For An Act To Be Entitled. Subtitle

Transcription

1 Stricken language would be deleted from present law. Underlined language would be added to present law. 0 0 State of Arkansas st General Assembly A Bill ACT OF Regular Session, HOUSE BILL By: Representative Courtway For An Act To Be Entitled "AN ACT TO ADOPT TECHNICAL CORRECTIONS TO STATE INCOME, GROSS RECEIPTS AND COMPENSATING USE TAXES; AND FOR OTHER PURPOSES." Subtitle "STATE TAX TECHNICAL CORRECTIONS ACT." BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: SECTION. Ark. Code Ann. --0(b)() is amended to read as "(b)() Section A of the Internal Revenue Code of, as amended and in effect on January,, is adopted for purposes of determining the allowable credit under the Arkansas Income Tax Act, as amended, -- et seq., for household and dependent care services necessary for gainful employment." SECTION. Ark. Code Ann. -- is amended to read as "Sections,, 0-0, and 0- inclusive, and of the Internal Revenue Code of, as in effect on January,, relating to annuities, retirement savings, and employee benefit plans, respectively, are hereby adopted for the purpose of computing Arkansas income tax liability, except Arkansas capital gains treatment, and the Arkansas tax rates shall apply. The requirements for filing a joint return under (c)()(a) of the Internal Revenue Code of shall not apply. Any additional tax or penalty imposed by this section shall be ten percent (%) of the amount of any additional tax or penalty provided in the federal income tax law adopted by this section." 0.mhf

2 HB 0 0 SECTION. Ark. Code Ann. --0(b)() is amended to read as "() Section of the federal Internal Revenue Code of, in effect on January,, is adopted in computing amounts excludible from gross income under the Arkansas Income Tax Act, -- et seq., for payments received under a cafeteria plan;" SECTION. Ark. Code Ann. --0(b)() is amended to read as "() Section of the federal Internal Revenue Code of, as in effect on January,, regarding the exclusion from income for dependent care assistance, is hereby adopted for the purpose of computing Arkansas income tax liability. However, no amounts excluded from gross income pursuant to this subdivision shall be taken into account in computing the dependent care credit contained in --0;" SECTION. Ark. Code Ann. --0(b)() is amended to read as "() Sections - of the federal Internal Revenue Code of, as in effect on January,, regarding the exclusion from income of disability and health plan payments, are hereby adopted for the purpose of computing Arkansas income tax liability;" SECTION. Ark. Code Ann. --0(b)() is amended to read as "() Section of the Internal Revenue Code of, as in effect on January,, regarding the exclusion from gross income of meals or lodging furnished for the convenience of the employer, is adopted for the purpose of computing Arkansas income tax liability;" SECTION. Ark. Code Ann. --(a)() is amended to read as "() BUSINESS EXPENSES. All of, except subsection (n), of the Internal Revenue Code of, as in effect on January,, regarding trade or business expenses, is hereby adopted for the purpose of computing 0.mhf

3 HB 0 0 Arkansas income tax liability;" SECTION. Ark. Code Ann. --(a)() is amended to read as "() MEDICAL AND DENTAL EXPENSES. Section of the Internal Revenue Code of, as in effect on January,, is adopted in computing the medical and dental expense deduction under the state income tax law;" SECTION. Ark. Code Ann. --(b) is amended to read as "(b) Section of the Internal Revenue Code of, as in effect on January,, regarding the deductions of expenses for entertainment, amusement, recreation, business meals, travel, etc., is hereby adopted for the purpose of computing Arkansas income tax liability only for taxable years beginning during calendar years and." SECTION. Ark. Code Ann. --(c)() is amended to read as "(c)() An individual who is self-employed shall be allowed a deduction equal to twenty-five percent (%) the applicable percentage, as set forth in U.S.C. (l)()(b) as in effect on January,, of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer, his spouse, and dependents." SECTION. Ark. Code Ann. -- is amended to read as "Section of the Internal Revenue Code of, as in effect on January,, regarding the deductions for interest expenses, is hereby adopted for the purpose of computing Arkansas income tax liability." SECTION. Ark. Code Ann. --(a) is amended to read as "(a) Sections,, and of the Internal Revenue Code of, as in effect on January,, regarding depreciation and expensing of property, are hereby adopted for the purpose of computing Arkansas income tax liability." SECTION. Ark. Code Ann. -- is amended to read as 0.mhf

