Making an IMPACT on Economic Development in Arkansas

The 2025 Arkansas legislative session will go down as the best economic development session in at least a couple of decades. As the General Assembly officially concludes today, I wanted to provide a brief summary of economic development legislation and to say thanks to those that made it happen.

Several months ago, Secretary Hugh McDonald assembled an incentives working group. This group included several leaders throughout the state that provided valuable input on specific legislation that we needed to pursue in order to put ourselves in the best position to compete with other states for jobs and investment.

The collective package of legislation being promoted by the Arkansas Department of Commerce, in collaboration with many partners, came to be known as IMPACT – or Improving Markets, Promoting Arkansas Commerce and Trade.

Arkansas wins more than its fair share of economic development projects, and we want to ensure that our state maintains – and increases – that momentum. The legislation passed during this session will play an important role in helping AEDC, economic developers around the state, and our local communities win projects.

The Arkansas General Assembly has shown time and time again how supportive they are of economic development in the State of Arkansas. My gratitude goes out to every legislator for their hard work this session. On behalf of AEDC, I especially want to say thank you to the legislators that sponsored the bills that will give us more tools and resources to attract companies to Arkansas, help our existing businesses grow, and encourage investment in the state.

IMPACT would not have been possible without the support of Governor Sarah Sanders. Governor Sanders is the state’s chief economic developer, leading economic development trips and talking with executives to close projects. Her leadership was instrumental in delivering a successful legislative session – particularly in economic development.

Here is a breakdown of the legislation that was passed:

Modernization and Automation Incentive (Act 882 of 2025)

The Modernization and Automation Tax Credit is designed to encourage investment from existing businesses in Arkansas. Companies that have operated in Arkansas for at least two years must incur at least $25 million in investment costs, and they can be eligible for up to five percent of eligible project costs.

Data Center Incentive (Act 548 of 2025)

This legislation amends the sales and use tax emption for qualified data centers in Arkansas to support the purchase of data center equipment and other eligible data center costs.

Lithium Industry Incentive (SB 568)

Under this legislation, Arkansas would create a sales and use tax exemption for lithium resource development for eligible firms that have invested at least $100 million in the state. It also amends the state’s laws on the severance tax rate.

Corporate Headquarter Relocation Incentive (Act 881 of 2025)

With this legislation, AEDC can offer a tax credit of up to 10 percent for companies that relocate their corporate headquarters to Arkansas. Arkansas is a business-friendly state, and we look forward to encouraging companies to shift their corporate HQs to our state with either an income tax credit or a sales and use tax credit of up to 10 percent of total eligible project costs.

Small Business Innovation Research Program Reform (Act 440 of 2025)

The legislature has reformed the Arkansas Small Business Innovation Research Matching Grant Program, which will improve the program for Arkansas entrepreneurs and researchers. Our state is committed to encouraging innovation – making this an important step in fostering research and development.

Industrial Development Authorities (Act 576 of 2025)

Act 576 will enable the creation of industrial development authorities , which are public benefit corporation established to help secure economic development projects and develop industry in a given area. Establishing industrial development authorities is designed to help increase job creation and make Arkansas more economically competitive.

In addition to the bills that originated with the incentives working group that convened at the Department of Commerce, there we’re a couple of economic development bills that have could be transformational in the coming years:

Economic Development Districts (SJR 15)

This legislation would authorize the creation of economic development districts, which could issue bonds for the purpose of financing projects within that district. SJR15 is a constitutional amendment that will be voted on by the people of Arkansas in 2026.

Generating Arkansas Jobs Act of 2025 (Act 373 of 2025)

This legislation reforms our state’s regulatory framework, enabling them to make strategic investments to support the growth of energy production in Arkansas. The Generating Arkansas Jobs Act will play an important role in ensuring that Arkansas has reliable electric and natural gas utility services, which will make Arkansas more competitive for economic development projects.

Companies are thriving in Arkansas, thanks to the state’s low-cost framework, strong workforce and talent pipeline, common-sense public policy, and supportive communities. In Arkansas, we work to give businesses what they need to succeed and get out of their way, enabling them to make investments and create jobs in the state.

We expect the IMPACT legislation to have a big impact in Arkansas – and we look forward to more economic growth in our state. If you have any questions about any of the legislation and what it means for your companies or clients, don’t hesitate to reach out to our team to learn more.

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This article was originally published by AEDC Executive Director Clint O'Neal via LinkedIn - view here.