The income producing activity is performed entirely for Form AR-718. within Arkansas or, 2) The income producing activity is performed both inside and outside of Arkansas, Sales/Receipts Factor: The receipts factor is a fraction, the income reportable to Arkansas is determined the numerator of which is the total sales of the taxpayer by calculating the property, payroll, and sales factor in this State during the tax period, and the denominator excluding sales from transactions other than the sale of which is the total sales of the taxpayer everywhere of tangible personal property and applying the resulting during the tax period. The method of calculating percentage to the Arkansas sales factor numerator for receipts for purposes of the denominator is the same as gross receipts from transactions other than sales of the method used in determining receipts for purposes tangible personal property. of the numerator. The receipts factor shall include only those receipts which constitute business income and (k) Total Sales/Receipts: (Add Lines 1a through 3j). are included in the computation of the apportionable Divide Line 3k in Column A by Line 3k in Column B to income base for the taxable year. Arkansas requires arrive at the percentage for Line 3k in Column C. receipts to be gross receipts instead of net receipts. Line 4: Alternative Apportionment Percentage: If the Line 1: Sales/Receipt corporation is subject to special industry and alternative apportionment, check the box and enter the percentage (a) Enter Destination Shipped from Within Arkansas: from Form AR-718, Line 5, Column C. Sale of property that is delivered or shipped by a seller located in Arkansas to a purchaser located in Arkansas. Line 5: Enter Percentage Attributable to Arkansas: Enter the percentage from Line 3k, Column C. If required (b) Enter Destination Shipped from Without Arkansas: to complete form AR-718, enter percentage from AR- Sale of property that is delivered or shipped to a purchaser 718, Column C, Line 5. located in Arkansas regardless of the f.o.b. point or other conditions of the sale. Part C - Arkansas Taxable Income

# Line 2: Origin Sales From Arkansas

Line 1: Enter Income Apportioned to Arkansas. (Part A, Line 4) x (Part B, Line 5). (c) Enter Origin Shipped from Within Arkansas to Other Non-Taxable Jurisdictions: Sales of property that Line 2: Enter Direct Income Allocated to Arkansas: is shipped from an office, store, warehouse, factory or Include non-business income and partnership income/

loss that are sourced to Arkansas. Arkansas Regulation 1.26-51-802(b) requires corporations to directly allocate partnership Arkansas income or loss to Arkansas rather than including partnership income and apportionment factors in the corporation's apportionment formula. Multistate corporations with partnership income should deduct all partnership income on Part A, Line 3 (Deduct Adjustments). Partnership losses should be added on Part A, Line 2 (Add Adjustments). The corporation's Arkansas partnership income or loss should then be entered on Part C, Line 2 Add: Direct Income Allocated to Arkansas line. Attach Forms AR K-1 and if claiming withholding, attach Forms AR1099PT.

# Line 3: Enter only the amount of Apportioned NOL available or the amount needed to absorb the total of

Lines 1 and 2 on Part C. (Attach Form AR1100NOL). Example: Line C1=$1000 + Line C2=$500 NOL available is $5000; Line C3 will only show $1500 Line 4: Enter Total Income Taxable to Arkansas: Total of Lines C1 and C2, and subtract C3. Enter here and on Page 1, line 1 of AR1100PET. IMPORTANT: Status 2 - Multistate filers must report total taxable income to Arkansas on the Apportionment of Income Schedule, Part C, Line 4. This amount includes both 1) income apportioned to Arkansas and 2) direct allocations to Arkansas. While Schedules K and AR-KREC provides a means for reconciliation and necessary details of items of income/ deductions. The Apportionment of Income Schedule, Part C, Line 4 is the line used to report total Arkansas Taxable Income.

# Schedule D - Arkansas Capital Gains

Partners Share of Income (P4) Part A - Arkansas Capital Gains Enter the beginning and ending dates of the tax year.

Enter federal employer identification number. DO NOT Line 1: Enter Capital Gains Apportioned to Arkansas: ENTER "APPLIED FOR" anywhere on this return for Enter total apportionable capital gains (federal total the entity or any partners. Enter the name of the Passamount adjusted to Arkansas basis). Through Entity. Line 2: Arkansas Apportionment Factor: Enter Arkan­ Enter the name of each Partner or Entity, complete all sas apportionment percentage from Section B, line 5. information for each Member or Entity. Enter a check mark to indicate Arkansas resident or business domicile. Line 3: Capital Gains apportioned to Arkansas: If there are more than 21 members, attach additional Multiply Line 1 by Line 2. (Arkansas apportioned capital P4 pages (for paper) or include member schedules gains) enter here. as e-file attachments (for electronic returns). A spread­ sheet (on CD/USB) is acceptable for paper filings in lieu Line 4: Enter Net Capital Gains: Enter net capital gains of additional P4 pages; include name, TIN, ownership (losses) to be allocated to Arkansas (if any). %, profit/loss/capital %, ordinary income (excl. capital gains), capital gains, and tax amount for each member. Line 5: Less Capital Loss Carryforward: Enter any prior year Arkansas capital loss carryforward deduction.

