The proposed legislation, titled the "Overtime but not Overtaxed Act," aims to exempt compensation for overtime work 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. This exemption is intended to provide financial relief to workers who earn additional income through overtime hours.

Additionally, the bill specifies that the new provisions will take effect for tax years beginning on or after January 1, 2026. This timeline allows for the necessary adjustments to be made within the state's tax framework to accommodate the changes introduced by the act.