Is Your Business On Target?

At the discretion of the AEDC Executive Director, targeted businesses may be offered special incentives designed to help new, knowledge-based, start-up businesses:

  • A refund of sales and use taxes paid on the purchase of building materials and machinery and equipment associated with the approved project
  • A transferable income tax credit equal to 10% of payroll for up to five years
  • A transferable income tax credit equal to 33% of eligible research and development expenditures
  • The income tax credits earned under this program may be sold upon approval by AEDC

Eligibility

To qualify as a targeted business, companies must meet the following requirements and be classified by AEDC in one of the six targeted emerging technology sectors listed below:

  • Be less than five years old
  • Show proof of an equity investment of at least $250,000
  • Pay at least 150% of the lesser of the state or county average hourly wage where the business is located
  • Meet requisite payroll thresholds

Additional eligibility criteria may be required for individual targeted programs (sales and use tax refund for targeted businesses, payroll income tax credit for targeted businesses, payroll rebate for targeted business and targeted ArkPlus).

Emerging Technology Sectors

Advanced Materials & Manufacturing Systems, with emphases on:

  • Electronics Manufacturing
  • Energy-Efficient Storage Devices
  • Environmental Issues Related to Materials & Manufacturing
  • Photonics, Nanotechnology
  • Photovoltaics

Biotechnology, Bioengineering and Life Sciences, with emphases on:

  • Biopharmaceuticals & Drug Discovery
  • Cell Molecular Biology
  • Genetics
  • Geriatrics
  • Medical Devices
  • Neuroscience
  • Oncology
  • Protein Structure & Function
  • Rehabilitation
  • Sensor Technology

Bio-Based Products, with emphases on:

  • Adhesives
  • Automotive Components
  • Biodiesel
  • Engineered Products from Non-Traditional Biomass Sources
  • Ethanol
  • Methanol
  • Polymers
  • Synthetic Transportation Fuels

Information Technology, with emphases on:

  • Database Systems
  • Distributed Systems
  • Knowledge and Data Engineering
  • Software Development
  • State of the Art Applications of Information Technology to Bioinformatics and/or Healthcare
  • Wireless Systems

Agriculture, Food and Environmental Sciences, with emphases on:

  • Agricultural Medicine
  • Aquaculture
  • Distributed Energy Generation
  • Energy Reduction
  • Forestry
  • Nutrition
  • Poultry
  • Rice
  • Spatial Technology
  • Toxicology
  • Waste Minimization

Transportation Logistics, with emphases on:

  • Automated Systems
  • Intelligent Material Handling
  • Transportation Management Systems

Sales and Use Tax Refund for Targeted Businesses

Act 182 of 2003 § 15-4-2706(e)(1)
This incentive program provides a refund of sales and use taxes paid on the purchases of building materials and taxable machinery and equipment associated with the approved project for targeted businesses, as defined above. In addition to meeting targeted business eligibility requirements, the business must invest at least $100,000 and meet the eligibility criteria of the Targeted Business Payroll Income Tax Credit Program § 15-4-2709.

A targeted business with an annual payroll in excess of one million dollars ($1 million) is excluded from participating in this program.

The application for a sales and use tax refund must be accompanied by an endorsement resolution from the local governing authority (city council or quorum court) that authorizes the refund of its local taxes.

Payroll Income Tax Credit for Targeted Businesses

Act 182 of 2003 § 15-4-2709
The discretionary payroll income tax credit for targeted businesses assists start-up businesses in targeted sectors that pay significantly more than the state or county average wage of the county in which the business locates. A targeted business with an annual payroll in excess of one million dollars ($1 million) is excluded from participating.

The benefit for a qualifying targeted business is a 10% income tax credit based on its annual payroll, with a cap of $100,000 per year in earned income tax credits. The incentive may be offered for a period not to exceed five years.

A unique feature of this incentive is the ability of the business that earns the targeted business income tax credit to sell the credits. The business must make application to AEDC for the sale of credits. Upon approval by AEDC, the business may sell earned income tax credits.

Since one of the allowable costs under the research and development tax credits (discussed below) is the salary of a person performing research, a business earning job creation income tax credits for targeted businesses is prohibited from earning research and development tax credits, as authorized by § 15-4-2708 or by § 26- 51-1102(b) for the same expenditure.

Payroll Rebate for Targeted Businesses

Targeted businesses with payrolls exceeding $250,000 may be offered, at the discretion of the AEDC Executive Director, rebates of five percent of payroll for up to ten years. To qualify, the average hourly wage of the new, full-time permanent employees must be at least 175% of the state or county average hourly wage, whichever is less. The payroll rebate for targeted businesses may not be used in conjunction with the payroll income tax credit for targeted businesses.

Targeted ArkPlus

Targeted businesses creating new payroll exceeding $250,000 may be offered, at the discretion of the AEDC Executive Director, income or sales and use tax credits based upon investment. Prior to the execution of the financial incentive agreement, the targeted business must elect to receive the credits as sales and use tax credits or income tax credits.

To qualify, the average hourly wage of the new, full-time permanent employees must be at least 175% of the state or county average hourly wage, whichever is less. Additionally, targeted businesses must invest a minimum of two hundred fifty thousand dollars ($250,000) within four (4) years of the effective date of the financial incentive agreement.

The credit earned by the targeted business shall be based upon a percentage of the investment as follows:

  1. The credit amount shall be two percent (2%) of investments from two hundred fifty thousand dollars ($250,000) up to five hundred thousand dollars ($500,000);
  2. The credit amount shall be two percent (2%) of the investment up to five hundred thousand dollars ($500,000) plus four percent (4%) of the investment in excess of five hundred thousand dollars ($500,000) up to one million dollars ($1,000,000);
  3. The credit amount shall be two percent (2%) of the investment up to five hundred thousand dollars ($500,000) plus four percent (4%) of the investment in excess of five hundred thousand dollars ($500,000) up to one million dollars ($1,000,000) plus six percent (6%) of the investment in excess of one million dollars ($1,000,000) up to two million dollars ($2,000,000); and,
  4. The credit amount shall be two percent (2%) of the investment up to five hundred thousand dollars ($500,000) plus four percent (4%) of the investment in excess of five hundred thousand dollars ($500,000) up to one million dollars ($1,000,000) plus six percent (6%) of the investment in excess of one million dollars ($1,000,000) up to two million dollars ($2,000,000) plus eight percent (8%) of the investment in excess of two million dollars ($2,000,000).

The percentage of tax liability that may be offset is determined by the average hourly wage paid to the new, full-time permanent employees as follows:

  1. A targeted business that pays at least one hundred seventy-five percent (175%) of the state or county average hourly wage, whichever is less, may offset fifty percent (50%) of its tax liability.
  2. A targeted business that pays at least two hundred percent (200%) of the state or county average hourly wage, whichever is less, may offset seventy-five percent (75%) of its tax liability.
  3. A targeted business that pays at least two hundred twenty-five percent (225%) of the state or county average hourly wage, whichever is less, may offset one hundred percent (100%) of its tax liability.

The income tax credit may be applied against the approved company’s Arkansas income tax liability. The sales and use tax credit may be applied against the company’s state sales and use tax liability as reported on its monthly sales and use tax report in the calendar year following the calendar year of expenditure. Any unused credit may be carried forward for a period not to exceed nine (9) tax years after the tax year in which it was first earned.

Contact

Hunter Hauk

Incentives Manager

(501) 682-1682