Stricken language would be deleted from and underlined language would be added to present law.
Act 594 of the Regular Session
1 State of Arkansas
2 93rd General Assembly A Bill
3 Regular Session, 2021 HOUSE BILL 1706
4
5 By: Representatives Wardlaw, Beaty Jr., Bentley, M. Berry, Bragg, Brown, Deffenbaugh, Dotson, Eaves,
6 Evans, Fielding, V. Flowers, Fortner, Gonzales, M. Gray, Hillman, Holcomb, Jean, Jett, L. Johnson,
7 Love, Lowery, Lynch, Maddox, Magie, McClure, M. McElroy, Richmond, Rye, Scott, Tollett, Tosh,
8 Vaught, Watson, Womack
9 By: Senators J. Dismang, Beckham, L. Chesterfield, J. English, T. Garner, Gilmore, Hill, Rapert, B.
10 Sample, D. Wallace
11
12 For An Act To Be Entitled
13 AN ACT TO CREATE THE LOGGING AND WOOD FIBER
14 TRANSPORTATION JOB CREATION INCENTIVE ACT; TO CREATE
15 THE ARKANSAS WOOD ENERGY PRODUCTS AND FOREST
16 MAINTENANCE INCOME TAX CREDIT; AND FOR OTHER
17 PURPOSES.
18
19
20 Subtitle
21 TO CREATE THE LOGGING AND WOOD FIBER
22 TRANSPORTATION JOB CREATION INCENTIVE
23 ACT; AND TO CREATE THE ARKANSAS WOOD
24 ENERGY PRODUCTS AND FOREST MAINTENANCE
25 INCOME TAX CREDIT.
26
27
28 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
29
30 SECTION 1. DO NOT CODIFY. Title.
31 This act shall be known and may be cited as the "Logging and Wood Fiber
32 Transportation Job Creation Incentive Act".
33
34 SECTION 2. DO NOT CODIFY. Legislative findings.
35 The General Assembly finds that:
36 (1) Arkansas is a timber-rich state with over one-half (1/2) of
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1 the total area of the state, or nineteen million (19,000,000) acres, as
2 forestland;
3 (2) In the southern United States, Arkansas ranks first for the
4 number of hardwood seedlings grown and fourth for the number of total
5 seedlings grown;
6 (3) Approximately one (1) in every eight (8) Arkansans, equating
7 to about three hundred forty-five thousand (345,000) Arkansans, own
8 forestland;
9 (4) The forest products industry in Arkansas provides more than
10 twenty-eight thousand (28,000) jobs, largely in rural areas;
11 (5) Though the state is rich in timber, the growth of the
12 Arkansas pine forest currently exceeds harvest by eleven million (11,000,000)
13 tons per year;
14 (6) The unharvested Arkansas timber causes innumerable potential
15 jobs to be unfulfilled and the loss of state and local tax revenue and other
16 economic revenue; and
17 (7) In order to attract industry to use the available fiber
18 resources, support healthy timberland, encourage capital investment in the
19 Arkansas timber industry, and provide well-paying jobs, the creation of a
20 logging and wood fiber transportation job creation income tax credit should
21 be established.
22
23 SECTION 3. Arkansas Code 19-6-301(181), concerning the enumeration
24 of special revenues, is amended to read as follows:
25 (181) Arkansas Economic Development Incentive Act of 1993
26 transfers Transfers from general revenues for financial incentive plans, and
27 incentive agreements under 15-4-1607, 26-51-506(c)(2)(B)(vii), and 26-
28 51-506(c)(3)(D)(vi), and 26-51-2704(c)(7)(A);
29
30 SECTION 4. Arkansas Code Title 26, Chapter 51, is amended to add an
31 additional subchapter to read as follows:
32 Subchapter 27 Arkansas Wood Energy Products and Forest Maintenance Income
33 Tax Credit
34
35 26-51-2701. Title.
36 This subchapter shall be known and may be cited as the "Arkansas Wood
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1 Energy Products and Forest Maintenance Income Tax Credit".
2
3 26-51-2702. Legislative purpose and intent.
4 The purpose and intent of this subchapter is to increase capacity in
5 the state for the use of sawmill residuals, including sawdust and wood chips,
6 thinnings to maintain a healthy forest, unwanted treetops, and damaged or
7 diseased trees not wanted by sawmills.
8
9 26-51-2703. Definitions.
