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 27 - ARKANSAS WOOD ENERGY PRODUCTS AND FOREST MAINTENANCE INCOME TAX CREDIT (§§ 26-51-2701 — 26-51-2704) › Section 26-51-2704 - Arkansas wood energy products and forest maintenance income tax credit

(a)
There is allowed a tax credit against the tax imposed by this chapter in an amount equal to thirty percent (30%) of the costs of wood energy products equipment purchased for use in Arkansas after the date specified in the incentive agreement by a taxpayer that:
(1)
Is engaged in the business of collecting, separating, treating, pulverizing, drying, modifying, or manufacturing wood energy products; and
(2)
Has been certified as owning a qualified wood energy products and forest maintenance project or a qualified wood energy products and forest maintenance expansion project.
(b)
(1)
If a tax credit is allowed under this section and, as of the end of the taxable year in which the tax credit is first allowed, the taxpayer does not have a public retirement system of the State of Arkansas as a proprietor, partner member, shareholder, or holding an interest, the lesser of five million dollars ($5,000,000) or the amount of income tax due by the taxpayer may be claimed each year.
(2)
(A)
Any unused tax credit that cannot be claimed in a tax year under subdivision (b)(1) of this section may be carried forward indefinitely to apply the unused tax credit to future tax liability.
(B)
Beginning July 1, 2021, and by July 15 of each subsequent year, a taxpayer shall provide notice to the Department of Finance and Administration of the amount of tax credits, including without limitation tax credits the taxpayer expects will receive certification during the fiscal year by the Department of Energy and Environment, subject to the limitation in subdivision (b)(1) of this section, that will be sold or transferred for value.
(c)
(1)
If at the time of the execution of the incentive agreement the taxpayer that owns a qualified wood energy products and forest maintenance project or a qualified wood energy products and forest maintenance expansion project is a proprietorship, partnership, limited liability company, or other business organization and any portion of the tax credits allowed under this section would be apportioned to a public retirement system of the State of Arkansas as proprietor, partner, member, or shareholder of the taxpayer, the public retirement system shall have the possession and control of all tax credits, including without limitation any tax credits allowed under this section and otherwise apportioned to the other proprietors, partners, members, shareholders, or beneficiaries.
(2)
The possession and control of tax credits by a public retirement system under this subsection shall be confirmed in writing by the office of the Department of Finance and Administration charged with the administration of the tax credits allowed under this section.
(3)
A public retirement system that has possession and control of tax credits under this subsection shall sell or transfer for value the tax credits allowed under this section to the State of Arkansas for eighty percent (80%) of the face value in lieu of the right of a proprietor, partner, member, shareholder, or beneficiary of the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project to claim the tax credits as otherwise allowed under applicable state law.
(4)
Subject to the total tax credit allowed under this section for a qualified wood energy products and forest maintenance project, the maximum amount of tax credits allowed under an incentive agreement between the taxpayer and the state, and the annual transfer by the Arkansas Economic Development Commission as agreed by the state and the taxpayer, no more than five million dollars ($5,000,000) of the tax credits in the possession and control of the public retirement system with respect to a qualified wood energy products and forest maintenance project under this subsection may be sold or transferred each year.
(5)
Subject to the total tax credit allowed under this section for a qualified wood energy products and forest maintenance expansion project, the maximum amount of tax credits allowed under an incentive agreement between the taxpayer and the state and the annual transfer by the commission as agreed by the state and the taxpayer, no more than five million dollars ($5,000,000) of the tax credits in the possession and control of the public retirement system with respect to a qualified wood energy products and forest maintenance expansion project under this subsection may be sold or transferred each year.
(6)
Any unused tax credit that cannot be sold or transferred in a tax year by the operation of subdivision (c)(4) or subdivision (c)(5) of this section may be carried forward indefinitely to be sold or transferred by future operation of subdivision (c)(4) or subdivision (c)(5) of this section.
