Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Rule 006.05.99-004 - Regulation 1999-4 - Regulation on the Tuition Reimbursement Tax Credit Program, Act 1036 of 1999

Current through Register Vol. 49, No. 6, June, 2024
Pursuant to the authority provided in Ark. Code Ann. §
								19-1-208
				(1987), Ark. Code Ann. §
								26-18-301
				(1987) and Ark. Code Ann. §
								25-15-201, et
				seq. (1987) (the Arkansas Administrative Procedures Act), the Director of the
				Arkansas Department of Finance and Administration and the Commissioner of
				Revenue for the State of Arkansas do hereby promulgate the following
				Regulation. This Regulation is to be read in conjunction with the previous
				Regulations of the Department of Finance and Administration ("Department") and
				laws of this State.
1) Definitions.
a) "Accredited institution of post-secondary
			 education" means a school currently accredited by the North Central Association
			 of Schools and Colleges or currently certified by the Arkansas Department of
			 Higher Education.
b) "Eligible
			 Company" means an entity currently operating in the state of Arkansas that is
			 classified in one of the following:
i)
			 Manufacturers classified in Federal Standard Industrial Classification (SIC)
			 codes 20-39, including semiconductor and microelectronic manufacturers;
ii) Computer businesses primarily
			 engaged in providing computer programming services; the design and development
			 of prepackaged software; businesses engaged in digital content production and
			 digital preservation; computer processing and data preparation services;
			 information retrieval services; computer and data processing consultants and
			 developers. All businesses in this group must derive at least sixty percent
			 (60%) of their revenue from out of state sales and have no retail sales to the
			 general public;
iii) Businesses
			 primarily engaged in commercial physical and biological research as classified
			 by SIC code 8731;
iv) Businesses
			 primarily engaged in motion picture production. All businesses in this group
			 must derive at least sixty percent (60%) of their revenue from out of state
			 sales and have no retail sales to the general public;
v) Distribution centers with no retail sales
			 to the general public;
vi) An
			 office sector business with no retail sales to the general public;
vii) A corporate or regional headquarters
			 with no retail sales to the general public and;
viii) A trucking/distribution terminal, as
			 classified by SIC code 4231, with no retail sales to the general
			 public.
c) "Computer
			 businesses" grouped into category (ii) above fall generally into the following
			 SIC codes with the additional conditions that they derive at least sixty
			 percent (60%) of their revenues from out of state sales and have no retail
			 sales to the general public: SIC 7371, 7372, 7374, 7375, and 7379.
d) "Corporate or regional headquarters" means
			 the home or center of operations, including research and development, of a
			 national or multinational corporation with no retail sales to the general
			 public.
e) "Digital Content
			 Production" - means companies engaged in the creation of a product that
			 includes acquiring, modeling, and manipulating video imagery, film and
			 animation. These products are created in digital form and are eligible for
			 copyrighting under the copyrighting laws of the United States. Outlets for
			 digital content products may include broadcast television, corporate
			 presentations, cable shows, advertising, video games, movies and themed
			 entertainment outlets. For companies engaged in digital content production to
			 be eligible for benefits under this program, they must derive at least sixty
			 percent (60%) of their revenue from out of state sales and have no retail sales
			 to the general public.
f) "Digital
			 Preservation" - means companies engaged in the transformation, storage,
			 archiving and/or distribution of various forms of media which have been
			 transferred into a digital format. Media transformation into digital content
			 may include film, video or written materials. For companies engaged in digital
			 preservation to be eligible for benefits under this program, they must derive
			 at least sixty percent (60%) of their revenue from out of state sales and have
			 no retail sales to the general public.
g) "Distribution center" means a facility for
			 the reception, storage, or shipping of a business' own products or products
			 which the business wholesales to retail businesses or ships to its own retail
			 outlets. Distribution centers can have no retail sales to the general
			 public.
h) "Full-time permanent
			 employee" - means a person working at an eligible company that has been
			 employed for at least twenty-six (26) consecutive weeks and that works at least
			 thirty (30) hours per week and is subject to the Arkansas individual income
			 tax.
i) "Motion picture production
			 company" means a company that produces any motion picture or portion thereof
			 for: display at theaters, video release, television shows, music videos and
			 special effects, titles and credits all of which are embodied on film or
			 prepared for digital presentation. Motion picture production companies are
			 generally a subset of those companies classified in SIC code 7812 and must
			 derive at least sixty percent (60%) of their revenue from out of state sales
			 and have no retail sales to the general public.
j) "No retail sales to the general public"
			 means no walk-in, "point of sale" service to the general public.
k) "Office sector business" means control
			 centers that influence the environment in which data processing, customer
			 service, credit accounting, telemarketing, claims processing, and other
			 administrative functions that act as production centers are performed. Office
			 sector businesses can have no retail sales to the general public.
