Arkansas — Corporate Income / Franchise Tax

Arkansas imposes an annual corporate income tax on two categories of corporations. Every corporation organized under the laws of Arkansas must pay income tax on its entire net income received during the income year. Foreign corporations doing business within Arkansas must pay income tax on the proportion of their entire net income apportioned to Arkansas. The tax applies to C corporations; S corporations follow separate filing requirements and are not subject to the C corporation income tax regime. The Arkansas Department of Finance and Administration administers corporate income tax through its Corporation Income Tax Section.

Source: Corporation Income Tax, Arkansas DFA

Arkansas imposes a graduated corporate income tax on net income for tax years beginning on or after January 1, 2024. The rate structure applies to both domestic corporations (those organized under Arkansas law) and foreign corporations (those doing business in Arkansas on their apportioned income).

Tax years beginning January 1, 2024 through December 31, 2026. The brackets are: 1.0% on the first $3,000 of net income; 2.0% on the next $3,000 of net income (between $3,001 and $6,000); 3.0% on the next $5,000 of net income (between $6,001 and $11,000); and 4.3% on all net income exceeding $11,000. Act 1 (SB1) and Act 4 (HB1001) of the Second Extraordinary Session of 2024 reduced the top rate from the prior 4.8% to 4.3%, effective for tax years beginning on or after January 1, 2024.

Tax years beginning on or after January 1, 2027. The top corporate income tax rate will be reduced from 4.3% to 4.1% for all net income exceeding $11,000. The lower brackets (1.0%, 2.0%, and 3.0%) remain unchanged. Act 1 (HB1001) of the First Extraordinary Session of 2026, signed by Governor Sarah Huckabee Sanders on May 6, 2026, enacted this rate reduction. According to the Arkansas Department of Finance and Administration's fiscal impact statement, this reduction will decrease general revenues by $12.7 million in fiscal year 2027 and $25.4 million in fiscal year 2028 and thereafter.

Source: Corporate FAQs, Arkansas DFA

Source: HB1001 Fiscal Impact Statement, Arkansas DFA

For tax years beginning on or after January 1, 2021, Arkansas requires all taxpayers with income from sources both within and without the state to use a single sales factor to apportion business income. The apportionment formula is a fraction: the numerator is total sales of the taxpayer in Arkansas during the tax period, and the denominator is total sales of the taxpayer everywhere during the tax period. Act 822 of 2019 amended Arkansas Code Annotated §§ 26-5-101, Article IV, and 26-51-709 through 26-51-718 to adopt this single sales factor method, replacing the prior multi-factor formula.

Source: Corporate FAQs, Arkansas DFA

Effective January 1, 2026, Arkansas established a corporate economic nexus threshold of $250,000 in gross receipts for nonresident corporations or partnerships with no physical presence in the state. Act 719 of 2025 amended Arkansas Code § 26-51-202 to create this bright-line standard. A nonresident corporation or partnership with Arkansas receipts of at least $250,000 in the current or preceding year is subject to income tax, regardless of physical presence. Nonresident corporations with physical presence in Arkansas engaging in unprotected activities establish nexus even below the $250,000 threshold, subject to Public Law 86-272 limitations.

Source: Corporate FAQs, Arkansas DFA

Arkansas corporations must file income tax returns on or before the 15th day of the fourth month following the close of the tax year. Calendar-year filers must file by April 15; fiscal-year filers by the 15th day of the fourth month after year-end. This deadline applies to both domestic corporations organized under Arkansas law and foreign corporations doing business in Arkansas that file Form AR1100CT. Arkansas Code Annotated § 26-51-806 sets this deadline. Payment of any tax due must be made by this original due date to avoid interest and penalties, even if an extension to file is granted.

Source: Corporate FAQs, Arkansas DFA

Effective for tax years beginning on or after January 1, 2026, Arkansas applies different sourcing rules depending on the type of receipt. Act 719 of 2025 modernized Arkansas's apportionment framework by adopting market-based sourcing for certain receipts while retaining destination-based sourcing for tangible personal property sales.

