Stricken language would be deleted from and underlined language would be added to present law. Act 614 of the Regular Session *JLL093* 03/10/2025 7:49:54 AM JLL093 State of Arkansas

1 95th General Assembly A Bill

2 Regular Session, 2025

SENATE BILL 412 3

4 By: Senator J. Boyd 5 By: Representative McClure 6

7 For An Act To Be Entitled 8 AN ACT TO AMEND THE INCOME TAX DEDUCTIONS FOR MOVING 9 AND TRAVEL EXPENSES; TO AUTHORIZE THE DEPARTMENT OF 10 FINANCE AND ADMINISTRATION TO SET THE PER-MILE AMOUNT 11 FOR THE INCOME TAX DEDUCTION FOR TRAVEL AND 12 TRANSPORTATION EXPENSES BY PROCLAMATION; AND FOR 13 OTHER PURPOSES. 14

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16 Subtitle 17 TO AUTHORIZE THE DEPARTMENT OF FINANCE 18 AND ADMINISTRATION TO SET THE PER-MILE 19 AMOUNT FOR THE INCOME TAX DEDUCTION FOR 20 TRAVEL AND TRANSPORTATION EXPENSES BY 21 PROCLAMATION. 22

23 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 24

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SECTION 1. Arkansas Code § 10-3-309(b)(1)(B), concerning the items not 26 included in the definition of "rule" as used in relation to the legislative 27 review and approval of state agency rules, is amended to add an additional 28 subdivision to read as follows: 29

(vi) A proclamation issued by the Secretary of the 30 Department of Finance and Administration under § 26-51-423(a)(2). 31

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SECTION 2. Arkansas Code § 25-15-202(9)(B), concerning the items not 33 included in the definition of "rule" under the Arkansas Administrative 34 Procedure Act, is amended to add an additional subdivision to read as 35 follows: 36

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(ix) A proclamation issued by the Secretary of the 1 Department of Finance and Administration under § 26-51-423(a)(2). 2

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SECTION 3. Arkansas Code § 26-51-403(b)(8), concerning deductions from 4 gross income, is amended to read as follows: 5

(8) Deductions for moving expenses, as set forth in § 26-51- 6 423(a)(4) 26-51-423(a)(1)(C); 7

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SECTION 4. Arkansas Code § 26-51-423(a), concerning income tax 9 deductions for expenses, is amended to read as follows: 10

(a)(1) In computing net income, there shall be allowed as deductions 11 the following expenses: 12

(1)(A) Business Expenses. All of 26 U.S.C. § 162, except 13 subsection (n), as in effect on January 1, 2019, regarding trade or business 14 expenses, is adopted for the purpose of computing Arkansas income tax 15 liability; 16

(2)(B) Medical and Dental Expenses. Title 26 U.S.C. § 17 213, as in effect on January 1, 2011, is adopted in computing the medical and 18 dental expense deduction under the state income tax law; and 19

(3) Travel Expenses. In determining travel expenses deductible 20 as a business expense in computing net income as provided under subdivision 21 (a)(1) of this section, the deduction for vehicle miles shall be determined 22 by the Secretary of the Department of Finance and Administration under his or 23 her regulatory authority in § 26-18-301; and 24

(4)(C) Moving Expenses. Title 26 U.S.C. § 217, as in 25 effect on January 1, 2011, regarding the deduction of moving expenses, is 26 adopted for the purpose of computing Arkansas income tax liability. 27

(2)(A) In determining travel and transportation expenses 28 deductible under this subsection in computing net income, the amount of the 29 per-mile deduction for vehicle miles shall be determined by proclamation of 30 the Secretary of the Department of Finance and Administration. 31

(B) The amount of the per-mile deduction allowed under 32 this subsection shall not exceed one dollar ($1.00) per mile. 33

(C) The secretary shall: 34

(i) Set the amount of the per-mile deduction allowed 35 under this subsection as close to the amount of the per-mile deduction for 36

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3 03/10/2025 7:49:54 AM JLL093 vehicle miles most recently established by the Internal Revenue Service as is 1 fiscally responsible without causing an undue hardship on taxpayers; and 2

(ii) Issue a proclamation under subdivision 3 (a)(2)(A) of this section no later than thirty (30) days after the per-mile 4 deduction for vehicle miles established by the Internal Revenue Service is 5 changed. 6

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SECTION 5. Arkansas Code § 26-51-423(c)(3), concerning income tax 8 deductions for expenses for a self-employed taxpayer, is amended to read as 9 follows: 10

(3) Any amount paid by the taxpayer for insurance to which this 11 subsection applies shall not be taken into account in computing the amount 12 allowable to the taxpayer as a deduction under subdivision (a)(2) (a)(1)(B) 13 of this section. 14

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SECTION 6. Arkansas Code § 26-51-423(g)(1), concerning income tax 16 deductions for expenses, is amended to read as follows: 17

(g)(1) A deduction pursuant to subdivision (a)(1)(A) of this section 18 for interest or intangible-related expenses paid by the taxpayer to a related 19 party shall be allowed only if: 20

(A) The interest or intangible-related income received by 21 the related party is subject to income tax imposed by the State of Arkansas, 22 another state, or a foreign government that has entered into a comprehensive 23 income tax treaty with the United States; 24

(B) The interest or intangible-related income received by 25 the related party was received pursuant to: 26

(i) An “arm's length” contract or at an “arm's 27 length” rate of interest; and 28

(ii) A transaction not intended to avoid the payment 29 of Arkansas income tax otherwise due; 30

(C) The taxpayer and the secretary enter into a written 31 agreement prior to the due date of the taxpayer's Arkansas income tax return: 32

(i) Authorizing the taxpayer to take the deduction 33 for the tax year at issue; or 34

(ii) Requiring the use of an alternative method of 35 income apportionment by the taxpayer for the tax year at issue; or 36

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(D) During the taxable year, the related party recipient 1 of interest or intangible-related income, in a location not described in 2 subdivision (g)(1)(A) of this section, a “non-tax location”: 3

(i) Operates an active trade or business in the non- 4 tax location; 5

(ii) Has a minimum of fifty (50) full-time- 6 equivalent employees in the non-tax location; 7

(iii) Owns real or tangible personal property with a 8 fair market value in excess of one million dollars ($1,000,000) located in 9 the non-tax location; and 10

(iv) Has revenues generated from sources within the 11 non-tax location in excess of one million dollars ($1,000,000). 12

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SECTION 7. Arkansas Code § 26-51-437(b)(1) and (2), concerning the 14 itemized deductions not included in the definition of "miscellaneous itemized 15 deductions", are amended to read as follows: 16

(1) The deduction allowed under § 26-51-423(a)(1)(A) relating to 17 expenses in carrying on a trade or business. However, employee business 18 expenses which are not reimbursed by the employer are miscellaneous itemized 19 deductions; 20

(2) The deduction allowed under § 26-51-423(a)(2) 26-51- 21 423(a)(1)(B) relating to medical, dental, drug, and related healthcare 22 expenses; 23

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25 APPROVED: 4/14/25 26

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