Applied Research Grant Program
The Applied Research Grant Program provides matching grant funds to help create applied research partnerships between private industry and Arkansas-based colleges and universities to stimulate the transfer of science and technology. Private industry match may be in the form of cash or new machinery and equipment. “Applied research” means any activity which seeks to utilize, synthesize, or apply existing knowledge, information, or resources to the resolution of a specified problem, question, or issue.
AEDC may fund up to 50% of the total cost of the applied research project being funded. Remaining project costs shall be funded with cash or new machinery and equipment provided by a business or industry cosponsoring the project; however, AEDC may fund up to sixty-six and two-thirds percent (66 and 2/3%) of the applied research project if the participating private industry is principally located in Arkansas and employs up to 50 persons.
AEDC will approve for funding only those applied research projects which are likely to enhance employment opportunity within Arkansas.
Arkansas Business and Technology Accelerator Grant Program
The Arkansas Business and Technology Accelerator Grant Program is a discretionary grant of up to $250,000 to sponsor business and technology programs to mentor start-up companies. It was created to stimulate growth of corporate mentors and innovative start-ups through the infusion of innovative ideas, products, and services. A “business and technology accelerator” would be a full-time, immersive program in which an applicant would mentor and accelerate start-up businesses. Applicants should be in good standing with the Arkansas Secretary of State and be involved in one or more of the following:
The program was formed to create high skilled, high wage jobs by encouraging the development of technological products and services. Disbursements of Arkansas Business and Technology Accelerator Grant Program funds shall be made on a reimbursable basis, payable when invoices and financial reports are submitted to the AEDC.
Basic Research Grant Program
The Basic Research Grant Program provides matching grant funds to help promote and support the growth and development of scientists working in Arkansas and to enhance the status of science and technology in Arkansas-based colleges and universities by funding basic research. “Basic research” means any original investigation for the advancement of scientific or technological knowledge.
AEDC may fund up to 60% of the total cost of the basic research project being funded. Remaining project costs shall be funded with cash or in-kind services provided by the college or university proposing the research project.
Business Incubator Program
The Business Incubator Program was created to enhance economic development by stimulating technological innovation and fostering the growth of technology-based enterprises to create new employment opportunities for Arkansans through the establishment of Arkansas-based college and university incubators. The intent of the program is to create an entrepreneurial and technological environment drawing upon a diversity of business enterprises which will stimulate the innovation process and result in economic benefits to Arkansans.
Applications for funding should emphasize innovation, entrepreneurial engagement, leveraging of private capital to the greatest extent possible, and local business support.
Small Business Innovation Research (SBIR) Matching Grant Program
The SBIR Matching Grant Program was created to leverage the federal SBIR program and stimulate innovation and growth among the state’s technology businesses resulting in the creation and retention of high-tech jobs. Applicants to this program must have been awarded a federal SBIR award to be eligible. These discretionary funds may provide matching grants of up to 50% of the amount of federal Phase I and Phase II SBIR grants, not to exceed $50,000 for Phase I awards and $100,000 for Phase II awards. To be eligible, a company must be principally involved in one or more of the following targeted business activities:
Technology Transfer Assistance Grant
The TTAG Program is a matching grant program created to encourage the transfer and deployment of innovative technology into an Arkansas-based business or for the creation of commercial technology through the federal SBIR program. The AEDC will fund up to $3,750 of costs associated with transferring new or existing technology from a qualified applicant — such as a public or private enterprise, laboratory, college, or university — to an enterprise based in Arkansas. Up to $5,000 of total project costs will be considered, with the first $2,500 funded by the AEDC; the remaining $2,500 is cost-shared equally (50:50) between the AEDC and the enterprise. Each enterprise is eligible to receive assistance for two technology transfer projects per state fiscal year. Projects are evaluated on a competitive basis.
TTAG grants are awarded to the technology transfer resource provider. The resource provider must possess the capability to locate and transfer innovative technology and transfer it to a specific Arkansas-based enterprise. In certain cases, to be determined on a case-by-case basis, the resource provider could be the company requesting assistance if they have the capability to locate and transfer the innovative technology. The technology being transferred must resolve a company’s technology-based problem, issue, or concern.
TTAG grant awards can be used to fund costs associated with engineering or technical support fees, database searches, travel, responses to the Small Business Innovation Research Program (SBIR), Small Business Technology Transfer Program (STTR) or the Advanced Technology Program (ATP) and other costs to be decided on a case-by-case basis. TTAG grant awards will not fund costs associated with fixed assets for an enterprise or costs associated primarily with training. TTAG grant awards can also be used by a business to obtain technical assistance from a university.
