The proposed bill aims to amend Arkansas income tax laws concerning certain trusts, with the intent to enhance the state's competitiveness in the financial services sector. It seeks to attract out-of-state trust assets for administration by Arkansas trustees, recognizing that many Arkansas residents currently establish trusts in foreign states to avoid trust-level taxation. The bill emphasizes the need to amend existing laws to eliminate the incentive for residents to set up nongrantor trusts outside the state, thereby encouraging them to keep trust assets within Arkansas for local management and administration.

Specifically, the bill introduces a new section to the Arkansas Code that allows for an income tax exemption for trusts administered by resident trustees, provided they are not classified as grantor trusts under federal law as of January 1, 2025. This exemption is designed to preserve certain trust assets within the state and is set to take effect for tax years beginning on or after January 1, 2025.