# Form AR K1 must be completed for each member of the pass-through entity using the same information that

Line 6: Net Capital Gains: Compute as line 3 ± line 4 − would have been used if the business did not make the line 5. Enter here and on P1, line 3. election to file under the PET tax. However, all items on the AR K1 form should be adjusted from the return Part B - Tax Imposed on certain capital gains: of the member with the exception of guaranteed pay­ ments. Guaranteed payments must be reported as tax­ If the corporation made its election to be an S Corpora­ able income on the member's Arkansas individual re­ tion before 1987, IRC Section 1374 (as in effect before turn. The AR K1 should be used to show amounts to the enactment of the Tax Reform Act of 1986) continues exclude from income or deductions on Form AR-OI or to impose a tax on certain gains of the S Corporation. other applicable forms. See the instructions for Form Consult the IRS instructions to determine if you are li­ AR1000F and Form AR1000NR for details. able for this tax. If so, complete Part B, Schedule D, Form AR1100PET. If multistate, under Schedule D, part If an entity elects to be taxed under Act 362, all B, Line 3, multiply by apportionment factor from Part B, items of income or deduction which are normally Line 5. passed onto the owner members on a K-1 form will be included on the PET tax return. These items in­ Part C - Tax imposed on certain Built-in gains: clude section 179 depreciation, charitable contribu­ tions, passive income, rental income, certain capital If the corporation made its election to be an S Corpo­ gains, guaranteed payments, royalties, dividends, ration after December 31,1986, IRC Section 1374 pro­ interests and any other item of income or deduc­ vides for a tax on built-in gains that applies to certain tion that is not included on the K-1 form as ordinary S corporations. Consult the IRS instructions to deter­ income. mine if you are liable for this tax. If so, complete Part C, Schedule D, Form AR1100PET. If multistate, under Schedule D, Part C, Line 2, multiply apportionment fac­ tor from Part B, Line 5. P1 Line 7 - Income Tax on Capital Gains/Built in gains: Enter the sum of lines B7 + C6 on P1 line 7. P1 line 7 is 'Income Tax on Capital Gains / Built-in Gains.

Special Industry Apportionment Rules Airlines Arkansas Regulation 4.26-51-718(d) requires airlines Arkansas Regulations require taxpayers primarily engaged in to determine Arkansas net taxable income by taking that certain industries to apportion income using a special industry portion of total operating revenue that the total passenger apportionment method. See below for a brief description of and freight receipts in Arkansas bear to total receipts from each special industry apportionment method. For a complete inside and outside Arkansas. description of industries that are required to modify their apportionment factors, see the Corporation Income Tax Bus Lines and Trucking Companies Regulations at www.dfa.arkansas.gov. Arkansas Regulation 5.26-51-718(d) requires a company Construction Contractors whose primary business is bus lines or trucking to Arkansas Regulation 1.26-51-718(d) modifies the determine its net income subject to Arkansas income tax by an apportionment formula which is the number of miles sales factor for all Construction contractors. Gross operated within Arkansas divided by the total system miles. receipts derived from the performance of a contract are attributable to Arkansas if the construction project is Pipelines located in Arkansas. If the construction project is located both inside and outside of Arkansas, the gross receipts Arkansas Regulation 6.26-51-718(d) establishes attributable to Arkansas are based upon the ratio that special rules for taxpayers operating a pipeline for the construction costs for the project in Arkansas incurred transportation of oil or gas both inside and outside of during the tax year bear to the total construction costs Arkansas. The sales factor includes any gas sales and for the entire project during the tax year. The amount of storage sales within Arkansas plus a proportionate part gross receipts to be included in the sales factor for the of system revenue earned in Arkansas determined on current tax year is based on the cost ratio regardless of the basis of total barrel or unit miles within Arkansas to whether the taxpayer uses the accrual method or the cash the total barrel or unit miles in the system. Pipelines method of accounting for receipts and disbursements. should not use a property or payroll factor for tax years All Construction contractors should not use a property or beginning in 2021 and after. payroll factor for tax years beginning in 2021 and after. Private Railcar Operators Television and Radio Broadcasting Arkansas Regulation 2.26-51-204 requires taxpayers, Arkansas Regulation 2.26-51-718(d) modifies the other than a railroad, engaged in the business of operating numerator of the sales factor to include all gross railcars or in the business of furnishing or leasing railcars receipts of the taxpayer from sources within Arkansas for the transportation of freight or property whether or not plus a ratable part of film or radio programming revenue owned by such taxpayer, over any railway lines partly including advertising revenue determined by an audience within and partly without the State to determine Arkansas factor. The audience factor is determined based on the net taxable income by taking that portion of total net ratio that the taxpayer's Arkansas viewing or listening operating income that the total miles operating in the State audience bears to its total viewing or listening audience. bears to total system miles operated. Television and radio broadcasters should not use a property or payroll factor for tax years beginning in 2021 Public Utilities and after. Arkansas Regulation 3.26-51-204 requires telephone, Publishing electric power, and gas distribution companies operating both inside and outside of Arkansas shall allocate and Arkansas Regulation 3.26-51-718(d) modifies the sales factor for taxpayers in the business of publishing, apportion their net income provided under ACA 26-51-701, et seq, ACA 26-51-709 requires income to be apportioned selling, licensing, or distribution of books, newspapers, using a single sales factor. magazines, periodicals, trade journals, or other printed materials that have income from sources both inside and outside of Arkansas. The sales factor is modified to include a "circulation factor". Publishers should not use a property or payroll factor for years beginning in 2021 or after.

