Arkansas Corporation Income Tax Amended Return

Corporation Income Tax Amended Return
Form AR1100CTX
ARKANSAS

2020

C Corporation

Income Tax Instructions
Due Date: On or before the 15th day of the 4th month following
the close of the tax year, for calendar year filers the due date
is April 15th.

Simple Reasons to e-file!

Arkansas

Filing Confirmation Provided
Makes Complex Returns Easy
File Federal & State Forms Together

e

file

	Secure

Mailing Address:

State of Arkansas
Corporation Income Tax Section
P.O. Box 919
Little Rock, Arkansas 72203-0919

Physical Address:

Corporation Income Tax
1816 W 7th St, Room 2250
Ledbetter Building
Little Rock, AR 72201-1030
Page 1

TAX HELP AND FORMS

 Internet
	
	

You can access the Department of Finance and Administration’s
website at www.dfa.arkansas.gov.
	 
	 Get current and prior year forms and instructions
	 
	 Access latest income tax info and archived news
	 
	 Get e-file information
You can e-mail questions to:
		

[email protected]

 Phone
	
	

General Information..................................................(501) 682-4775
	
Representatives are available to assist callers at the number
above during normal business hours (Monday through
Friday from 8:00 a.m. to 4:30 p.m.) with:
		 Taxpayer Assistance	

	 Notices Received
		 Forms	
	 Amended Returns
		 Audit and Examination	 
	 Payment Information
Other useful phone numbers:
		
Business Incentive Credits.............. (501) 682-7106
		
Withholding Tax............................... (501) 682-7290
		 Collections....................................... (501) 682-5000
		
Revenue Legal Counsel.................. (501) 682-7030
		
Individual Income Tax...................... (501) 682-1100
		
Sales and Use Tax........................... (501) 682-7104
		
Problem Resolution and.................. (501) 682-7751
			
Tax Information Office (Offers In Compromise)
		
		

Internal Revenue Service................ (800) 829-1040
Social Security Administration......... (800) 772-1213

	Forms
	

To obtain a booklet or forms you may:

		

ATAP
	

Arkansas Taxpayer Access Point (ATAP) allows taxpayers or
their representatives to log on to a secure site and manage
their account online.
Access ATAP at www.atap.arkansas.gov to:
	
		
	 	
		

Make Tax Payments
Make Estimated Tax Payments
Make name and address changes
View account letters

(Registration is not required to make payments or to check
refund status.)

 Mail

	
	

	             Corporation Income Tax Section
			
P. O. Box 919
			
Little Rock, AR 72203-0919
Be sure to apply sufficient postage or your return will not be
delivered by the U.S. Postal Service.

	
	

Walk-In

Representatives are available to assist walk-in taxpayers
with corporate income tax questions, but are not available
to prepare your return.
No appointment is necessary, but plan to arrive before
4:00 p.m. to allow sufficient time for assistance.
The Corporate Income Tax Office is located at:
1816 W. 7th Street, Room 2250
Ledbetter Building, Little Rock, AR 72201
Office hours are Monday through Friday from 8:00 a.m. to
4:30 p.m.

1.	 Access our website at:
https://www.dfa.arkansas.gov/income-tax/corporation/corporation-forms/

		 2.	Call: (501) 682-4775
		

Page 2

CONTENTS
	
	
	
	
	
	
	

Tax Help and Forms........................................................................................................... 2
What’s New for 2020.......................................................................................................... 4
Important Reminders for 2020.........................................................................................5-8
Instructions:
Domestic and Foreign Income Tax General Instructions................................................9-11
Specific Line Instructions, AR1100CT Return..........................................................12-14

	

Income from Sources Within and Without the State Instructions.............................15-20

	

Financial Institutions..........................................................................................................21

	

Business Incentive Tax Credits.................................................................................... 22-27

	 Exempt Organizations and Subchapter S....................................................................... 28-29
	

Tax Tables.................................................................................................................... 30-31	

	

Page 3

WHAT’S NEW for 2020
NOTE: The following is a brief description of each Act and is not intended to replace a careful reading of 		
the Act in it’s entirety. The Arkansas Legislature enacted numerous changes to the Arkansas Tax
Code in 2019. However, many of those changes are not effective until future tax years.
Federal Tax Changes adopted in the 2020 Cares Act can only be adopted for Arkansas if the Arkansas
Legislature adopts them in the 2021 Legislative Session.
Act 822 of 2019 amends Arkansas Code Annotated 26-5-101, Article IV, 26-51-709 through 26-51-718 and
26-51-1401 through 26-51-1405 to provide for a single sales factor to apportion income from both within and without
Arkansas for tax years beginning on or after January 1, 2021. Act 822 also amends Arkansas Code Annotated
26-51-205 to reduce the maximum corporation income tax rate to 6.2% for taxable income that exceeds $100,000
for tax years beginning on or after January 1, 2021, and for tax years beginning on or after January 1, 2022
the maximum income tax rate shall be 5.9% for income exceeding $25,000. Act 822 amends Arkansas Code
Annotated 26-51-427 to allow net operating losses occurring in tax years beginning on or after January 1, 2020
to be carried forward 8 tax years and net operating losses occurring in tax years beginning on or after January 1,
2021 to carry forward 10 tax years.

Page 4

IMPORTANT REMINDERS for 2020
Federal Subchapter S Corporations cannot file Arkansas C Returns
Act 434 of 2017 amends ACA 26-51-409(b) to require a corporation filing a federal Subchapter S income tax
return to file an Arkansas Subchapter S income tax return. ACA 26-51-413(b) is repealed. Federal Subchapter
S corporations will no longer be allowed to file Arkansas C corporation income tax returns for tax years
beginning on or after January 1, 2018. Overpayments made for 2017 estimate payments or 2018 Estimated Credit
Carryforwards can be applied to Composite Accounts, Withholding or refunded but will not be applied to Individual
Accounts. Effective for tax years beginning on and after January 1, 2018.
Multistate Corporations must allocate income from partnerships
Act 482 of 2017 amends ACA 26-51-802(c) to require that Partnership income be determined for state income tax
purposes by using an apportionment method. Partners will continue to allocate partnership income. Effective for
tax years beginning on and after January 1, 2018.
Withholding Payments
Form AR1100-WH is a new form for 2017 and following years which corresponds with Line 36 on Form AR1100CT
for corporations to report withholding tax paid on their behalf by partnerships and will need to be included with Form
AR1100CT. Corporations claiming withholding must attach Form AR1100-WH listing each partnership that withheld
tax and a copy of Form AR1099PT from each partnership. The partnership must have filed its annual withholding
return of Form AR941PT and paid the tax withheld before credit for the withholding will be allowed.
Withholding Payments as Reported on Form AR941PT
Act 760 of 2017 amends ACA 26-51-919(a)(2), (b)(l)(A)(i). (c)(5)(A) and (d) for the income tax withholding
requirements for members or owners of a pass-through entity to require withholding on corporate partners and to
allow corporations to participate in composite returns. Effective for tax years beginning on and after January 1, 2018.
Amended Tax Returns
For tax years beginning on or after January 1, 2010 the AR1100CTX Arkansas Amended Return form was removed.
An Arkansas Amended Return will be filed on the Form AR1100CT by checking the appropriate box as filing an
Amended Return. Taxpayers should use Form AR1100CTX for tax years 2009 and prior. A copy of the corporation’s
Federal Amended Return, or IRS audit report, or an explanation for filing the Arkansas Amended Return must be
attached to the Form AR1100CT.
Arkansas Form AR1100CT
To correctly process the Corporation’s return it is essential that every applicable line and space on Form AR1100CT
and related schedules be typed or printed including tax year, corporation name, address, city, state, zip code,
telephone number, FEIN (Federal Employer Identification Number), date of incorporation, NAICS business code
used on the federal return, date began business in Arkansas, and filing status (check one box only). If consolidated
box 4 is checked, you must also indicate number of entities in Arkansas in the space immediately to the right of
Filing Status 4 description.
Consolidated filers must complete a Form AR1100CT (with Schedule A if applicable) for each corporate
entity and a separate Form AR1100CT for the consolidated group. If Filing Status 4 is checked, do not check
any other filing status box. An Arkansas consolidated group with its members having business activity only within
Arkansas must check the box for filing Status 4.

