Stricken language would be deleted from and underlined language would be added to present law. Act 22 of the Regular Session *JLL055* 12-12-2014 10:57:31 JLL055

State of Arkansas As Engrossed: S1/15/15 S1/22/15 H1/28/15

1 90th General Assembly A Bill

2 Regular Session, 2015

SENATE BILL 6 3

4 By: Senators J. Dismang, Bledsoe, Burnett, Caldwell, E. Cheatham, L. Chesterfield, A. Clark, Collins- 5 Smith, J. Cooper, J. English, Files, Flippo, S. Flowers, J. Hendren, Hester, Hickey, J. Hutchinson, Irvin, 6 B. Johnson, U. Lindsey, Maloch, B. Pierce, Rapert, Rice, B. Sample, D. Sanders, G. Stubblefield, Teague, 7 E. Williams, J. Woods 8 By: Representatives Gillam, Jean, Jett, Collins, Bragg, Branscum, Cozart, D. Douglas, Eaves, L. Fite, 9 Henderson 10

11 For An Act To Be Entitled 12 AN ACT TO CREATE THE MIDDLE CLASS TAX RELIEF ACT OF 13 2015; TO AMEND THE INCOME TAX RATES FOR INDIVIDUALS, 14 TRUSTS, AND ESTATES; TO ADJUST THE MINIMUM AND 15 MAXIMUM DOLLAR AMOUNTS IN CERTAIN INCOME BRACKETS FOR 16 INDIVIDUALS, TRUSTS, AND ESTATES; TO AMEND THE INCOME 17 TAX APPLICABLE TO CAPITAL GAINS; TO DECLARE AN 18 EMERGENCY; AND FOR OTHER PURPOSES. 19

20

21 Subtitle 22 TO CREATE THE MIDDLE CLASS TAX RELIEF ACT 23 OF 2015; TO AMEND THE INCOME TAX RATES 24 AND BRACKETS FOR INDIVIDUALS, TRUSTS, AND 25 ESTATES; TO AMEND THE INCOME TAX ON 26 CAPITAL GAINS; AND TO DECLARE AN 27 EMERGENCY. 28

29

30 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 31

32

SECTION 1. DO NOT CODIFY. This act shall be known as the "Middle 33 Class Tax Relief Act of 2015".

34

35

SECTION 2. Arkansas Code § 26-51-201(a), concerning the income tax on 36

As Engrossed: S1/15/15 S1/22/15 H1/28/15 SB6

2 12-12-2014 10:57:31 JLL055

individuals, trusts, and estates, is amended to read as follows: 1 (a) For tax years beginning on and after January 1, 2012 2 2014, a tax is imposed upon, and with respect to, the entire income of every 3 resident, individual, trust, or estate. The tax shall be levied, collected, 4 and paid annually upon the entire net income as defined and computed in this 5 chapter at the following rates, giving effect to the tax credits provided 6 hereafter, in the manner set forth: 7

(1)(A) On the first four thousand ninety-nine dollars ($4,099) 8 four thousand two hundred ninety-nine dollars ($4,299) of net income or any 9 part thereof, one percent (1%). nine-tenths percent (0.9%); 10

(B) For tax years beginning on and after January 1, 2014, 11 on the first four thousand ninety-nine dollars ($4,099) of net income or any 12 part thereof, nine-tenths percent (0.9%); 13

(2)(A) On the next four thousand one hundred dollars ($4,100) of 14 net income or any part thereof, two and five-tenths percent (2.5%).; 15

(B) For tax years beginning on and after January 1, 2015, 16 on the next four thousand one hundred dollars ($4,100) of net income or any 17 part thereof, two and four-tenths percent (2.4%); 18

(3)(A) On the next four thousand dollars ($4,000) four thousand 19 two hundred dollars ($4,200) of net income or any part thereof, three and 20 five-tenths percent (3.5%).; 21

(B) For tax years beginning on and after January 1, 2015, 22 on the next four thousand dollars ($4,000) of net income or any part thereof, 23 three and four-tenths percent (3.4%); 24

(4)(A) On the next eight thousand two hundred dollars ($8,200) 25 eight thousand four hundred dollars ($8,400) of net income or any part 26 thereof, four and five-tenths percent (4.5%).; 27

(B) For tax years beginning on and after January 1, 2015, 28 on the next eight thousand two hundred dollars ($8,200) of net income or any 29 part thereof, four and four-tenths percent (4.4%); 30

(5)(A) On the next thirteen thousand six hundred dollars 31 ($13,600) fourteen thousand one hundred dollars ($14,100) of net income or 32 any part thereof, six percent (6%).; 33

(B) For tax years beginning on and after January 1, 2015, 34 on the next thirteen thousand six hundred dollars ($13,600) of net income or 35 any part thereof, five and nine-tenths percent (5.9%); and 36

As Engrossed: S1/15/15 S1/22/15 H1/28/15 SB6

3 12-12-2014 10:57:31 JLL055

(6)(A) On net income of thirty-four thousand dollars ($34,000) 1 thirty-five thousand one hundred dollars ($35,100) and above, seven percent 2 (7%).; 3