1) "Trucking sector business" means a
			 business that is classified within the Federal Standard Industrial
			 Classification (SIC) Code number 4231. This SIC code includes companies that
			 operate terminal facilities used by highway-type property carrying vehicles and
			 includes terminals which provide maintenance and service for motor vehicles.
It does not include terminals operated by motor freight transportation
			 companies for their own use.
2) Intent.
It is the intent of the tuition reimbursement tax credit
				program that the eligible company's arrangement with its employee require the
				employee to complete the employee's financial arrangement with the school for
				the payment of the employee's tuition, books, and fees at the beginning of the
				course and that the company reimburse the employee after the employee completes
				the course to the satisfaction of the company.
3) Qualifications
a) The program allows eligible companies to
			 claim an income tax credit equal to thirty percent (30%) of the cost of
			 tuition, books, and fees reimbursed by a company to a full-time permanent
			 employee of the company after the employee has satisfactorily completed one (1)
			 semester of undergraduate or post-graduate education at an accredited
			 institution of post-secondary education located in Arkansas. Courses taken by
			 an employee must be directly related to the company's business or
			 industry.
b) The program applies
			 only to reimbursements paid by eligible companies to their employees after July
			 30, 1999 for courses taken by such employees after July 3 0, 1999.
c) The tax credit claimed by the company
			 cannot exceed twenty-five percent (25%) of the company's income tax liability
			 for the tax year in which the credit is taken. Unused credits cannot be carried
			 forward, backward or refunded. The company's income tax credit must be claimed
			 for the tax year in which reimbursement was actually paid to the
			 employee.
d) A company cannot claim
			 both the tuition reimbursement tax credit under Act 1036 of 1999 and the
			 training tax credit under Act 1117 of 1997 (the Biotechnology Act) for the same
			 courses.
4)
			 Certification.
To qualify for the benefits of this Program, a company
				must:
a) Complete Form AR1036 listing
			 each employees' name for which tuition reimbursement payments were made during
			 the tax year, the total amount reimbursed for tuition, fees, and books for each
			 employee, and the total amount of credit being claimed. Form AR1036 must be
			 fully completed and attached to the eligible company's tax return.
b) If the eligible company is a partnership,
			 limited liability company, or subchapter-S corporation, additional information
			 is required in Section C of Form AR1036. The total amount of the allowable
			 tuition reimbursement credit will "flow through" to the members of the income
			 tax "pass through" entity (partnership, limited liability company, or
			 subchapter-S corporation). The credit should then be allocated to each member
			 based upon that member's proportionate share of the entity's net income and
			 loss. A member's "proportionate share" is generally equivalent to the member's
			 percentage of ownership in the entity. A duplicate Form AR1036 must be produced
			 for each member and included with each members' tax return.
5) Verification.
Tuition Reimbursement Tax Credit claims, including information
				relating to Form AR1036, are subject to verification by the Department of
				Finance and Administration, including verification by audit. The employer is
				responsible for maintaining records adequate to substantiate the employer's
				tuition reimbursement tax credit claim. These record must include clear proof
				that the employees for whom credit is being claimed actually paid for tuition,
				books and fees and that such employees were actually reimbursed for those
				expenses by the employer.
6) Additional Information.
Customized Training Incentives Team
Arkansas Department of Economic Development
One State Capitol Mall
Little Rock, AR 72201
(501) 682-7323
Arkansas Department of Finance and Administration
Income Tax Administration
Ledbetter Building
Seventh & Wolfe Streets
P. O. Box 1272
Little Rock, AR 72203
(501) 682-7225 (Individual Income Tax)
(501) 682-4775 (Corporation Income Tax)
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