10 As used in this subchapter:
11 (1) Cost means:
12 (A) In the case of a transfer of title or a lease
13 agreement that is treated as a purchase by a lessee for Arkansas income tax
14 purposes, the amount of the purchase price; and
15 (B) In the case of a lease that is not a lease agreement
16 that is treated as a purchase by a lessee for Arkansas income tax purposes
17 but that otherwise qualifies as a purchase under this section, the amount of
18 lease payments due to be paid during the term of the lease after deducting
19 any portion of the lease payments attributable to interest, insurance, and
20 taxes;
21 (2) "Incentive agreement" means an agreement entered into by a
22 business and the Arkansas Economic Development Commission to provide the
23 business an incentive to locate a new qualified wood energy products and
24 forest maintenance project or expand an existing qualified wood energy
25 products and forest maintenance project in Arkansas;
26 (3)(A) New full-time permanent employee means a position or
27 job that:
28 (i) Is created pursuant to an executed incentive
29 agreement;
30 (ii) Is filled by one (1) or more employees or
31 contractual employees who:
32 (a) Were Arkansas taxpayers during the year in
33 which the tax credits or incentives were earned;
34 (b)(1) Work at the facility identified in the
35 incentive agreement.
36 (2) New employees of the taxpayer that
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1 enters into the incentive agreement who do not work at the facility may be
2 counted if they:
3 (A) Otherwise meet the definition
4 of a new full-time permanent employee;
5 (B) Are subject to the Arkansas
6 Income Tax Withholding Act of 1965, 26-51-901 et seq.;
7 (C) Meet an average hourly wage
8 threshold equal to or greater than the state average hourly wage for the
9 preceding calendar year; and
10 (D) Are verified by reports and
11 methods established as required by the incentive agreement; and
12 (c)(1) Are not employees hired by a business
13 before the date the incentive agreement was executed unless:
14 (A) The position or job filled by
15 the existing employee was created in accordance with the incentive agreement;
16 and
17 (B) The position vacated by the
18 existing employee was either filled by a subsequent employee or no subsequent
19 employee will be hired because the business no longer conducts the particular
20 business activity requiring that classification.
21 (2) If the Director of the Arkansas
22 Economic Development Commission and the Secretary of the Department of
23 Finance and Administration find that a significant impairment of Arkansas job
24 opportunities for existing employees will otherwise occur, they may jointly
25 authorize the counting of existing employees as new full-time permanent
26 employees; and
27 (iii) Has been filled for at least twenty-six (26)
28 consecutive weeks with an average of at least thirty (30) hours worked per
29 week.
30 (B) New full-time permanent employee includes a
31 contractual employee who works at the facility identified in the incentive
32 agreement only if the contractual employee is offered a benefits package
33 comparable to a direct employee of the business seeking incentives under this
34 subchapter;
35 (4) Purchase means:
36 (A) A transaction under which title to an item is
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1 transferred for consideration; or
2 (B) A lease contract that is entered into for a period of
3 at least three (3) years regardless of whether title to the item is
4 transferred at the end of the period;
5 (5) Qualified wood energy products and forest maintenance
6 project means a project specified in the incentive agreement to include one
7 (1) or more Arkansas facilities in the same ownership group:
8 (A) For which the taxpayer commenced construction by the
9 date specified in the incentive agreement, but no earlier than January 1,
10 2020;
11 (B) That supports the Arkansas timber industry by using
12 low-value wood, including without limitation sawmill residuals, unwanted
13 treetops, and damaged or diseased trees, to produce high-efficiency, high-
14 energy wood energy products;
15 (C) In which the taxpayer has a total investment in excess
16 of fifty million dollars ($50,000,000);
17 (D) That is undertaken by a taxpayer who has entered into
18 an incentive agreement with the State of Arkansas in which the taxpayer
19 commits to creating at least one hundred (100) net new full-time permanent
20 employees with an average annual wage of at least sixty thousand dollars
21 ($60,000);
22 (E) That will provide a positive cost-benefit analysis to
23 the state as determined by the commission and the Office of Economic Analysis
24 and Tax Research;
25 (F) That is certified as having a closing date before
26 December 31, 2023, for all facilities, by which the taxpayer has certified
27 and the state has verified that necessary capital acquisition and borrowing
28 for the facilities has occurred to ensure that funds will be available to:
29 (i) Secure a site for the facilities;
30 (ii) Obtain engineering services for the facilities;
31 (iii) Purchase equipment for the facilities; and
32 (iv) Commence construction on the facilities; and
33 (G) That is undertaken by a taxpayer that has elected by
34 agreement with the State of Arkansas for the taxpayers facilities to be
35 classified as a qualified wood energy products and forest maintenance
36 project; and
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1 (6)(A) Wood energy products equipment means:
2 (i) New or used machinery or equipment located in
3 Arkansas on the last day of the taxable year that is operated or used
4 exclusively in Arkansas to collect, separate, treat, pulverize, dry, modify,
5 or convert wood fiber so the resulting product may be used as a raw material,
6 for productive energy use, or to manufacture other materials;
7 (ii) Devices that are directly connected with or are
8 an integral and necessary part of machinery or equipment operated or used
9 exclusively in Arkansas to collect, separate, treat, pulverize, dry, modify,
10 or convert wood fiber and are necessary for the collection, separation,
11 treatment, pulverization, drying, modification, or manufacturing of wood
12 fiber;
13 (iii) Equipment that produces energy with wood
14 power; and
15 (iv) A device that is directly connected with or is
16 an integral and necessary part of machinery or equipment operated or used
17 exclusively in Arkansas to produce energy with wood power.