Page 5

To correctly process Corporate Income Tax payments, use the AR1100ESCT for Estimate payments and AR1100CTV
for Corporate Income Tax payments. For Composite payments use the AR1000CRES for Estimate payments and
AR1000CRV for Composite return tax payments.
ATAP - Arkansas Taxpayer Access Point
Arkansas Taxpayer Access Point (ATAP) is available for the filing of most Arkansas Corporation Income Tax returns
and tax payments. Federal returns and other required schedules must be attached with the ATAP filing or mailed
separately to the Corporation Income Tax Section. They may be provided on CD, in PDF, or in paper form. The
secure online filing, managing, and payment options of ATAP are available at www.atap.arkansas.gov. Taxpayers
and their authorized representatives will be able to view and manage their Corporation Income Tax activity including
other tax activity such as Individual Income Tax, Sales Tax. Withholding Tax, and other taxes administered by DFA.
Accountants and attorneys must obtain permission from their clients to access and view their client’s accounts.
ATAP is a web-based service that will give taxpayers, or their designated representative, online access to their tax
accounts, and offers the following services:
Register a business, file a return online, file a return using XML return upload, change a name, change an address,
amend a return, make a payment, store banking information for use during payment submission, view tax period
financial information (tax, penalty, interest, credits, balance, etc.), view payments received, view recent account
activity, view correspondence from the department.
If you are currently enrolled with our online systems to either make payments or file a return electronically, you will
need to sign up in ATAP to take advantage of the enhanced services. To correctly process payments on ATAP, make
sure you are choosing the correct type of payment and applying it to the correct tax year.
The Arkansas Corporation Income Tax Return must be organized as follows:
Other than Filing Status 4 Filers:
	

Arkansas Form AR1100CT (front) (Must be signed on Schedule A, page 2)

	

Arkansas Form AR1100CT Schedule A, if applicable

	

Arkansas Schedule of Check-Off Contributions, Form AR1100CO if applicable

	

Arkansas approved extension, if applicable

	

Arkansas Reconciliation Schedule, Form AR1100REC

	

Business Incentive Tax Credit Certificates (originals), if any, Schedule AR1100BIC, if applicable

	

Copy of Federal return with supporting schedules

	

All other schedules pertaining to the Arkansas return

Corporations with Filing Status 2 must complete Schedule A (Apportionment Schedule).

Page 6

Filing Status 4 Filers:
	

Arkansas Form AR1100CT (page 1 only) for Group (Must be signed on Schedule A, page 2)

	

Arkansas Form AR1100CT for each entity (including parent) within the Group, and Schedule A, if applicable

	

Arkansas Schedule of Check-Off Contributions, Form AR1100CO, if applicable

	

Arkansas approved extension, if applicable

	

Arkansas Reconciliation Schedule, Form AR1100REC

	

Business incentive Tax Credit Certificate (original) if any, Form AR1100BIC, if applicable

	

Copy of Federal Return with supporting schedules

	

All other schedules pertaining to the Arkansas return

Corporations with Filing Status 4 (Consolidated Return) must complete a separate AR1100CT and Schedule A, if
applicable, for each member with gross income from sources within Arkansas and consolidate the applicable taxable
income on a Consolidated Group AR1100CT and attach a copy of the Federal return. Each member’s Arkansas
Business Incentive Tax Credit may be combined to reduce the consolidated group’s total tax liability without separate
entity restrictions, except for the Arkansas Economic Development Credit and ArkPlus Credit. Charitable contribution
limits are calculated on a separate corporation basis for consolidated filers.
All percentages used in determining the apportionment factor on Schedule A must be calculated to 6 places to the
right of the decimal (example 35.333452%).
Estimated Tax Requirements
ACA 26-51-911(c)(1) and ACA 26-51-913(a)(2) adopt federal due dates for making declarations of estimated
Arkansas income tax. Arkansas taxpayers are required to file an Estimated Declaration when their liability exceeds
$1,000. The AR1100ESCT, Estimate Payment Vouchers 1 through 4, and Extension Voucher 5 for tax year 2020
are not included in these instructions. You will find them at our website, www.dfa.arkansas.gov. Filling the forms
out online will automatically fill in the taxpayer information and provide the appropriate scan line needed for proper
processing.
To make sure payments are processed correctly, please use the correct payment voucher. Use the AR1100ESCT
vouchers for Corporation Income tax payments. For Individual Composite payments use the AR1000CRES vouchers.
ACA 26-19-106 provides that a corporation with an estimated quarterly income tax liability equal to or greater
than $20,000.00 must pay the estimated quarterly income tax due by electronic funds transfer (Refer to General
Instructions). Corporations that underestimate their corporate tax liability must calculate any penalty due as
applicable, on Part 2 of Form AR2220, and enter the penalty amount on page 1, Line 45 of Form AR1100CT. Enter
the numerical exception from Part 3 in the box on Line 45 if applicable.
If a corporation is required to remit Arkansas estimated corporation income tax payments through the Electronic
Funds Transfer (EFT) method, ACA 26-19-107 authorizes the assessment of an EFT penalty equal to five percent
(5%) based on the amount of taxes due. Taxpayers who are required to pay by EFT will be notified in writing by
the Department. The Form EFT-CT is no longer used to register for EFT payments. You will find current
instructions at https://www.dfa.arkansas.gov/excise-tax/sales-and-use-tax/electronic-filing-and-paymentoptions/ or by calling Excise Tax at (501) 682-7105.
												

Page 7

Copy of Federal Return is Required
ACA 26-51-806(d)(1) requires a completed copy of the corporation’s Federal Corporate Income Tax Return, Form
1120, 1120S, or other form, along with all schedules and documents, be attached to the Arkansas “C” Corporation
Income Tax Return, Form AR1100CT. The Federal return may be submitted by CD, PDF, TIF format, or attached
in paper form.
Signatures and Verification
The return must be signed by a corporate officer in the space provided on the bottom of Schedule A, page 2 of
Form AR1100CT. The return of a foreign corporation having an agent in the State may be sworn to by such agent.
If receivers, trustees in bankruptcy, or assignees are operating the property or business of the corporation, such
receivers, trustees, or assignees shall sign the return for such corporation under certification. The return must be
signed in the space provided on the bottom of Schedule A, page 2 of Form AR1100CT. For consolidated returns,
only the group Form AR1100CT, Schedule A, page 2, must be signed. Refer to General Instructions.

