This bill proposes significant amendments to the Multistate Tax Compact and the Uniform Division of Income for Tax Purposes Act, focusing on modernizing the apportionment of income from multistate operations. Key changes include redefining "business income" to "apportionable income," which now includes all income that is apportionable under the U.S. Constitution and not allocated under state laws. The bill shifts the method for sourcing receipts from services and intangibles from the cost of performance to a market-based sourcing approach. It also outlines a gradual transition to 100% sourcing of tangible personal property sales outside the state by 2030, while introducing new definitions and clarifications regarding commercial domicile, compensation, and nonapportionable income.

Additionally, the bill grants the Secretary of the Department of Finance and Administration the authority to establish alternative methods for income allocation if existing provisions do not fairly represent a taxpayer's business activity. It specifies that the burden of proof lies with the party petitioning for an alternative method and outlines conditions under which the Secretary may not bear this burden. The bill also introduces a new tax obligation for nonresident corporations or partnerships with Arkansas receipts exceeding $250,000, regardless of physical presence in the state. Furthermore, it repeals Arkansas Code 26-51-722, establishing a new effective date for the act for tax years beginning on or after January 1, 2026, to ensure equitable treatment of taxpayers in income allocation and apportionment processes.

Statutes affected:
SB 567: 26-5-101, 26-51-202
Act 719: 26-5-101, 26-51-202