Allocated Income 2. Gain and Losses: Partnership Income Gains and losses from sales of assets:

Act 482 of 2017 amends ACA 26-51-802(c) to require

A) Sales of real property located in this State. partnership income from activites within and without this

B) Sales of tangible personal property. State that is reflected on a partnership return shall be

1) The property had a situs in this State at the time apportioned to Arkansas under the uniform Division of of sale, Income for Tax Purposes Act (ACA 26-51-701 et seq).

or Entities that are partners in a partnership must allocate

2) The taxpayer's commercial domicile is in this their share of partnership income as shown on form AR

State, K-1 from the partnership. Partnership Income subject

or to Arkansas Pass-Through Entity Tax (PET) should be

3) The property has been included in depreciation

excluded from the Arkansas Individual return.

which has been allocated to this State; in which

event gains or losses on such sales shall be

Non-Business Income

allocated on the percentage that is used in the

formula for allocating income to this State. The following items of income to the extent that they do not constitute business income are to be allocated 3. Interest and Dividends: to this State. Interest and dividends if the taxpayer's commercial 1. Rents & Royalties: domicile is in this State.

A) Net rents and royalties from real property located in

4. Patent and Copyright Royalties:

this State.

A) If and to the extent that the patent or copyright is

B) Net rents and royalties from tangible personal

utilized by the taxpayer in this State,

property

or

1) If and to the extent that the property is used in

B) If and to the extent that the patent or copyright

this State, is utilized by the taxpayer in a state in which

or the taxpayer is not taxable and the taxpayer's

2) In their entirety, if the commercial domicile is in

commercial domicile is in this State.

this State and the taxpayer is not organized under

the laws of or taxable in the state in which the

A copyright is utilized in a state to the extent that printing

property is utilized. or other publications originate in the state. If the basis of receipts from copyright royalties does not permit allocation The extent of utilization of tangible personal property in a to states or if the accounting procedures do not reflect state is determined by multiplying the rents and royalties states of utilization, the copyright is utilized in the state in by a fraction, the numerator of which is the number of which the taxpayer's commercial domicile is located. days of physical location of the property in the State during the rental or royalty period in the taxable year; and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is utilized in the state in which the property is located at the time the rental or royalty payer obtained possession.

ables and fees charged to card holders are attributable Financial Institutions to Arkansas if the billing address of the card holder is in Arkansas. Net gains from the sale of loans and loan ser­ vicing fees are sourced in the same manner as the loan interest. Net gains from the sale of credit card receiv­ In general, all state and national banks, savings and ables are sourced in the same manner as the interest loan, building and loan associations, or any other entity on credit card receivables. Interest, dividends, and net operating as financial institutions are to be taxed under gains from investment and trading assets and activities existing law. For a complete definition of "financial insti­ are attributed to Arkansas if such receipts are properly tution", refer to ACA 26-51-1402. assigned to a regular place of business of the taxpayer within Arkansas.

# Who Must File

1) A financial institution having its principal office in this State shall be taxed as a business corporation organized and existing under the laws of this State,

or 2) A financial institution having its principal office out side this State but doing business in this State shall be taxed as a foreign business entity doing business in this State. This is not intended to recognize the right of a foreign financial institution to conduct any business in this State except to the extent and under the conditions permitted by any acts or any other now existing applicable laws of this State. ACA 26-51-426 adopted Internal Revenue Code Sec­ tions 582, 585, and 593 as in effect January 1, 1999 regarding bad debts of financial institutions. Act 822 of 2019 amends ACA 26-5-101, Article IV, 26- 51- 709 through 26-51-1405 to provide for a single sales factor to apportion income from within and without Ar­ kansas for tax years beginning on or after 01/01/2021. ACA 26-51-1401 requires that a financial institution whose business activity is taxable both within and with­ out this State to allocate and apportion its net income to this State. All business income which is includable in the apportionable income tax base shall be apportioned to this State by multiplying such income by the taxpayer's receipts factor as described in ACA 26-51-1403. Generally, the receipts factor is a fraction; the numera­ tor is the financial institution's gross receipts in Arkan­ sas during the taxable year, and the denominator is all gross receipts that the financial institution derives from transactions and activities in the regular course of its trade or business. Interest from loans secured by real property is attributed to Arkansas if the property is lo­ cated in Arkansas. Interest from loans not secured by real property is attributed to Arkansas if the borrower is

located in Arkansas. Interest from credit cards receiv­