Page 8

2020 State of Arkansas
Domestic and Foreign Income Tax General Instructions
Who Must File
Every corporation organized or registered under the laws
of this State, or having income from Arkansas sources
as defined in ACA 26-51-205, must file an income tax
return. Consolidated returns are permitted under certain
conditions. D.I.S.C and F.S.C. Corporations are treated
as regular business corporations. Business corporations,
D.I.S.C, and F.S.C. Corporations should use Arkansas
Form AR1100CT. Small business “S” corporations must
use Form AR1100S. Financial institutions must check
the appropriate filing status box on the Form AR1100CT
or AR1100S. A pass-through entity filing as an LLC or
Partnership, or a pass-through entity electing to file as a
corporation, should check the box on Form AR1100CT.
(Refer to ACA 4-32-1313 or ACA 26-51-802.)
Consolidated Returns
All corporations that are eligible members of an affiliated
group filing a Federal Consolidated corporation income
tax return may elect to file an Arkansas Consolidated
income tax return. However, only corporations in the
affiliated group that have gross income from sources
within the State that is subject to Arkansas income
tax are eligible to file consolidated income tax returns
in Arkansas. An Arkansas consolidated group with its
members having business activity only within Arkansas
must check the box for Filing Status 4.
In computing Arkansas consolidated taxable income or
loss to which the tax rate is applied, the separate net
income or loss of each corporation that is entitled to be
included in the affiliated group will be included in the
consolidated net income or loss to the extent that its net
income or loss is separately apportioned or allocated
to Arkansas. All corporations in the affiliated group that
are eligible to file an Arkansas Consolidated corporation
income tax return must consent to, and join in, the filing
of the return prior to the last day for filing. The filing of
the consolidated return will be considered as consent of
each eligible corporation in the affiliated group.
Corporations with Filing Status 4 (Consolidated Return)
must complete a separate Form AR1100CT reflecting
taxable income before intercompany eliminations and
adjustments, and Schedule A, if multistate, for each
member with gross income from sources within Arkansas.
Each member’s separate net income or loss must be
consolidated on a group Form AR1100CT beginning on
Line 30. Schedule A should not be completed for the

consolidated group, but must be included for signature
by a corporate officer. A complete copy of the Federal
return must be attached. A schedule listing each
intercompany elimination and adjustment, identifying
the entity by FEIN to which it applies must be
submitted if this information is not clearly shown on
the Federal return.
Time For Filing
Arkansas adopted a new due date for Corporate
Income tax returns for tax years beginning on or
after January 1, 2016. Arkansas Corporate Income
Tax Returns are now due the 15th day of the 4th month
following the end of the tax year. This includes short tax
years. Cooperative Association returns are due on or
before the 15th day of the 9th month following the close of
the tax year. Exempt organizations are due on the 15th
day of the 5th month.
Extensions of Time for Filing
If you have received an automatic Federal extension
(Form 7004), the time for filing your Arkansas Corporation
Income Tax Return shall be extended until the due date
of your federal return. When filing the Arkansas Form
AR1100CT, check the box at the top indicating that the
Federal Extension Form 7004 and/or Arkansas Extension
Form AR1155 has been filed and file the Arkansas return
on or before the extended due date. It is no longer
necessary to include a copy of the Federal Form 7004.
To request an initial Arkansas extension of 180 days from
the original Arkansas return due date or an Arkansas
extension of 60 days beyond the automatic federal
extension due date, complete and mail Arkansas Form
AR1155 by the federal extended due date or, if applicable,
the Arkansas extended due date to the Corporation
Income Tax Section. If you have an automatic federal
extension and do not want to request an additional 60
day Arkansas extension, you do not fill out the Form
AR1155. Extensions using Form AR1155 are only
available for the filing of original returns. Approved
Arkansas extension(s) must be attached to the Arkansas
income tax return when it is filed. Submit payment with
the AR1155 Voucher that is attached to the form only if
you are requesting an Arkansas Extension, unless paying
by EFT method.	

Page 9

Amended Returns

Filing Declaration of Estimated Income Tax

For tax years beginning on or after January 1, 2010
the AR1100CTX Arkansas Amended Return form
was removed. An Arkansas Amended Return will be
filed on the AR1100CT by checking the appropriate
box as filing an Amended Return. Taxpayers should
use AR1100CTX for tax years 2009 and prior. A copy
of the corporation’s Federal Amended Return, or IRS
audit report, or an explanation for filing the Arkansas
Amended Return must be attached to the AR1100CT.
Arkansas amended returns must be filed within three
(3) years from date of filing the original return, or two (2)
years from date of payment of tax on the original return,
whichever is later, except when required to report the final
results of an IRS audit. Refund requests must be filed on
the amended return. Attach schedules and an explanation
for filing the Arkansas amended return to the AR1100CT.
If multistate, attach amended apportionment schedule.
If consolidated, attach separate company amended
AR1100CT with amended apportionment schedule, if
applicable. Interest at 10% per annum will be computed
on a daily rate of .00027397 from the original return due
date to date amended return is filed and the tax is paid.

Every taxpayer who can expect to owe Arkansas income
tax in excess of $1,000 must make a declaration and
the timely pay the estimated tax in equal installments.
The declaration shall be filed with the commissioner on
or before the 15th day of the 4th month of the tax year of
the taxpayer. Taxpayers, whose income from farming for
the tax year can reasonably be expected to amount to at
least two-thirds (2/3) of the total gross income from all
sources for the tax year, may file such declaration and
pay the estimated tax on or before the 15th day of the 2nd
month after the close of the tax year or the taxpayer may
file an income tax return and pay the tax on or before the
15th day of the 4th month after the close of the tax year.
To avoid penalty, all other taxpayers must pay quarterly
estimates on or before the 15th day of the 4th month, 6th
month, 9th month and 12th month of the tax year. The Form
AR1100ESCT, Estimate payment vouchers 1 through 4
and Extension payment voucher 5 are not included in
these instructions. Filling out the forms on our website,
www.dfa.arkansas.gov, will automatically fill in the
taxpayer information and provide the appropriate scan
line needed for proper processing.

Report of Change in Federal Taxable Income

Corporations may remit estimated and extension
corporation income tax payments through ATAP (Refer
to www.atap.arkansas.gov for instructions).

