Daily Legislative Update
Wednesday, March 25, 2009
73rd Day of the 87th General
Assembly
SPECIAL EDITION
* * * CALL TO ACTION * * *
Now that our priority issue, the sales tax reduction for manufacturers energy costs, awaits the Governor’s signature and the session seems to be winding down, the State Chamber/AIA is turning its attend to four additional bills that we would like to pass before the session ends.
Two bills, SB 769 and SB 770 by Sen. Larry Teague and Rep. Keith Ingram, were filed in the Senate and were immediately opposed by DFA. However, in the past few days we have negotiated agreements with DFA on both bills. SB 769 has cleared the Senate and will hopefully be considered in the House Revenue and Taxation Committee tomorrow. SB 770 received a Do Pass from the Senate Revenue and Taxation Committee today.
The other two bills in our package were filed in the House and we plan to run them tomorrow in the House Revenue and Taxation Committee. Please contact the following members of that committee and urge them to support HB 1911 and HB 1949. The members of that committee are:
John Lowery—chair, Frank Glidewell—vice chair, Jonathan Dismang, David Dunn, Ed Garner, Rick Green, Jim House, Keith Ingram, Wilhelmina Lewellen, Uvalde Lindsey, Buddy Lovell, Bruce Maloch, Allen Maxwell, Robert Moore, Mike Patterson, Bobby Pierce, Beverly Pyle, J.R. Rogers, Kathy Webb and Robbie Wills.
HB 1911 by Rep. Keith Ingram would extend the net operating loss carry-forward provisions in the income tax laws and HB 1949 by Rep. Davy Carter would extend the time businesses have to claim rebates of local sales taxes paid in excess of local caps removed by the streamlined sales tax laws.
HB 1949 was originally filed to extend the rebate time from six months to three years. As we discussed this issue with many legislators, we recognized that three years was too long for them to support. Therefore, Rep. Carter amended the bill yesterday to reduce the extended time from three years to one year. We view this amendment as an attempt to compromise the issue. The bill does not have an impact on state revenue. However, the rebates have caused cash flow issues for the cities and counties; we are sensitive to this issue. In fact, we met with DFA yesterday about this issue and discussed options that might mitigate the cash flow issues for the local governments but we could not develop a workable solution other than shortening the time from three years to one year. We believe it is important for legislators to understand that the money at issue here is money that we firmly believe belongs to the businesses. Before streamlined sales tax, businesses did NOT pay the amounts at issue here because there was a cap. Because streamlined required the removal of the caps, we only agreed to support streamlined if a mechanism was created to return the amount of additional taxes paid by businesses. In other words, when we reached an agreement with DFA on this is 2007 the intent was to allow a full refund to businesses. However, now that we have seen this operate for two years, we believe the six-month time period is too short. It will not allow small, less sophisticated businesses time to claim the rebate. Extending this time to one year will help those businesses.
HB 1911 is a bill that will not have an impact on state revenue until fiscal year 2016. It is also a perfect time for this bill because it will increase chances that businesses suffering losses in this time of economic crises may be able to survive long term. Here are some talking points on this bill.
HB 1911 by Rep. Keith Ingram--AN ACT TO EXTEND THE NET OPERATING LOSS CARRY-FORWARD
PERIOD FOR
• Bill would extend NOL carry forward period from five years to 15 years.
• Would apply only to losses incurred on or after January 1, 2009.
• First budget year that would be impacted by change would be FYE 2016 (tax year 2015).
•
• Among other surrounding states, NOL carry forwards are as follows:
MS 20 forward (2 back)
OK 20 forward (2 back)
MO 20 forward (2 back)
TN 15 forward (0 back)
LA 15 forward (3 back)
• DFA estimates that more than 75 percent of
Arkansas NOL’s expire due to
• Other state statistics for 46 states and DC with state income tax:
• 20 years - 25 states
• 15 years - 8 states
• 12 years - 1 state
• 10 years - 5 states
• 7 years - 1 state
• 5 years - 7 states
NOTE: 18 states permit both carry forward and carry backs (AR does not allow). Federal law is two years back, 20 years forward.
- When New Jersey extended its NOL carry forward period from seven to 20 years in 2009, its Governor announced this would: “creat[e] a more level playing field that is expected to encourage companies to invest in New Jersey . The longer period aims to help New Jersey ’s economy by making state law more consistent with the rest of the country, thus making the Garden tate more competitive as a location for new business relocations and expansions.” Same reasoning applies in Arkansas.
- More than 20 years ago, Arkansas adopted a 15 year NOL carryover for some manufacturers and a 10 year NOL carryover for others. But the NOL carryover for other businesses has remained the same.
- Unreasonably short NOL carryover period puts
businesses in
- We are facing a major economic downturn of magnitude most of us have not seen in our lifetimes. Impossible to determine how long recession will last.
- Arkansas companies that are able to survive should not be taxed on “phantom” profits that only exist because >Arkansas prevents them from offsetting losses incurred in earlier years.
- This is a job and economic development issue in
PLEASE CONTACT MEMBERS OF THE HOUSE REVENUE AND TAXATION COMMITTEE AND URGE THEM TO SUPPORT HB 1949 AND HB 1911.
CONTACT INFORMATION
State Senators: 501-682-2902
State Representatives: 501-682-6211
State Chamber/AIA
Staff
Randy Zook, President/CEO:
rzook@arkansasstatechamber.com
Kenny Hall, Executive Vice President: khall@arkansasstatechamber.com
Angela DeLille, Director of Governmental Affairs:adelille@arkansasstatec hamber.com
State Chamber/AIA
phone: (501) 372-2222
