On August 5, Governor Hutchinson called for a Special Session of the Arkansas legislature to address certain matters. The Special Session began on August 9 and concluded the morning of August 11.
Below is a summary of what was passed at the legislative session.
Section 179 Depreciation
- This law will adopt the 2022 federal Section 179 depreciation schedule as it existed Jan. 1, 2022, which provides an income tax reduction for the expensing of certain property.
- The federal Section 179 depreciation schedule allows businesses to deduct the entire purchase price of new or used equipment up to $1.08 million in 2022, rather than capitalizing and depreciating the asset over the designated useful life of the asset. The $1.08 million deduction is reduced dollar-for-dollar if asset purchases exceed $2.7 million for 2022.
- Arkansas previously adopted Section 179 as it existed on Jan. 1, 2009, with the dollar limitation on the deduction at $25,000 and the dollar-for-dollar phase-out starting at $200,000. The federal limitation is adjusted for inflation each year.
- One measure will accelerate the implementation of cutting the State’s top individual income tax rate from 5.5% to 4.9%, retroactive to Jan. 1, 2022. The State’s top individual income tax rate is scheduled to be cut to 5.3% on Jan. 1, 2023, to 5.1% on Jan. 1, 2024, and to 4.9% on Jan. 1, 2025, under current state law.
- Another measure will accelerate the reduction in the state’s top corporate income tax rate to 5.3% on Jan. 1, 2023. Arkansas’ top corporate income tax rate of 6.2% dropped to 5.9% on Jan. 1, 2022. The rate is scheduled to drop to 5.7% on Jan. 1, 2023, to 5.5% on Jan. 1, 2024, and to 5.3% on Jan. 1, 2025, under current state law.
- Finally, there will be a temporary nonrefundable income tax credit of $150 for individual taxpayers with net income up to $87,000 — with a phase out of the credit for filers having net income of up to $101,000 for tax year 2022 — and of $300 for married taxpayers filing jointly with net income up to $174,000 — with a phase out of the credit for filers having net income up to $202,000 for tax year 2022. These taxpayers will be required to be full-time residents of Arkansas to receive the tax credit.
WLJ was proud to assist the Arkansas State Chamber of Commerce in securing the depreciation changes.