An agreed Revenue Agent’s Report (RAR) must be
reported on an amended return using the appropriate
Form AR1100CT or AR1100CTX (refer to Amended
Return instructions). The RAR must be reported to this
State within 180 days after the receipt of the RAR or
supplemental report reflecting correct net income of
taxpayer. ACA 26-18-306(b)(1-3) states that a refund
shall not be paid if the amended return is filed on or after
the 181st day following receipt of the notice from the IRS.
Any additional tax and interest must be paid with the
amended return or a refund must be requested on an
amended return if applicable. Statute of limitations will
remain open for three (3) years for assessment of tax if
a taxpayer fails to disclose Federal Revenue Agent’s	
Report.
Period Covered
A taxpayer must calculate their Arkansas income tax
liability using the same income year for Arkansas income
tax purposes as used for Federal income tax purposes
(ACA 26-51-402). Arkansas Regulation 1.26-51102(17)(B) states, A fractional part of a year (short tax
year) means a period of less than twelve (12) months.
If a short tax year ends on or before the 15th day of the
month, then the short tax year shall be deemed to have
ended on the last day of the previous month. If a short
tax year ends on or after the 16th of the month, then the
short tax year shall be deemed to have ended on the last
day of the current month.
Page 10

If the Director determines that a corporation’s estimated
quarterly Arkansas income tax liability exceeds
$20,000.00, the corporation is required to pay the
estimated quarterly income tax payments due by
electronic funds transfer (EFT). The EFT must be made
no later than the day before each quarterly due date. If the
corporation timely pays the estimated quarterly income
tax payments by EFT, the corporation is not required to file
a quarterly estimated income tax voucher. If a taxpayer is
required to submit estimate payments by EFT, a letter will
be sent by DFA notifying the taxpayer of the requirement.
Accounting Methods
A taxpayer must calculate their Arkansas income tax
liability using the same accounting method for Arkansas
income tax purposes as used for Federal income tax
purposes. If a corporation changes its accounting
method, attach a copy of any certification or approval
received from the Internal Revenue Service authorizing
the change of accounting method to the corporation’s
Arkansas return.(ACA 26-51-401).

Payment of Taxes

Balance Sheets

The tax should be paid by attaching to the return a check
or money order payable to the order of “Department of
Finance & Administration.” Enclose proper payment
voucher with all remittance checks and write the
corporation’s FEIN or CIT account ID number and
the tax year on the check. Payments with returns may
not be made by EFT. Tax due on returns may be paid
through ATAP. (Refer to www.atap.arkansas.gov.) To
avoid interest and/or penalty the tax must be paid in full
by the original return due date, which is the 15th day of
the 4th month after the close of the corporation’s tax year.
An approved federal and/or state extension, which
allows the corporation’s return to be filed on or before
the approved extended due date, does not extend the
time period to pay the tax due in full. Interest and/or
penalty will be assessed on any tax due paid after the
original return due date as referenced above. Payments
with a return should include the AR1100CTV payment
voucher for Corporation Income tax payments and the
AR1000CRV for Individual Income tax.

The balance sheet submitted with the return should be
prepared from the books and should agree therewith. If
there are any differences between current year beginning
and prior year ending balance sheets, submit a schedule
of reconciliation with the return. All corporations engaged
in an interstate and intrastate trade or business and
reporting to the Surface Transportation Board, or to any
national, state, municipal or other public officer, may
submit copies of their balance sheet, prescribed by said
Board, national, state or municipal authorities, as of the
beginning and end of the taxable year.

Penalties and Interest
The following penalties shall be imposed:(ACA 26-18208)
	
	
	
	
	
	
	

Failure to file timely - 5% per month not to exceed
35%.
Failure to make timely remittance - 5% per month not to
exceed 35%.
Underestimate penalty - 10% of the amount of the
underestimate.
Failure to file return - $50.00.
Failure to make required EFT payment - 5% of the tax
due.
Incomplete electronic payment -10% of the amount
of the draft or $20.00, whichever is greater.	
Failure to Comply - $50.00.

If any part of any deficiency or tax liability is due
to negligence or intentional disregard of rules and
regulations, a penalty of 10% of the total amount shall
be added. Any part of any deficiency determined to be
due to fraud shall be subject to a 50% penalty. Interest at
the rate of 10% per annum shall be assessed on all tax
deficiencies. Interest will be computed using a daily
rate of .00027397 from the 15th day of the 4th month
after the close of the tax year until the date the tax
is paid.

Page 11

General Instructions

Specific Line Instructions for Page 1 of AR1100CT Return
Type Return

Deductions

Whether the C Corporation is filing an Initial Return (first
time filing), an Amended Return (making changes to an
original return), a Final Return (going out of business), or
filing as a Cooperative Association or Financial Institution,
clearly mark the AR1100CT by checking the applicable
box at the top of the form.

Line 13-Gains or Losses: Enter the total net gain or
loss. Capital loss is reported in the tax year in which it is
incurred. Gains and Losses must be adjusted to indicate
any difference in Arkansas and federal basis. ACA 26-51406 adopts Internal Revenue Code Section 1400Z-2 as
in effect on January 1, 2018 for tax years beginning on
or after January 1, 2018 regarding opportunity zones. To
claim an exemption for capital gains as a result of the sale
of property located in an opportunity zone for Arkansas
income tax purposes, the property must be located in an
opportunity zone located in Arkansas. Opportunity zone
gains for property located in other states are taxable in
Arkansas.

Income
Line 7-Gross Sales: Enter the gross sales, less goods
returned, and any allowances or discounts from the sale
price.
Line 8-Less Cost of Goods Sold: Enter the cost of
goods sold. If the production, purchase, or sale of
merchandise is an income producing factor in the trade or
business, inventories of merchandise on hand should be
taken at the beginning and end of the taxable year, which
may be valued at cost or market, whichever is lower.
Fully explain the method used. In case the inventories
reported on the return do not agree with those shown on
the balance sheet, attach a statement explaining how the
difference occurred.
Line 9-Gross Profit: Enter the gross profit which is
obtained by deducting Line 8 from Line 7.
Line 10-Dividends: Enter taxable dividends only.
Dividends from 80% or greater directly owned subsidiaries
are exempt.
Line 11-Taxable Interest: Enter interest income taxable
in Arkansas. Enter amounts received or credited as
interest to the corporation during the tax year on bank
deposits, C.D.’s, notes, mortgages, corporation bonds,
taxable U.S. interest, and all other interest including
interest on out-of-state municipal bonds (out-of-state
municipal bonds are taxable in Arkansas). Attach
schedule to the Arkansas return identifying each
U.S. Agency or political subdivision of Arkansas
and Schedule AR1100REC to reconcile amounts
received that are not included as taxable interest on
the Arkansas return.
Line 12-Gross Rents/Gross Royalties: Enter all gross
rents and royalties. Attach schedule showing amounts
received from rents and royalties separately, if not shown
separately on federal return. The schedule should
reconcile Arkansas and federal rents and royalties.
Page 12

Line 14-Other Income: Enter all other taxable income
for which no place is provided on the return. The holder of
the ownership interest in a Financial Asset Securitization
Investment Trust (FASIT) must list the net income from
prohibited transactions on this line. Attach schedule
explaining all items included.
Line 15-Total Income: Enter the net amount of Lines 9
through 14 inclusive.
Line 16-Compensation of Officers/Other Salaries
and Wages: Enter the compensation of all officers and
employees, in whatever form paid. Attach a schedule
showing amounts paid to officers and employees
separately, if not shown separately on the federal return.
The schedule should reconcile Arkansas and Federal
compensation of officers and employees.
Line 17-Repairs: Enter the amount of repair costs for
business property.
Line 18-Bad Debts: Enter debts which have been
definitely ascertained to be worthless and have been
charged off within the year. The Reserve Method for
computing and deducting bad debts on receivables
may be used only by small banks and thrift institutions.
A debt previously charged off as bad, if subsequently
collected, must be reported as income for the year in
which collected.
Line 19-Rent on Business Property: Enter rent paid
for business property.					
	