4 HB 0 0 "Section 0 of the Internal Revenue Code of, as in effect on January,, regarding deductions for charitable contributions, is hereby adopted for the purpose of computing Arkansas income tax liability. This adoption is for taxable years beginning on or after January,, and will have no effect on years prior to its adoption." SECTION. Ark. Code Ann. --() is amended to read as "() Section of the Internal Revenue Code of, as in effect on January,, regarding the limitations on deductibility of passive activity losses and credits, is hereby adopted for the purpose of computing Arkansas income tax liability;" SECTION. Ark. Code Ann. -- is amended to read as "Any bank, building and loan, savings and loan or any other savings institution chartered and supervised as a savings and loan, or similar associations under federal or state law shall be allowed a bad debt expense deduction computed in accordance with Internal Revenue Code,, and, as in effect on January,." SECTION. Ark. Code Ann. --(a) is amended to read as "(a) To the extent they apply to capital gains and losses, realized or incurred during income years beginning after December,, -, and - of Title of the United States Code as in effect on January,, and the regulations of the Secretary of the Treasury promulgated thereunder and in effect on January,, are adopted for the purpose of computing tax liability under the Arkansas Income Tax Act of, as amended, -- et seq. However, the provisions of this section shall not apply to C corporations as defined in U.S.C. as in effect on January,. Furthermore, any other provisions of the federal income tax law and regulations necessary for interpreting and implementing U.S.C. -, and - are adopted to that extent and as in effect on January,." SECTION. Ark. Code Ann. --0(a) is amended to read as "(a) Subchapter S of the federal Internal Revenue Code of, as in effect on January,, regarding small business corporations, is 0.mhf

5 HB 0 0 hereby adopted for the purpose of computing Arkansas income tax liability." SECTION. Ark. Code Ann. --(b) is amended to read as "(b) Section of the Internal Revenue Code of, as in effect on January,, regarding the taxation of foregone interest on a below-market loan, is hereby adopted for the purpose of computing Arkansas income tax liability." SECTION. Ark. Code Ann. --0(a)() is amended to read as "() Sections and of the Internal Revenue Code of, as in effect on January,, regarding combat pay of members of the armed forces and income taxes of members of the armed forces on death, are adopted. The provisions contained in of the Internal Revenue Code are in addition to all other provisions contained in this section." SECTION 0. Ark. Code Ann. --(d) is amended to read as "(d) Nonresidents and part-year residents shall divide adjusted gross income from Arkansas sources by the adjusted gross income from all sources to arrive at the applicable percentage that Arkansas adjusted gross income represents of all adjusted gross income received by the taxpayer in the income year. Part-year residents shall divide adjusted gross income received while an Arkansas resident by the adjusted gross income from all sources to arrive at the applicable percentage that the adjusted gross income received while an Arkansas resident represents of all adjusted gross income received by the taxpayer in the income year." SECTION. Ark. Code Ann. -- is amended to add a new subsection to read as "() Section 0 of the Internal Revenue Code of, as in effect on January,, regarding the deductibility from income of contributions made to a Medical Savings Account (MSA) by the taxpayer or the taxpayer's employer, is hereby adopted for the purpose of computing Arkansas income tax liability." SECTION. Ark. Code Ann. --0(b)() is amended to read as 0.mhf

6 HB 0 0 "() The proceeds of life insurance policies and contracts paid upon the death of the insured; Section of the Internal Revenue Code of, as in effect on January,, relating to the exclusion from gross income of proceeds or benefits paid upon the illness or death of the insured, is hereby adopted for the purpose of computing Arkansas income tax liability;" SECTION. Ark. Code Ann. --0(b)() is amended to read as "() The gain, if any, resulting when property of a taxpayer, because of its destruction in whole or part, or theft, seizure, or requisition or condemnation or threat or imminence thereof, is compulsorily or involuntarily converted into property similar or related in service or use to the property so converted, or into money and such money is forthwith in good faith expended in the acquisition of other property similar or related in service or use to the property so converted, or in the acquisition or control of a corporation owning such other property, or in the establishment of a replacement fund; Section of the Internal Revenue Code of, as in effect on January,, relating to the exclusion from gross income of gain resulting from the involuntary conversion of a taxpayer's property, is hereby adopted for the purpose of computing Arkansas income tax liability;" SECTION. Ark. Code Ann. --0 is amended to read as "(a) Subchapter M of the Internal Revenue Code of, as in effect on January,, relating to regulated investment companies, real estate investment trusts and financial asset securitization investment trusts (FASITs), is adopted as state income tax law for the purpose of computing Arkansas income tax liability and shall govern all corporations which are registered as investment companies under the Investment Company Act of 0, as in effect on January,. However, those provisions of Subchapter M addressing the tax rates applied to FASIT income are not adopted. Any FASIT income subject to Arkansas income tax shall be taxed at the rates set forth in Ark. Code Ann (b) Any election made for federal income tax purposes under Subchapter M of the Internal Revenue Code of, as in effect on January,, shall be deemed made for state income tax purposes. (c) This section shall take effect and be enforced for tax years 0.mhf