(B) For tax years beginning on and after January 1, 2015, 4 on net income of thirty-four thousand dollars ($34,000) and above, six and 5 nine-tenths percent (6.9%). 6

(7) For tax years beginning on and after January 1, 2016, every 7 resident, individual, trust, or estate having net income greater than or 8 equal to twenty-one thousand dollars ($21,000), but less than or equal to 9 seventy-five thousand dollars ($75,000), shall determine the amount of income 10 tax due under this subsection in accordance with the table set forth below: 11

12 From

Less Than or Equal To

Rate 13 $0

$4,299

0.9% 14 $4,300

$8,399

2.5% 15 $8,400

$12,599

3.5% 16 $12,600

$20,999

4.5% 17 $21,000

$35,099

5% 18 $35,100

$75,000

6% 19

20

(8) For tax years beginning on and after January 1, 2015, every 21 resident, individual, trust, or estate having net income of less than twenty- 22 one thousand dollars ($21,000) shall determine the amount of income tax due 23 under this subsection in accordance with the table set forth below: 24

25 From

Less Than or Equal To

Rate 26 $0

$4,299

0.9% 27 $4,300

$8,399

2.4% 28 $8,400

$12,599

3.4% 29 $12,600

$20,999

4.4% 30

31

(9) For tax years beginning on and after January 1, 2016, every 32 resident, individual, trust, or estate having net income of more than 33 seventy-five thousand dollars ($75,000) shall determine the amount of income 34 tax due under this subsection in accordance with the table set forth below: 35

36

As Engrossed: S1/15/15 S1/22/15 H1/28/15 SB6

4 12-12-2014 10:57:31 JLL055

From

Less Than or Equal To

Rate 1 $0

$4,299

0.9% 2 $4,300

$8,399

2.5% 3 $8,400

$12,599

3.5% 4 $12,600

$20,999

4.5% 5 $21,000

$35,099

6% 6 $35,100 and above

6.9% 7

8

(10) For tax years beginning on and after January 1, 2016, every 9 resident, individual, trust, or estate having net income of more than 10 seventy-five thousand dollars ($75,000) but not more than eighty thousand 11 dollars ($80,000), shall reduce the amount of income tax due as determined 12 under subdivision (a)(9) of this section by deducting a bracket adjustment 13 amount in accordance with the table set forth below: 14

15 From

Equal To

Bracket Adjustment Amount 16 $75,001

$76,000

$440 17 $76,001

$77,000

$340 18 $77,001

$78,000

$240 19 $78,001

$79,000

$140 20 $79,001

$80,000

$40 21 $80,001 and above

$0 22

23

(11) The tables set forth in subdivisions (a)(1)-(a)(10) of this 24 section shall be adjusted annually in accordance with the method set forth in 25 subsection (d) of this section. 26

27

SECTION 3. Effective for tax years beginning on and after January 1, 28 2015, Arkansas Code § 26-51-815(b), concerning the computation of capital 29 gains and losses, is amended to read as follows: 30

(b)(1) Except as otherwise provided in this subsection, if a taxpayer 31 has a net capital gain for tax years beginning on and after January 1, 1999, 32 thirty percent (30%) of the gain is exempt from state income tax. 33

(2) If a taxpayer has a net capital gain for tax years beginning 34 on and after January 1, 2015, fifty percent (50%), the following portion of 35 the gain is exempt from state income tax.: 36

As Engrossed: S1/15/15 S1/22/15 H1/28/15 SB6

5 12-12-2014 10:57:31 JLL055

(A) From January 1, 2015, through January 31, 2015, fifty 1 percent (50%); and 2

(B) Beginning on and after February 1, 2015, forty percent 3 (40%). 4

(3) The amount of net capital gain in excess of ten million 5 dollars ($10,000,000) from a gain realized on or after January 1, 2014, is 6 exempt from the state income tax. 7

8

SECTION 4. EMERGENCY CLAUSE. It is found and determined by the 9 General Assembly of the State of Arkansas that income tax rates for Arkansas 10 residents are too high in comparison to the income tax rates in surrounding 11 states; that these burdensome income tax rates prevent Arkansas from being 12 competitive with surrounding states in the region; that amending the 13 exclusion from tax for a portion of capital gains income will increase the 14 state's ability to provide additional tax relief to middle class taxpayers 15 without overburdening the state's resources; and that this act is immediately 16 necessary because it is in the best interests of the state to increase 17 Arkansas's ability to compete in the region by dedicating as much funding as 18 is economically possible and prudent to relieve the income tax burden 19 suffered by middle class taxpayers in the state. Therefore, an emergency is 20 declared to exist, and this act being immediately necessary for the 21 preservation of the public peace, health, and safety shall become effective 22 on: 23

(1) The date of its approval by the Governor; 24

(2) If the bill is neither approved nor vetoed by the Governor, 25 the expiration of the period of time during which the Governor may veto the 26 bill; or 27

(3) If the bill is vetoed by the Governor and the veto is 28 overridden, the date the last house overrides the veto. 29

30 /s/J. Dismang 31

32

33 APPROVED: 02/06/2015 34

35

36