Line 20-Taxes: Enter taxes paid or accrued during the
taxable year. Do not include Arkansas or federal income
taxes or taxes assessed against local benefits tending

to increase the value of the property assessed. Attach
Schedule AR1100REC to the AR1100CT to reconcile
federal and Arkansas taxes.
Line 21-Interest: Enter interest paid on business
indebtedness.
Line 22-Contributions: Enter the Arkansas allowable
amount for charitable contributions. Title 26 U.S.C.170
as in effect on January 1, 2018, regarding deductions
for charitable contributions, is adopted for the purpose
of computing Arkansas income tax liability with the
exception of the carryforward period. A five (5) year
carryforward period is allowed and is carried over
separately from the NOL. No carryback of contributions
is allowed. The Arkansas contribution deduction allowable
will be calculated using Arkansas taxable income rather
than Federal taxable income. The contribution limits
are calculated on a separate corporation basis for
consolidated filers. (ACA 26-51-419)(a)(1)

Line 27-Total Deductions: Enter the total of Lines 16
through 26 inclusive.
Note: Expenses of Earning Tax Exempt Income
ACA 26-51-431(c) provides that no deductions shall be
allowed for interest on indebtedness incurred or continued
to purchase or carry obligations the interest on which is
wholly exempt from the taxes imposed by Arkansas
law; expenses otherwise allowable as deductions which
are related to tax exempt income other than interest;
expenses otherwise allowable as deductions which are
related to non-business income.
Example a: (interest expense):
	

disallowed
avg. non-tax assets	
avg. total assets
X interest expense = expense

Example b: (non-business income):

Line 23-Depreciation: Enter depreciation expense
claimed. ACA 26-51-428 did not adopt the bonus
depreciation provisions contained in Internal Revenue
Code 168(k). The following IRC Code was adopted:
Sections 167,168(a)-(j) of the IRS Code of 1986 as
in effect on January 1, 2019, and Section 179 as in
effect on January 1, 2009 for property purchased in tax
years beginning or after January 1, 2014. For tax years
beginning on or after January 1, 2011, the Arkansas
Section 179 expense election is $25,000 with phase out
beginning at $200,000. Attach Arkansas Schedule
AR1100REC to the AR1100CT to reconcile Federal
and Arkansas depreciation.

	

Line 24-Depletion: Enter depletion claimed. Arkansas
allows Federal depletion allowances as in effect January
1, 2019. In computing the depletion allowance deduction
allowed for oil and gas wells, the depletion deduction shall
be controlled by the provisions of IRC Section 613A as
in effect on January 1, 2019.

(A)	Net operating losses must be carried over to the next
succeeding taxable period and annually thereafter
for a total period of eight (8) tax periods succeeding
the year of such net operating loss or until such net
operating loss has been exhausted or absorbed by
the taxable income of any succeeding year, whichever
is earlier.

Line 25-Advertising: Enter amount for business
advertising.
Line 26-Other Deductions: Enter other deductions
authorized by law. Attach schedule explaining all
items included. Pension Profit Sharing and Employee
Benefits deductions remain valid deductions. Those
lines were removed from Form AR1100CT to allow other
modifications.
								
	

% X non-bus. inc. = disallowed expense

Taxpayer must justify % used and submit schedule.
State may increase % if justification can be made.
Line 28-Taxable Income Before Net Operating Losses:
Enter the amount from subtracting Line 27 from Line 15.
Line 29-Net Operating Losses: Enter on line 29, or
Schedule A, Part C, Line 3, net operating losses being
claimed, but do not exceed net taxable income on
the return. Losses must be carried forward under the
following conditions:(Attach AR1100NOL form)

(B)For computing the amount of NOL that will be allowed
for carryforward purposes, there shall be added to
gross income all nontaxable income, not required to
be reported as gross income by law, less any related
expenses which will otherwise be nondeductible.
Multistate tax filers must follow above procedures
and apportion NOL by the apportionment formula for
year of loss, applying the Arkansas percentage factor
for the year of loss against total apportionable loss
for that year. Failure to provide a complete schedule
of net operating losses (with the return) may result in
disallowance of any NOL claimed.		
	
Page 13

Carryback of NOL is not allowed. Contributions are not
to be added to NOL and carried forward.
	

Net operating losses of a corporation which merges
into another corporation will be allowed under the
following conditions:

Line 40-Amount Applied to Check Off Contributions:
Enter amount applied to Check Off Contributions; attach
AR1100CO.
Line 41-Amount to be Refunded: Enter amount to be
refunded (Line 38 less Lines 39 and 40).

(1)	 The acquiring corporation must own at least 80% of
the acquired corporation’s voting stock, and

Line 42-Tax Due: Enter the tax due (Line 33 less Line
34 and 35; and Line 36 plus or minus Line 37).

(2)	 Assets of the merged corporation must earn
sufficient profits in the post-merger period to absorb
the carryover losses claimed by the surviving
corporation. 					
	
Attach schedules of proof and computations to the
return on which any NOL is being carried forward.

Line 43-Interest on Tax Due: Enter the interest on tax
due.	

Line 30-Net Taxable Income: Enter the amount of
taxable income (Line 28 less Line 29 or Schedule A
Line C4 on page 2). (If Amended Return box checked,
enter amended net taxable income).
Line 31-Tax from Table: Enter Tax from Table (pages
32-33).
Line 32-Business Incentive Credits: Enter Business
Incentive Credits. Attach AR1100BIC and original
certificates.
Line 33-Tax Liability: Enter Tax Liability. (If Amended
Return box checked, enter amended tax liability.) (Line
31 less Line 32)
Line 34-Estimated Tax Paid: Enter Estimated Tax paid,
including estimate carryforward from prior year.
Line 35-Payment with Extension Request: Enter
payment made with extension request.
Line 36-Withholding Payment: Enter amount of
withholding from a partnership, if applicable, attach Form
AR1100-WH and AR1099PT.
Line 37-Amended Return Only: Enter Net tax paid
(refunded or carried forward) on previous return(s) for
this tax year.
Line 38-Overpayment: Enter Overpayment amount
(Line 34 plus Line 35 plus Line 36; plus or minus Line
37, less line 33).
Line 39-Amount Applied to 2020 Estimated Tax: Enter
amount applied to 2020 estimated tax.
Page 14

Line 44-Penalty for Late Filing or Payment: Enter the
penalty for late filing or payment amount.
Line 45-Penalty for Underpayment of Estimated Tax:
Enter the penalty for underpayment of Estimated tax,
attach AR2220 and enter exception checked in Part 3.
Line 46-Amount Due: Enter the amount due (add
Lines 42 through 45).

