Arkansas committee approves modernization tax credit for existing businesses

The Arkansas House Revenue and Taxation Committee convened on April 7, 2025, to discuss significant amendments to the state's modernization and automation incentive program. The meeting focused on enhancing incentives for existing businesses in Arkansas, aiming to encourage local expansion and modernization rather than attracting new companies from out of state.

A key amendment was adopted, requiring a positive cost-benefit analysis from the Arkansas Economic Development Commission (AEDC) for projects seeking financial incentives. This change aims to ensure that taxpayer money is used effectively and that companies maintain their payroll levels during and after the project.

The proposed program, known as HP 1935, targets businesses that have been operational for at least two years and plan to invest a minimum of $25 million in eligible project costs. Eligible projects include the construction of new facilities or the expansion and modernization of existing ones. The incentive would provide a tax credit of up to 5% of the eligible project costs, with a maximum credit of $2 million per year, and unused credits can be carried forward for five years.

Clint O'Neil, executive director of the AEDC, emphasized that this program differs from the previous InvestArk program, which was phased out due to its high costs and statutory nature. The new program is discretionary, allowing the AEDC to tailor incentives based on specific project needs and competitive factors. This flexibility is intended to help Arkansas businesses remain competitive against states that already offer similar incentives.

Committee members raised questions about the potential impact of modernization on job numbers, with O'Neil clarifying that the focus is on increasing capacity and maintaining payroll levels, rather than simply automating processes that could lead to job losses.

The committee concluded the meeting without opposition to the bill, indicating a consensus on the importance of supporting local businesses in Arkansas through targeted financial incentives. The next steps will involve further discussions and potential implementation of the amended program.