Income/Franchise:
Arkansas: Proposed Rule Implements Election to Pay Tax at the Pass-through Entity Level
Proposed Rule 2022-6; Legal Notice, Ark. Dept. of Fin. & Admin. (9/9/22). The Arkansas Department of Finance and Administration (Department) released a proposed rule reflecting legislation enacted last year that allows certain pass-through entities to elect to pay state income tax at the entity level on an annual basis [see H.B. 1209 (2021) and State Tax Matters, Issue 2021-11, for more details on this new law]. Specifically, the proposal seeks to implement new state law that for tax years beginning on or after January 1, 2022, provides the following:
A qualifying pass-through entity may elect to pay state income tax at the entity level if owners that hold more than 50% of the voting rights of the pass-through entity elect to do so; and
Correspondingly, the income of a member that is subject to this new pass-through entity tax would be excluded from Arkansas income tax.
A public hearing on this proposed rule is scheduled for October 3, 2022, and the Department is also accepting written comments on it. Please contact us with any questions.
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