7 HB 0 0 beginning on or after January,." SECTION. Ark. Code Ann. --0(c)() is amended to read as "() Returns and payments to the director by employers engaged in seasonal business shall be made on or before the last day of the month following the month for which those amounts were deducted and withheld from the wages of his employees. However, any employer who files regular quarterly withholding returns shall not be required to file monthly returns as provided in this subsection." SECTION. Ark. Code Ann. --0(g)() is amended to read as "(g)() Once an employer has become liable to a quarterly an annual return of withholding, he must continue to file a quarterly an annual report, even though no tax has been withheld, until such time as he notifies the director, in writing, that he no longer has employees or that he is no longer liable for quarterly returns an annual return." SECTION. Ark. Code Ann. --0(b) is amended to read as "(b)() Notwithstanding the provisions of subsection (a) of this section, if the amount of taxable income or taxable estate for a taxpayer for any year, as returned to the United States Treasury Department, is changed and corrected by the Commissioner of Internal Revenue or any officer of the United States of competent authority, the taxpayer, within thirty (0) days from the receipt of the notice and demand for payment by the Internal Revenue Service, must report to the director the corrected federal tax, taxable income, or taxable estate for the taxable period covered by the change on an amended Arkansas income tax return. () If there is any additional state tax due from the taxpayer because of the correction by the Internal Revenue Service, any additional state tax must be assessed by the director within one () year of the filing of the notice amended Arkansas income tax return by the taxpayer. However, in the instance of a taxpayer who fails to notify the director of the correction as required by this subsection, no assessment of additional state tax due from the taxpayer because of the correction by the Internal Revenue Service shall 0.mhf

8 HB 0 0 be made by the director after the expiration of eight () years from the date the return was required to be filed or the date the return was filed, whichever period expires later. If the assessment made by the Internal Revenue Service is appealed by the taxpayer, the director shall have three () years from the date of the final Internal Revenue Service assessment or date of payment of the federal assessment by the taxpayer, whichever of the two periods expires later, in which to make an assessment." SECTION. Ark. Code Ann. --0(a)() is amended to read as "(a)() All tangible personal property which is procured from without this state for use, storage, distribution, or consumption including machinery, equipment, repair or replacement parts, materials, and supplies used, stored, distributed, or consumed by a contractor in the performance of a contract in this state shall be subject to the compensating tax of three percent (%) four and one-half percent ( %) of the purchase price as provided by the Arkansas Compensating Tax Act, -- et seq., or three percent (%) four and onehalf percent ( %) of its market or book value, whichever is greater, if the property has been subjected to prior use before coming to rest for use, storage, distribution, or consumption within this state. The four and onehalf percent ( %) compensating tax shall be in addition to any other compensating taxes levied by the State of Arkansas." SECTION. Ark. Code Ann. --0(b) is amended to read as "(b) In the case of leases or rentals of tangible personal property by a contractor for use, storage, distribution, or consumption in this state, the contractor shall report and remit the compensating tax on the basis of rental or lease payments made to the lessor of the tangible personal property during the term of the lease or rental, which lease rentals shall be in accordance with written contracts between lessor and lessee furnished to the Director of the Department of Finance and Administration." SECTION 0. Ark. Code Ann. --0(c)() is amended to read as "(c)() The provisions of this subchapter shall not apply in respect to the use, consumption, distribution, or storage of tangible personal property 0.mhf