General Instructions

For Taxpayers with Income from Sources Within and Without the State
Multistate corporations should complete lines 30-46 of
page 1, and Schedule A on page 2 of Form AR1100CT.
Multistate corporations should not complete lines 7-29
of Form AR1100CT.
Business Income is defined in ACA 26-51-701(a) as
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 trade
or business operations. In essence, all income which
arises from the conduct of trade or business operations
of a taxpayer is business income. Income of any type or
class and from any source is business income if it arises
from transactions and activity occurring in the regular
course of a trade or business. In general, all transactions
and activities of the taxpayer’s economic enterprise as
a whole constitute the taxpayer’s trade or business and
will be considered “Business Income”, unless otherwise
excluded by Arkansas law. ACA 26-51-701(e) defines
Nonbusiness income as all income other than business
income.
Unitary Determination of Intangible Income
Interest, dividends (less than 80% directly owned), rents,
royalties, gains, and losses from multistate corporations
are apportionable to Arkansas if a unitary business
relationship exists between the intangible income and
the State of Arkansas. Generally, a unitary business
relationship will exist when an activity conducted in one
state benefits and is benefited by an activity conducted
in another state.

Financial Institutions must use the single weighted sales
factor. Construction companies, pipelines, publishing
companies, railroads, and TV and radio broadcasters must
utilize the double weighted sales factor apportionment method
with factor modifications. Requirements for apportionment
formulas of the businesses listed in this paragraph (except
for financial institutions) are contained in the Arkansas
Corporation Income Tax Regulations which may be obtained
from www.dfa.arkansas.gov/income-tax/corporation/.
Change of Method	 				
									
Prior approval Required Before Deviation From the
Allocation and Apportionment Method: If the allocation
and apportionment provisions as set out above do not
fairly represent the extent of the taxpayer’s business
activity in this State, the taxpayer may petition for, or the
Commissioner of Revenue, Department of Finance and
Administration	 may require in respect to all or any part
of the taxpayer’s business activity, if reasonable:
A) Separate accounting					
									
B) The exclusion of any one or more factors;		
	
C) The inclusion of one or more additional factors which
will fairly represent the taxpayer’s business activity in
this State,
or					
D) The employment of any other method to effectuate
an equitable allocation and apportionment of the
taxpayer’s income.					

Apportionment Formula

To “petition for” and approved by DFA shall mean a
formal written request submitted and approved prior to
the filing of a return.

In general, taxpayers with income derived from activities
both within and without the State are required to apportion
Business Income and allocate the Nonbusiness and
Partnership income using the following factors:

Schedule A-Apportionment of Income for Multistate
Corporation

All multistate corporations except Financial Institutions
apportion business income to this State by multiplying
the income by a fraction, the numerator of which is
the property factor plus the payroll factor, plus double
the sales factor, and the denominator of which is four
(4). If a taxpayer does not have all four (4) factors, the
denominator shall be the same as the number of entries
other than zero (0) that apply to the total (everywhere)
amounts of the property, payroll and sales factors. When
double weighted, the sales factor counts as two (2).

Part A - Income To Apportion			
								
Line 1: Enter federal taxable income before any
adjustments, net operating losses, or special
deductions from Line 28 of the federal Form 1120. If
federal Form 1120 is not filed, use the appropriate line
from the federal form that is filed that reflects taxable
income before adjustments, net operating loss, and
special deductions.				

Enter the FEIN in the box provided.	

Page 15

Line 2: Enter any Add Adjustments. Examples Include: Line c: For Financial Institutions Only, refer to ACA 26-51-1404
Enter Average Value of Intangible Property in
Arkansas Corporation Income Taxes Deducted, Bonus
Depreciation, Federal Charitable Contributions, and
Column A and B. (Attach schedule)			
Partnership Loss. (Attach detailed schedule)		
									
									
Line d: Enter Total Property in both Columns: (Add 	
Line 3: Enter any Deduct Adjustments. Examples 		
Lines a.4, b and c).	
include: Arkansas Depreciation, Arkansas Charitable
Contributions, Partnership Income. (Attach detailed In Column C, calculate the Arkansas percent by dividing
schedule)	
the amount on Line d, Column A by the amount on Line
d, Column B.						
Line 4: Enter Arkansas Total Apportionable Income.
Line 1 + Total Amount from Line 2 - Total Amount from Payroll Factor: The payroll factor is a fraction, the
Line 3 = Line 4, Total Arkansas Apportionable Income.	 numerator of which is the total amount paid in this State
during the tax period by the taxpayer for compensation
	
Note: Lines 2 and 3 are for reporting any adjustments and the denominator of which is the total compensation
to taxable income that result in differences between paid everywhere during the tax period. The payroll factor
Federal and Arkansas tax laws. The examples listed shall include only that compensation which is included
above are not intended as an all-inclusive list of in the computation of the apportionable income tax base
for the taxable year. (ACA 26-51-713 and ACA 26-51required adjustments.				
	
1405)							
Part B - Apportionment Factor
	
Column A is total compensation paid within Arkansas;
Column A is for Amounts in Arkansas; Column B is Column B is total compensation paid everywhere during
the Total Everywhere; Column C is the Percentage the tax year; Column C is the percentage of Column (A)
of Column (A)÷(B). Calculate all percentages to six ÷ (B).
(6) places beyond whole percentages. Example
26.123456%						
Line 2: Enter Salaries, Wages, Commissions and
Other Compensation Related to the Production of
Property Factor: The property factor is a fraction, the Business Income.		
numerator is the average value of the taxpayer’s real and
tangible personal property owned or rented and used in Sales/Receipts Factor: The receipts factor is a fraction,
this State during the tax period, and the denominator is the numerator of which is the total sales of the taxpayer
the average value of all the taxpayer’s real and tangible in this State during the tax period, and the denominator
personal property owned or rented and used during the of which is the total sales of the taxpayer everywhere
tax period. (ACA 26-51-710)
during the tax period. The method of calculating receipts
for purposes of the denominator is the same as the
Line 1: Enter Property Used in Business		
method used in determining receipts for purposes of the
numerator. The receipts factor shall include only those
Line a: Tangible Assets Used in Business and receipts which constitute business income and are
Inventories.
included in the computation of the apportionable income
(a1) Enter the amount at the beginning of the year in 	 base for the taxable year. Arkansas requires receipts
both Column A and Column B.
to be gross receipts instead of net receipts. Financial
institutions cannot double weight the sales/receipts
(a2) Enter the amount at the end of the year in both
factor. (ACA 26-51-715 and ACA 26-51-1403).	
Column A and Column B.
	
