The bill aims to reduce income tax rates for individuals, trusts, estates, and corporations in Arkansas, with specific changes set to take effect for tax years beginning on or after January 1, 2026, and January 1, 2027. For individuals, trusts, and estates, the bill introduces a new tax structure where those with net incomes up to $94,700 will have a tiered tax rate starting from 0% for incomes up to $5,599, increasing to 3.7% for incomes up to $94,700. For those earning above $94,700, a different rate structure applies, with a bracket adjustment for incomes between $94,701 and $97,600, allowing for deductions based on specific income brackets. Additionally, the bill mandates that the tax tables be adjusted annually.

For corporations, both domestic and foreign, the bill establishes a new income tax structure effective from January 1, 2027. Domestic corporations will be taxed at a rate of 1% on the first $3,000 of net income, 2% on the next $3,000, 3% on the next $5,000, and 4.1% on any income exceeding $11,000. Similarly, foreign corporations will be subject to the same tax rates on their net income. These changes are designed to simplify the tax structure and potentially lower the tax burden for various entities operating within the state.

Statutes affected:
SB 1: 26-51-201(a), 26-51-205(a), 26-51-205(b)
Act 2: 26-51-201(a), 26-51-205(a), 26-51-205(b)