In-House Research by a Targeted Business
The In-House Research program is a discretionary tax incentive for early stage, eligible targeted businesses (see targeted business eligibility list on page 7). The program provides an income tax credit equal to 33% of qualified research and development expenditures incurred each year for the first 5 years of the financial incentive agreement. Qualified research expenditures include in-house expenses for taxable wages paid, and usual fringe benefits specific to research activities of employees of the business. The income tax credits earned under this program may be sold upon approval by the Arkansas Economic Development Commission.
In-House R&D Facilities
The In-House R&D Facilities program is a discretionary incentive that allows a business that conducts in-house research within a research facility that qualifies for federal R&D tax credits to qualify for income tax credits. The eligible business must make an application to the Arkansas Economic Development Commission generally describing the research to be undertaken and the estimated expenditures to be made on in-house research. The income tax credit is equal to 20% of the incremental amount spent on qualified R&D expenditures that exceeds the baseline established in the preceding year, for a period of 5 years. The credits are to be used against a company’s income tax liability and cannot be sold. However, any unused credits can be carried forward for 9 years.
R&D with Universities
The R&D with Universities program is a discretionary incentive that allows an eligible business that contracts with one or more Arkansas colleges or universities in performing research to qualify for a 33% income tax credit for qualified research expenditures. The income tax credit may be carried forward for 9 years beyond the year in which the credit was earned.
Advantage Arkansas Program
The Advantage Arkansas Program is a job tax credit program for qualifying new and expanding companies. The credits earned will be equal to the appropriate percentage (based on the tier chart on page 11) of the net, new payroll for a period of five years with a minimum annual payroll ranging from $50,000 - $125,000. Employees must be taxpayers of Arkansas to qualify for the credit and the average hourly wage of the new employees must be $14.11.
A business may receive an additional tax credit of 1% of the payroll if the average hourly wage exceeds $125% of the lesser of the county or state average hourly wage.
The Company may apply the credit to their state income tax liability, not to exceed 50% of the total income tax liability for a reporting period. The income tax credit begins in the year in which the new employees are hired. Any unused credits can be carried forward for nine (9) years beyond the year in which they were earned.
The income tax credits are calculated as follows:
Annual Payroll of New Employees x 1 -4% = Annual Financial Incentive
|Year||Jobs||Average Hourly Wage||Payroll Estimates||Tax Credit Estimates|
|Year 1||20||$15.00||$624,000||$ 6,240|
|Year 2||25||$15.00||$780,000||$ 7,800|
|Total Estimated Tax Credits (Tier 1 – 1%)||$60,840|
|Total Estimated Tax Credits (Tier 2 – 2%)||$121,680|
|Total Estimated Tax Credits (Tier 3 – 3%)||$182,520|
|Total Estimated Tax Credits (Tier 4 – 4%)||$243,360|
|Tier||Payroll Threshold||Benefit Based on Payroll of New, Full-time, Permanent Employees|
|1||$125,000||1% of payroll|
|2||$100,000||2% of payroll|
|3||$75,000||3% of payroll|
|4||$50,000||4% of payroll|
Equity Investment Tax Credit (EITC)
An eligible business must be defined as a Targeted Emerging Sectors.
Emerging technology sectors are:
1. Advanced materials and manufacturing systems
2. Agriculture, food and environmental sciences
3. Biotechnology, bioengineering and life sciences
4. Information technology
5. Transportation logistics
6. Bio-based products
If a business falls within one or more of the targeted areas, additional eligibility criteria are:
If the business does not meet the above requirements, it can still be deemed an eligible business if; it has received or receives assistance in the form of equity investment from capital investment funds that target early-stage businesses and start-up businesses. The business must also pay 150% of the state or county average wage, whichever is lower, and it must meet two of the following conditions.
The EITC will be provided in the form of state income tax credits to persons or companies investing in certain types of eligible businesses. The tax credit is equal to thirty-three and one-third percent (33 1/3%) of the approved amount invested by an investor in an eligible business. This credit is transferable, which means it can be sold. It may only be sold once, and it must be sold within one year of earning the credit. The credit shall only be awarded at the discretion of the Executive Director of the Arkansas Economic Development Commission. The income tax credit earned may be used to offset 50% of the investor’s Arkansas income tax liability in any one tax year. Any unused credit may be carried forward for a period of nine years.