Line 3: Sales/Receipt
(a3) Enter total amounts: (Add Lines a1 and a2) in
both Columns.						
(a) Enter Destination Shipped from Within Arkansas:
									
Sale of property that is delivered or shipped by a seller
(a4) Enter Average of Tangible Assets: (Line 3 ÷ 2) in
located in Arkansas to a purchaser located in Arkansas.
both Columns. 					
(b) Enter Destination Shipped from Without Arkansas:
Line b: Enter Rental Property: (8 times annual rent
Sale of property that is delivered or shipped to a purchaser
Column A and B.
located in Arkansas regardless of the f.o.b. point or other
conditions of the sale.
Page 16

(c) Enter Origin Shipped from Within Arkansas to
U.S.Govt.: Gross receipts from sales of tangible personal
property to the United States Government are in this state
if the property is shipped from an office, store, warehouse,
factory, or other place of storage in this state and the
purchaser is the U.S. Government.
(d) Enter Origin Shipped from Within Arkansas to
Other Non-Taxable Jurisdictions: Sales of property that
is shipped from an office, store, warehouse, factory or
other place of storage in Arkansas to a taxpayer that is
not taxable in the state of the purchaser.
(e) Enter Other Gross Receipts: Includes items such
as interest income, other income, proceeds from sales of
assets, rental income. (Attach schedule)
Gross receipts from transactions other than sales of
tangible personal property are attributed to Arkansas if:
1) The income producing activity is performed entirely
within Arkansas or, 2) If the income producing activity
is performed both inside and outside of Arkansas,
the income reportable to Arkansas is determined
by calculating the property, payroll, and sales factor
excluding sales from transactions other than the sale
of tangible personal property and applying the resulting
percentage to the Arkansas sales factor numerator for
gross receipts from transactions other than sales of
tangible personal property.
(f) Enter Total Sales/Receipts: (Add Lines 3a through
3e). Divide Line 3f in Column A by Line 3f in Column B
to arrive at the percentage for Line 3f in Column C.
(g) Enter Double Weighted: (Applies to tax years
beginning on or after January 1, 1995) (Financial
Institutions must use Single Weighted Factor, Column
C, Line 3f X 2).
Line 4: Enter Sum of Percentages: (Single Weighted:
Add Column C, Lines 1d, 2a and 3f) (Double Weighted:
Add Column C, Lines 1d, 2a and 3g).
Line 5: Enter Percentage Attributable to Arkansas:
Line 4 divided by the Single/Double Weighted Factor.
For Part B, Line 5, divide Line 4 by number of entries
other than zero which you make on Part B, Column B,
Lines (1d), (2a), and (3f). Also any entry other than zero
in Part B, Column B, Line (3f), counts as two (2) entries
unless using Single Weighted Factor.
Part C - Arkansas Taxable Income				
								
Line 1: Enter Income Apportioned to Arkansas. (Part
A, Line 4) x (Part B, Line 5, Column C).

Line 2: Enter Direct Income Allocated to Arkansas:
Include non-business income and partnership income/
loss that are sourced to Arkansas. Arkansas Regulation
1.26-51-802(b) requires corporations to directly allocate
partnership Arkansas income or loss to Arkansas rather
than including partnership income and apportionment
factors in the corporation’s apportionment formula.
Multistate corporations with partnership income should
deduct all partnership income on Part A, Line 3 (Deduct
Adjustments). Partnership losses should be added on
Part A, Line 2 (Add Adjustments). The corporation’s
Arkansas partnership income or loss should then be
entered on Part C, Line 2 Add: Direct Income Allocated
to Arkansas line. Attach Forms ARK-1 and if claiming
withholding, attach Forms AR1099PT.
Line 3: Enter only the amount of Apportioned NOL
available or the amount needed to absorb the total of
Lines 1 and 2 on Part C. (Attach Form AR1100NOL).
Example: Line C1=$1000 + Line C2=$500
NOL available is $5000; Line C3 will only show $1500
Line 4: Enter Total Income Taxable to Arkansas:
Total of Lines C1, C2, and C3. (Enter here and on Line
30, page 1)
Special Industry Apportionment Rules
Arkansas Regulations require taxpayers primarily engaged
in certain industries to apportion income using a special
industry apportionment method. See below for a brief
description of each special industry apportionment method.
For a complete description of industries that are required
to modify their apportionment factors, see the Corporation
Income Tax Regulations at www.dfa.arkansas.gov.
Construction Contractors
Arkansas Regulation 1.26-51-718(d) modifies the
property factor to include the average value of construction
in progress. It also modifies the payroll factor to include
compensation paid for particular construction projects
and compensation “thrown back” to Arkansas if not
reported to another state. The sales factor is modified
for the percentage of completion method.
Television and Radio Broadcasting
Arkansas Regulation 2.26-51-718(d) modifies the
property factor to exclude outer-jurisdictional, film and
radio transmission property from the numerator and
denominator of the property factor. The numerator of the
sales factor shall include all gross receipts of the taxpayer
from sources within Arkansas plus a ratable part of film
Page 17

or radio programming revenue including advertising
revenue determined by an audience factor. The audience
factor is determined based on the ratio that the taxpayer’s
Arkansas viewing or listening audience bears to its total
viewing or listening audience.
Publishing
Arkansas Regulation 3.26-51-718(d) modifies the
apportionment factors for taxpayers in the business of
publishing, selling, licensing or distribution of books,
newspapers, magazines, periodicals, trade journals, or
other printed materials that have income from sources
both inside and outside of Arkansas. Outer-jurisdictional
property shall not be included in the property factor’s
denominator. The sales factor is modified to include a
“circulation factor”.
Airlines
Arkansas Regulation 4.26-51-718(d) requires airlines
to determine Arkansas net taxable income by taking that
portion of total operating revenue that the total passenger
and freight receipts in Arkansas bears to total receipts
from both inside and outside of Arkansas. The Arkansas
and Total Passenger & Freight Receipts should be
included on line 3.f. of Schedule A of Form AR1100CT
with a notation that this represents Passenger & Freight
Receipts.
Bus Lines and Trucking Companies
Arkansas Regulation 5.26-51-718(d) requires a company
whose primary business is bus lines or trucking to
determine its net income subject to Arkansas income tax
by an apportionment formula which is the number of miles
operated within Arkansas divided by the total system miles.
The Arkansas and Total miles operated should be included
on Line 3.f of Schedule A of Form AR1100CT with a notation
that this represents mileage.
Pipelines	
					
Arkansas Regulation 6.26-51-718(d) establishes
special rules for taxpayers operating a pipeline for the
transportation of oil or gas both inside and outside of
Arkansas. The payroll factor includes compensation paid
both inside and outside of Arkansas plus a ratable part for
services performed both in and outside the State based
on the total number of barrel or unit miles in Arkansas
divided by the total barrel or unit miles system-wide. The
sales factor includes any gas sales and storage sales
within Arkansas plus a proportionate part of system
revenue earned in Arkansas determined on the basis of
total barrel or unit miles within Arkansas to the total barrel
or unit miles in the system.
Page 18

Railroads
Arkansas Regulation 1.26-51-204 modifies the property,
payroll, and sales factor to include a mobile component
that is calculated based on miles operated in Arkansas
divided by total system miles.
Private Railcar Operators
Arkansas Regulation 2.26-51-204 requires taxpayers,
other than a railroad, engaged in the business of operating
railcars or in the business of furnishing or leasing railcars
for the transportation of freight or property whether or not
owned by such taxpayer, over any railway lines partly
within and partly without the State to determine Arkansas
net taxable income by taking that portion of total net
operating income that the total miles operating in the State
bears to total system miles operated.
Public Utilities
Arkansas Regulation 3.26-51-204 requires telephone,
electric power, and gas distribution companies operating
both inside and outside of Arkansas shall allocate and
apportion their net income provided under ACA 26-51-701.

