The "Overtime but not Overtaxed Act" aims to exempt compensation for overtime from the state income tax in Arkansas. The bill defines "overtime" as any hours worked beyond forty in a workweek that are required to be compensated under the Fair Labor Standards Act of 1938. It establishes a new section in the Arkansas Code, specifically 26-51-317, which states that compensation for overtime will not be subject to income tax.

Additionally, the bill specifies that the provisions will take effect for tax years beginning on or after January 1, 2026. This legislation seeks to provide financial relief to workers who earn overtime pay by ensuring that such earnings are not taxed, thereby encouraging fair compensation for additional work hours.