(7)
Beginning July 1, 2021, by July 15 of each year, a public retirement system with possession and control of tax credits under this subsection shall provide notice to the Department of Finance and Administration of the amount of tax credits, including without limitation tax credits the public retirement system expects will receive certification during the fiscal year by the Department of Energy and Environment, subject to the limitations in subdivisions (c)(4) and (c)(5) of this section, to be sold or transferred for value.
(8)
(A)
The State of Arkansas shall pay the purchase price equal to eighty percent (80%) of the face value of all the tax credits included in the notice required under subdivision (c)(7) of this section on or before June 30 of the calendar year following the calendar year in which the notice was provided for all tax credits certified by the Department of Energy and Environment by warrant from the Economic Development Incentive Fund funded by a transfer from general revenue.
(B)
Tax credits under this subsection sold or transferred for value to the State of Arkansas are extinguished upon payment of the purchase price as if claimed against the tax imposed by this chapter.
(C)
(i)
In the event the State of Arkansas fails to timely pay the purchase price required under subdivision (c)(8)(A) of this section for the tax credits included in the notice required under subdivision (c)(7) of this section, the public retirement system may, before the end of the taxable year following the taxable year in which failure to pay occurs, sell or transfer for value such tax credits to one (1) or more persons.
(ii)
The person or persons to whom the tax credits are sold or transferred under subdivision (c)(8)(C)(i) of this section may claim the tax credits in accordance with applicable law.
(iii)
Any tax credits sold or transferred for value under subdivision (c)(8)(C)(i) of this section shall not expire before the end of the third taxable year following the year in which the tax credits were sold or transferred for value under this section.
(D)
The sale or transfer of tax credits under this subdivision (c)(8) shall be confirmed in writing by the office of the Department of Finance and Administration charged with the administration of the tax credit allowed under this section.
(d)
A tax credit under this section shall not be authorized without:
(1)
A cost-benefit analysis, including without limitation an analysis of other incentives offered by the State of Arkansas with respect to the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project subject to the tax credit, as certified by the Director of the Arkansas Economic Development Commission in consultation with the Chief Fiscal Officer of the State; and
(2)
An incentive agreement with performance criteria and clawback provisions as required under subsection (e) of this section.
(e)
The issuance, sale, and transfer of a tax credit authorized under this section shall be subject to an incentive agreement with performance criteria and clawback provisions between the taxpayer and the commission that:
(1)
(A)
Is subject to the approval of the Chief Fiscal Officer of the State to ensure that the cost-benefit analysis required under subsection (d) of this section is met and maintained for a test period that is the longer of the life of the tax credits or twelve (12) years, subject to the limitation stated in subdivision (e)(1)(B) of this section.
(B)
The test period described in subdivision (e)(1)(A) of this section shall not be longer than fifteen (15) years; and
(2)
Shall include without limitation the:
(A)
Capital investment for the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project;
(B)
New full-time permanent employee positions created by the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project;
(C)
Annual salary requirements for the new full-time permanent employee positions created by the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project;
(D)
Timeline for fulfilling the investment and job creation targets stated in the performance and clawback agreement for the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project; and
(E)
Conditions for the clawback provisions, which are triggered if, during the test period stated in subdivision (e)(1) of this section, the taxpayer:
(i)
Does not meet the required targets of the qualified wood energy products and forest maintenance project or the qualified wood energy products and forest maintenance expansion project related to capital investment, job creation, timeline, or annual salary amounts; or
(ii)
Fails to maintain a positive cost-benefit analysis.
Amended by Act 2023, No. 845,§ 7, eff. 1/1/2023, app. for tax years beginning on or after January 1, 2023.
Amended by Act 2023, No. 845,§ 6, eff. 1/1/2023, app. for tax years beginning on or after January 1, 2023.
Added by Act 2021, No. 594,§ 4, eff. for tax years beginning on or after January 1, 2021.