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Committee adopts market-based sourcing measure with 10-year telecom carve-out
Summary
Senate Bill 567 updates corporate income tax sourcing to market-based receipts factor, includes a 10-year carve-out for telecommunications, a $250,000 nexus threshold, and DFA said the bill is revenue neutral now but could increase revenue by about $12 million after carve-out ends. The committee passed the bill.
Representative Birx presented Senate Bill 567, a DFA-sponsored measure to modernize Arkansas corporate income taxation by adopting market-based sourcing for receipts and revising business income definitions, the presenter said.
DFA staff explained the measure implements model language updated by the Multistate Tax Commission and provides carve-outs and changes requested by the Arkansas State Chamber. Tommy Burns (DFA, corporate income tax) told the committee the bill includes a 10-year carve-out allowing telecommunications companies to continue using a cost-of-performance methodology for up to 10 tax years; after that period, taxpayers may elect market-based sourcing. DFA said the bill adopts a nexus threshold of $250,000 in receipts and that, after chamber-requested changes, its analysis showed the bill to be revenue neutral for the state in the near term.
Representative Bray asked whether the revenue-neutral determination would persist after the 10-year telecom carve-out; Burns responded that projections suggested an approximate $12 million increase associated with that carve-out but cautioned that long-range projections are difficult.
Sponsor closed and the committee voted to pass the bill by voice vote.