9 HB 0 0 as defined in this subchapter for use or consumption in this state upon which a like tax equal to or greater than the amount imposed by this subchapter has been paid in another state, the proof of payment of the tax to be according to rules and regulations made by the director." SECTION. Ark. Code Ann. --(a)() is amended to read as "(a)() Every vendor making a sale of tangible personal property directly or indirectly for the purpose of storage, use, distribution, or consumption in this state shall collect the tax from the purchaser and give a receipt therefor. This provision includes all out-of-state vendors who deliver merchandise into Arkansas in their own conveyance where such merchandise will be stored, used, distributed, or consumed within this state." SECTION. Ark. Code Ann. -- is amended to read as "(a) For purposes of this section: () "Adoption expenses" means any amount expended by a claimant for adoption fees, court costs, or legal fees relating to the adoption of a child, whether or not the adoption process is completed; () "Claimant" means an adoptive parent or a prospective adoptive parent; and () "Household" means a claimant and an individual related to the claimant as husband or wife. (b)() Subject to the limitations provided in this section, there shall be allowed a credit against the tax imposed by the Arkansas Income Tax Act of, -- et seq., in an amount equal to ten percent (%) of all adoption expenses incurred by a claimant which exceed twenty percent (0%) of his or her Arkansas adjusted gross income. ()(A) The maximum credit that may be claimed under this section by a claimant may not exceed the lesser of the amount of individual income tax otherwise due or eight hundred dollars ($00) for each adoption process. (B) The maximum amount of adoption expenses for each adoption process for which a credit is claimed under this section is twenty thousand dollars ($0,000). () Except as provided in subdivision (b)(), of this section only one () credit per household is allowed each taxable year. 0.mhf

10 HB 0 0 () If a married couple files separately, each spouse may claim a maximum credit of fifty percent (0%) of the amount allowed under this section. (c) The Department of Finance and Administration is authorized to promulgate the rules and regulations necessary to administer this section. (d) This section applies to taxable years beginning on and after January,. Section of the Internal Revenue Code of ( U.S.C. ), as in effect on January, is adopted for purposes of determining the allowable credit for adoption related fees, costs and expenses paid or incurred by a taxpayer. The amount of credit allowed against Arkansas income tax due shall be twenty percent (0%) of the federal credit as calculated pursuant to U.S.C.." SECTION. Ark. Code Ann. -- is amended to read as "Sections,,,, and of the federal Internal Revenue Code of, as in effect on January,, the same being U.S.C.,,, and regarding the liquidations of corporations, are hereby adopted for the purpose of computing Arkansas income tax liability.; provided, however, that a corporation that (i) has made an election under subchapter S of the Internal Revenue Code of and (ii) has not made a corresponding election to be treated as an S Corporation for Arkansas income tax purposes pursuant to Section --0(b), will not be deemed to have made elections under Section of the Internal Revenue Code of for Arkansas income tax purposes, unless it has filed a separate election with the Arkansas Director of the Department of Finance and Administration stating that it is making an election under Section for Arkansas income tax purposes. For the purposes of the application of this section, the transition rule of sections (c) and (d) of the Tax Reform Act of, Public Law -, as amended by subsections (g)(), (g)()(a)-(c), (g)(), (g)()(a) and (B), and (g)() of section 0 of the Technical and Miscellaneous Revenue Act of, Public Law 0-, shall also apply under the state income tax law." SECTION. Sections through, and shall be effective for tax years beginning on and after January,. However, it is the intent of this Act that those portions of the Internal Revenue Code adopted by this Act 0.mhf

11 HB 0 0 which for federal tax purposes do not become effective until some time after January,, shall also not become effective for state tax purposes until the same time. SECTION. All provisions of this act of a general and permanent nature are amendatory to the Arkansas Code of Annotated and the Arkansas Code Revision Commission shall incorporate the same in the Code. SECTION. If any provision of this act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of this act are declared to be severable. SECTION. All laws and parts of laws in conflict with this act are hereby repealed. SECTION. EMERGENCY. It is hereby found and determined by the General Assembly that current state tax laws are unclear or confusing, creating difficulty for taxpayers seeking to comply with these tax laws; that the changes made by Sections through of this bill are necessary to provide adequate direction to those taxpayers and to maintain the efficient administration of the Arkansas tax laws; and that the provisions of Sections through of this Act are necessary to effectuate that purpose. Therefore, an emergency is hereby declared to exist and the provisions of Sections through of this Act being necessary for the preservation of the public peace, health, and safety shall become effective on the date of its approval by the Governor. If the bill is neither approved nor vetoed by the Governor, Sections through shall become effective on the expiration of the period of time during which the Governor may veto the bill. If the bill is vetoed by the Governor and the veto is overridden, Sections through shall become effective on the date the last house overrides the veto. APPROVED:-- 0.mhf

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