18 (B) Wood energy products equipment does not include a
19 vehicle or trailer that is licensed or that normally would be licensed for
20 use on highways in Arkansas.
21
22 26-51-2704. Arkansas wood energy products and forest maintenance
23 income tax credit.
24 (a) There is allowed a tax credit against the tax imposed by this
25 chapter in an amount equal to thirty percent (30%) of the costs of wood
26 energy products equipment purchased for use in Arkansas after the date
27 specified in the incentive agreement by a taxpayer that:
28 (1) Is engaged in the business of collecting, separating,
29 treating, pulverizing, drying, modifying, or manufacturing wood energy
30 products; and
31 (2) Has been certified as owning a qualified wood energy
32 products and forest maintenance project.
33 (b)(1) If a tax credit is allowed under this section and, as of the
34 end of the taxable year in which the tax credit is first allowed, the
35 taxpayer does not have a public retirement system of the State of Arkansas as
36 a proprietor, partner member, shareholder, or holding an interest, the lesser
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1 of five million dollars ($5,000,000) or the amount of income tax due by the
2 taxpayer may be claimed each year.
3 (2)(A) Any unused tax credit that cannot be claimed in a tax
4 year under subdivision (b)(1) of this section may be carried forward
5 indefinitely to apply the unused tax credit to future tax liability.
6 (B) Beginning July 1, 2021, and by July 15 of each
7 subsequent year, a taxpayer shall provide notice to the Department of Finance
8 and Administration of the amount of tax credits, including without limitation
9 tax credits the taxpayer expects will receive certification during the fiscal
10 year by the Department of Energy and Environment, subject to the limitation
11 in subdivision (b)(1) of this section, that will be sold or transferred for
12 value.
13 (c)(1) If at the time of the execution of the incentive agreement the
14 taxpayer that owns a qualified wood energy products and forest maintenance
15 project is a proprietorship, partnership, limited liability company, or other
16 business organization and any portion of the tax credits allowed under this
17 section would be apportioned to a public retirement system of the State of
18 Arkansas as proprietor, partner, member, or shareholder of the taxpayer, the
19 public retirement system shall have the possession and control of all tax
20 credits, including without limitation any tax credits allowed under this
21 section and otherwise apportioned to the other proprietors, partners,
22 members, shareholders, or beneficiaries.
23 (2) The possession and control of tax credits by a public
24 retirement system under this subsection shall be confirmed in writing by the
25 office of the Department of Finance and Administration charged with the
26 administration of the tax credits allowed under this section.
27 (3) A public retirement system that has possession and control
28 of tax credits under this subsection shall sell or transfer for value the tax
29 credits allowed under this section to the State of Arkansas for eighty
30 percent (80%) of the face value in lieu of the right of a proprietor,
31 partner, member, shareholder, or beneficiary of the qualified wood energy
32 products and forest maintenance project to claim the tax credits as otherwise
33 allowed under applicable state law.
34 (4) Subject to the total tax credit allowed under this section
35 for a qualified wood energy products and forest maintenance project, the
36 maximum amount of tax credits allowed under an incentive agreement between
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1 the taxpayer and the state, and the annual transfer by the commission as
2 agreed by the state and the taxpayer, no more than five million dollars
3 ($5,000,000) of the tax credits in the possession and control of the public
4 retirement system with respect to a qualified wood energy products and forest
5 maintenance project under this subsection may be sold or transferred each
6 year.
7 (5) Any unused tax credit that cannot