Allocated Income

2. Gain and Losses:

Partnership Income

Gains and losses from sales of assets:
	
	 A)	Sales of real property located in this State.

Act 482 of 2017 amends ACA 26-51-802(c) to require
partnership income from activites within and without this
State that is reflected on a partnership return shall be
apportioned to Arkansas under the uniform Division of
Income for Tax Purposes Act (ACA 26-51-701 et seq).
Corporations that are partners in a partnership must
allocate their share of partnership income as shown on
form ARK-1 from the partnership.
Non-Business Income
The following items of income to the extent that they
do not constitute business income are to be allocated
to this State.

	 B)	Sales of tangible personal property.
		 1) The property had a situs in this State at the time
of sale,
		
or
		 2) The taxpayer’s commercial domicile is in this 	
		
State,
		
or
		 3)The property has been included in depreciation
		
which has been allocated to this State; in which
		
event gains or losses on such sales shall be
		
allocated on the percentage that is used in the
		
formula for allocating income to this State.

3.	 Interest and Dividends:
1. Rents & Royalties:
										
	 A) Net rents and royalties from real property located in Interest and dividends if the taxpayer’s commercial
domicile is in this State.
	
this State.						
	
		 B) Net rents and royalties from tangible personal 4. Patent and Copyright Royalties:
	
property
			
1) If and to the extent that the property is used in 	 A)	If and to the extent that the patent or copyright is
utilized by the taxpayer in this State,
		
this State,
	
or
			
or
			
2) In their entirety, if the commercial domicile is in 	 B)	If and to the extent that the patent or copyright
is utilized by the taxpayer in a state in which
		
this State and the taxpayer is not organized under
the taxpayer is not taxable and the taxpayer’s
		
the laws of or taxable in the state in which the
commercial domicile is in this State.
		
property is utilized.
The extent of utilization of tangible personal property in a
state is determined by multiplying the rents and royalties
by a fraction, the numerator of which is the number of
days of physical location of the property in the State during
the rental or royalty period in the taxable year; and the
denominator of which is the number of days of physical
location of the property everywhere during all rental or
royalty periods in the taxable year.
	
If the physical location of the property during the rental
or royalty period is unknown or unascertainable by the
taxpayer, tangible personal property is utilized in the state
in which the property is located at the time the rental or
royalty payer obtained possession.

								

A copyright is utilized in a state to the extent that printing
or other publications originate in the state. If the basis of
receipts from copyright royalties does not permit allocation
to states or if the accounting procedures do not reflect
states of utilization, the copyright is utilized in the state in
which the taxpayer’s commercial domicile is located.
Apportionment of Intragroup Intangible Licensing
Transactions:
Regulation 1996-3 clarifies the calculation method for
determining the sales factor in apportioning business
income received from intragroup intangible licensing
transactions. This regulation applies to a corporation that
is a passive intangible holding company and receives
business income from intragroup intangible licensing
transactions with one or more members of the same
group. Also, at least one of the other members of the
same group from which the business income is received
by the taxpayer must be subject to the Arkansas Income
Tax Act.
Page 19

The sales factor for intragroup intangible transactions is
modified as follows:
1. If the licensing agreement states a method of
measuring the activity between the licensor and licensee,
the numerator of the sales factor is the amount of the
sales or receipts received as provided in the licensing
agreement.
2. If the licensing agreement does not state a method
of measuring the activity between the licensor and
licensee, the measuring activity will be based on one of
the following:
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	

a. If the licensee’s activity generates sales or receipts,
the numerator of the sales factor will be the
percentage of sales in Arkansas compared to the
licensee’s total sales,
or	
b. If the licensee’s activity does not generate sales
or receipts, the numerator of the sales factor will
be the percentage of units produced or cost of units
produced in Arkansas compared to the licensee’s
total units produced or total cost of units produced,
or
c. If neither of the above methods accurately
represent the licensor’s business activity in Arkansas,
the licensor may petition for, or the Director may
require, another method.

3. If the licensing agreement states a method of
measuring the activity between the licensor and licensee
in addition to a specifically stated dollar amount, the
numerator of the sales factor will be the stated measuring
activity plus the stated dollar amount attributable to
Arkansas.
This Regulation modifies the sales factor for intragroup
intangible licensing transactions only. Business income
from any other source should be apportioned in
accordance with ACA 26-51-709.
If a passive intangible holding company meets the above
characteristics and the licensee elects to forego the
intragoup intangible licensing transactions deduction, the
passive intangible holding company will not be required
to report the business income received from intragroup
intangible licensing transactions for Arkansas income
tax purposes.
The licensee’s election to forego the deduction will be
binding unless the licensee and the passive intangible
holding company submit a written petition to change the
election to the Director, and the Director approves the
change.
Page 20

Financial Institutions
In general, all state and national banks, savings and
loan, building and loan associations, or any other entity
operating as financial institutions are to be taxed under
existing law. For a complete definition of “financial
institution”, refer to ACA 26-51-1402.
Who Must File
	

	

1)	 A financial institution having its principal office in
this State shall be taxed as a business corporation
organized and existing under the laws of this State,
or
2) A financial institution having its principal office
outside this State, but doing business in this State,
shall be taxed as a foreign business corporation
doing business in this State.

This is not intended to recognize the right of a foreign
financial institution to conduct any business in this State
except to the extent and under the conditions permitted
by any acts or any other now existing applicable laws of
this State.
ACA 26-51-702 requires any taxpayer having income
from business activity which is taxable both within and
without this state, other than activity as a public utility or
the rendering of purely personal services by an individual,
shall allocate and apportion their net income.
ACA 26-51-426 adopted Internal Revenue Code Sections
582, 585, and 593 as in effect January 1, 1999, regarding
bad debts of financial institutions.
ACA 26-51-1401 et seq. adopted the Multistate Tax
Commission regulation regarding apportionment and
allocation of net income of financial institutions. It requires
that a financial institution whose business activity is
taxable both within and without this State to allocate
and apportion its net income to this State. All business
income which is includable in the apportionable income
tax base shall be apportioned to this State by multiplying
such income by the apportionment percentage which is
determined by adding the receipts factor, property factor,
and payroll factor, and dividing the sum by three (3).
Receipts Factor
Generally, the receipts factor is a fraction; the numerator is
the financial institution’s gross receipts in Arkansas during
the taxable year, and the denominator is all gross receipts
that the financial institution derives from transactions and
activities in the regular course of its trade or business.
Interest from loans secured by real property is attributed

to Arkansas if the property is located in Arkansas. Interest
from loans not secured by real property is attributed to
Arkansas if the borrower is located in Arkansas. Interest
from credit cards receivables and fees charged to card
holders are attributable to Arkansas if the billing address
of the card holder is in Arkansas. Net gains from the
sale of loans and loan servicing fees are sourced in
the same manner as the loan interest. Net gains from
the sale of credit card receivables are sourced in the
same manner as the interest on credit card receivables.
Interest, dividends, and net gains from investment and
trading assets and activities are attributed to Arkan