Arkansas Code of 1987 (2023) › Title 26 - TAXATION (§§ 26-1-101 — 26-82-119) › Subtitle 5 - STATE TAXES (§§ 26-50-101 — 26-65-108) › Chapter 51 - INCOME TAXES (§§ 26-51-101 — 26-51-2804) › Subchapter 2 - IMPOSITION OF TAX (§§ 26-51-201 — 26-51-207) › Section 26-51-204 - Railroads and public utilities - Apportionment - Definitions

(a)
Every railroad or other public utility, whether organized under the laws of this state or any other state or the federal government, shall be subject to the provisions of the Income Tax Act of 1929, §
26-51-101
et seq., and shall pay the state income tax levied by this subchapter upon that proportion of its entire net income applicable to the State of Arkansas.
(b)
(1)
An organization operating a railroad partly within this state and partly without this state shall apportion the net operating income attributable to this state by multiplying the organization's income by:
(A)
The sales factor described in subdivision (b)(2) of this section; or
(B)
A fraction, the numerator of which is the sum of the property factor described in subdivision (b)(3) of this section, the payroll factor described in subdivision (b)(4) of this section, and two (2) times the sales factor described in subdivision (b)(2) of this section, and the denominator of which is four (4).
(2)
The sales factor is a fraction, the numerator of which is the sum of the taxpayer's gross revenue from within this state and the proportionate part of the taxpayer's interstate revenues determined on the basis of the taxpayer's miles operated within this state compared to the taxpayer's total miles operated within the railway system, and the denominator of which is the total operating revenues of the taxpayer.
(3)
(A)
The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax year, and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax year.
(B)
The average value of the taxpayer's operating equipment, including without limitation locomotives, freight and passenger cars, and work and miscellaneous equipment, shall be apportioned to this state in the ratio of the total miles the taxpayer's property is operated within this state to the total miles the taxpayer's property is operated throughout the railway system.
(C)
The average value of the taxpayer's real and tangible personal property owned in this state is the average of the original cost of the real and tangible personal property at the beginning and the end of the tax year.
(D)
The taxpayer's real and tangible personal property rented and used in this state is valued at eight (8) times the net annual rental amount.
(4)
The payroll factor is a fraction, the numerator of which is the sum of the compensation paid by the taxpayer for services performed entirely within the state and a proportionate part of the compensation paid by the taxpayer for services performed both within and without the state based on the ratio of the taxpayer's total miles traveled within the state to the taxpayer's total miles traveled, and the denominator of which is total compensation paid by the taxpayer during the tax year.
(5)
As used in this subsection:
(A)
"Nonoperating income" means all income other than operating income; and
(B)
"Operating income" means income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations.
(c)
The Secretary of the Department of Finance and Administration may promulgate rules to administer this section.
Amended by Act 2023, No. 658,§ 3, eff. for tax years beginning on or after 1/1/2023.
Acts 1929, No. 118, Art. 2, § 3; Pope's Dig., § 14026; A.S.A. 1947, § 84-2003; Acts 2007, No. 218, § 10.