Seed Capital Investment Program (SCIP)
The SCIP is a direct investment by the state to help Arkansas technology-based companies with initial capitalization. This program helps companies reach the point of commercialization, including development and refinement of a product. It is for companies that cannot secure sufficient capital through traditional capital sources. This program may be in the form of debt financing, equity financing, a royalty participation agreement, or a combination of such financing agreements up to $500,000 (but usually in smaller staged tranches). SCIP investments are generally structured as royalty-based investments.
Technology Development Program (TDP)
The Technology Development Program (TDP) provides royalty financing for qualified science and technology projects with a potential for economic and employment growth in the state of Arkansas. The goal of the Technology Development Program is to assist in developing and commercializing new technology-based products and processes. This means that applications for award must have a well-defined project plan showing progression from idea, to prototype, to production. The total maximum award for the development of a given technology is $100,000 with a royalty rate of 0%-5% and an end date of 10 years, after which any and all remaining debt is forgiven and the TDP investment becomes a grant.
This program is a direct investment by the state to help develop or validate a technology for commercialization. The TDP program is flexible, and it has been used it to bridge funding gaps in SBIR Phase I and II grants, to create prototypes, to develop commercial applications for new technology, or to pay for the validation of university technology. Because this program is meant to cover gaps in funding, the Technology Development Program cannot be awarded to projects that are eligible for other programs.
Targeted Business Incentive Programs
Businesses that meet requisite pay thresholds and are involved in one or more of the targeted business sectors listed below may be eligible for targeted business incentives:
Targeted ArkPlus Program
The Targeted ArkPlus Program is a discretionary program that provides an income tax credit or a sales and use tax credit based upon new investment. The targeted business must invest a minimum of $250,000 within 4 years of the effective date of the financial incentive agreement, create a new payroll of at least $250,000, and pay an average hourly wage of at least 150% of the lesser of the state or county average hourly wage (whichever is less). The tax credit will be equal to 2% of the investment from $250,000 up to $500,000 and will be an additional 2% for every increase of $250,000 in investment. Any unused credit may be carried forward for a period up to 9 calendar years after the calendar year in which it was first earned.
Targeted Business Payroll Program
The Targeted Business Payroll Program is a discretionary program that provides a transferable income tax credit equal to 10% of payroll for eligible targeted businesses for a period of up to 5 years. Eligible businesses will have a payroll of at least $100,000 and no more than $1 million to qualify for the program, and the average hourly wages must be at least 150% of the state or county hourly wage (whichever is less). The income tax credits earned under this program may be sold upon approval by the Arkansas Economic Development Commission.
Targeted Create Rebate Program
The Targeted Create Rebate Program is a discretionary program that provides a tax rebate of 5% of eligible new, full-time payroll. This program may be offered for a period up to 10 years at the discretion of the AEDC Executive Director for targeted, tech-based businesses. The average hourly wage of new, full-time, permanent employees must be at least 150% of the state or county average hourly wage (whichever is less). This program may not be used with the Targeted Business Payroll Program.
Targeted Tax Back Program
The Targeted Tax Back program is discretionary program that provides a refund of sales and use taxes paid on the purchase of building materials and machinery and equipment associated with the approved project. Eligible businesses will have a payroll of at least $100,000 and no more than $1 million to qualify for the program, and project costs must occur within 4 years of the approval date. This program may be combined with the Targeted Business Payroll Program and the Targeted R&D Tax Credit, with approval from the Executive Director.
Tax Back Program
The Tax Back Program grants a refund of state and local sales and use taxes paid on the purchases of the material used in the construction of a building or buildings or any addition, modernization, or improvement to a new or expanding eligible business. A sales and use tax refund is also allowed for the purchases of taxable machinery or equipment associated with the building or project.
A refund shall not be authorized for:
To qualify for the Tax Back Program, the company must:
The refund will not include the sales tax dedicated to the Educational Adequacy Fund and the Conservation Tax Fund. These two exceptions reduce the state refund by 1%. Currently state sales tax rate is 6.5% therefore the refund of state taxes will be based upon 5.5% of the eligible taxable purchases. The refund of local taxes will be based on the sales tax rates for the possible site.
The Tax Back Program sales tax refunds are calculated as follows:
Eligible Expenses Amount x Total State & Local Sales Tax Percentage = Benefit Amount
|Tier||Investment Threshold||Benefit to Company|
|1||$500,000||5.5% + city & county tax|
|2||$400,000||5.5% + city & county tax|
|3||$300,000||5.5% + city & county tax|
|4||$200,000||5.5% + city & county tax|