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Arkansas Offers Competitive Incentives for Aerospace and Defense Industry

 April 29, 2019

Momentum is building in the Aerospace and Defense industry in Arkansas. With major companies like Lockheed Martin, Aerojet Rocketdyne, and Dassault Falcon, and specialty firms like Galley Support Innovations, the state’s skilled workforce continues to grow.

Arkansas offers a range of competitive incentives and programs that help make it business-friendly for the aerospace and defense industry.

Competitive tax and investment incentives, payroll rebates, industry infrastructure grants, and training programs help companies thrive here. Since January 2015, the state of Arkansas has signed incentive agreements with seven aerospace and defense companies across the state.

Job Creation Incentives

The state’s job-creation incentives are based on payroll and use a tier system based on a combination of factors: poverty rate, unemployment rate, per-capita personal income and population growth to determine qualification criteria and benefits. Tiers are assigned annually based on current data.

When it comes to payroll rebates in the Aerospace and Defense industry, the Create Rebate program can provide up to a 5 percent payroll rebate by providing annual cash payments based on a company’s annual payroll for new, full-time, permanent employees. Payments ranging from 3.9 percent to 5 percent of new payroll are determined by the tier assignment of the county where the job creation occurs.

The ArkPlus program is an income tax credit equal to 10 percent of the investment in a new location or expansion project. The benefits under this program are the same regardless of the tier in which the business is located; however, the company must meet the investment and income thresholds established for its tier.

Advantage Arkansas offers a state income tax credit from one to four percent of new payroll, accruing for five years, for job creation based on the payroll of new, full-time, permanent employees hired as a result of the project.

Investment Incentives

The Arkansas Research and Development incentive programs provide incentives for university-based research, in-house research, and research and development in start-up, technology-based enterprises. The university-based research programs include a 33-percent income tax credit for taxpayers who pay for research performed at Arkansas-based universities. A 20-percent income tax credit is available for eligible businesses performing in-house research. Targeted businesses may be offered income tax credits equal to 33 percent of approved expenditures for in-house research.

Tax Advantages

The Tax Back program provides sales and use tax refunds on the purchase of building materials and taxable machinery and equipment to qualified businesses investing at least $100,000 for a new construction, expansion or modernization project.

Arkansas’s Freeport Law provides that raw materials and finished goods in transit or awaiting shipment to out-of-state customers are exempt from property tax.


The Quick Action Closing Fund is a discretionary fund that allows the Governor to provide funds for infrastructure, training and other capital expenditures for projects creating, expanding and retaining employment in Arkansas.

The Arkansas Economic Development Commission (AEDC) administers the federally funded state Community Development Block Grant Program (CDBG) for Arkansas. CDBG funds may be loaned to eligible companies for fixed-asset financing on projects that create jobs for low- to moderate-income families.

Industrial Revenue Bonds provide manufacturers with competitive financing. In addition to long-term, fixed-rate, below-market interest rates on the bonds, it may be possible for the project to receive some property tax relief through the use of a Payment-in-Lieu-of-Tax (PILOT) Agreement for a period of time.


AEDC’s Business and Industry Training Program (BITP) helps new and expanding businesses with recruiting workers, pre-employment training, on-the-job training and train-the-trainer programs.

Other Advantages

Arkansas has one of the most progressive worker’s compensation programs in the nation, with more than 230 certified insurance underwriters. The state has the nation’s 6th lowest union membership rate in the U.S. at 4.8 percent, and the cost-of-living indices are among the lowest in the nation.

Companies are taking advantage of these rebates and incentives, and the Aerospace and Defense industry in Arkansas is continuing to grow.

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