Tangible personal property. Receipts from sales of tangible personal property are sourced to Arkansas if the property is delivered or shipped to a purchaser within Arkansas, regardless of the f.o.b. point or other conditions of sale. This destination-based rule applies to physical goods delivered into the state.

Services. Receipts from sales of services are sourced to Arkansas based on market-based sourcing principles—specifically, to the extent the services are delivered to a location in Arkansas. Prior to January 1, 2026, Arkansas sourced service receipts using the cost-of-performance method, which assigned receipts based on where the income-producing activity occurred measured by costs of performance. The shift to market-based sourcing aligns Arkansas with the majority of states imposing corporate income tax and follows the 2014 amendments to the Multistate Tax Compact.

Intangible property. Receipts from the rental, lease, licensing, or sale of intangible property are sourced to Arkansas to the extent the intangible property is used in Arkansas. The determination of where intangible property is "used" depends on the nature of the intangible and is generally tied to the location of the customer's benefit or use.

Telecommunications election. Providers of telecommunications service, internet access service, cable television service, community antenna television service, direct-to-home satellite television programming service, or a combination of these services may elect to continue using the cost-of-performance sourcing method for receipts from sales other than tangible personal property through December 31, 2035. This election is made on the taxpayer's return for the first tax year the taxpayer is eligible and, once made, cannot be changed for subsequent years without written approval from the Arkansas Department of Finance and Administration.

Throw-out rule. If Arkansas's sourcing rules assign receipts from the sale of services or the rental, lease, licensing, or sale of intangibles to a state where the taxpayer is not taxable, or if the state of assignment cannot be determined or reasonably approximated, the receipts must be excluded from both the numerator and the denominator of the sales factor. This throw-out rule differs from a traditional throwback rule, which would include such receipts in the numerator; under a throw-out rule, the receipts disappear from the apportionment calculation entirely.

Terminology changes. Act 719 also replaced statutory references to "business income" with "apportionable income" and "sales factor" with "receipts factor," conforming Arkansas law to the revised Multistate Tax Compact terminology. These changes do not alter the substantive apportionment methodology but modernize the statutory language.

Source: Act 719 of 2025, Arkansas State Legislature

Source: Corporate FAQs, Arkansas DFA

Arkansas grants corporations automatic extensions to file income tax returns when a federal extension has been filed, but payment of any tax due remains due on the original deadline to avoid interest and penalties.

Federal automatic extension recognition. Arkansas Code Annotated § 26-51-807 states that any person who requests an automatic extension of time for filing a federal income tax return will be granted an extension of time for filing the corresponding Arkansas income tax return until the extended due date of the federal return. A corporation that files federal Form 7004 with the IRS for an automatic extension receives an extension for its Arkansas corporate income tax return (Form AR1100CT). According to the Arkansas Department of Finance and Administration, a copy of federal Form 7004 is no longer required to be attached to the Arkansas return if the Federal Extension box is checked on Form AR1100CT.

Extended Arkansas deadline — one month beyond federal extension. For tax years beginning on or after January 1, 2021, Act 629 of 2021 amended Arkansas Code Annotated § 26-51-807(a) to allow taxpayers an extension to file of one month after the extended due date for a federal income tax return. For a calendar-year C corporation with a federal Form 7004 extending the federal deadline from April 15 to October 15, the Arkansas extended deadline is November 15 (one month after the federal extended due date). The one-month extended due date does not apply to returns for which a federal extension is not requested and does not extend the original due date for payment.

Additional Arkansas extension beyond federal extension. Arkansas Code Annotated § 26-18-505 states that, for good cause and upon written request, an Arkansas extension of 60 days beyond the automatic federal extension due date will be granted. A corporation seeking this additional extension must complete and mail Arkansas Form AR1155 (Request for Extension of Time for Filing Income Tax Returns) by the federal extended due date to the Corporation Income Tax Section. The Arkansas extension request must be postmarked on or before the Arkansas return due date or the federal extended return due date, whichever is applicable. Arkansas extensions must be attached to the Arkansas income tax return when filed.

Payment requirement and consequences of late payment. An extension of time to file does not extend the time to pay tax due. To avoid interest and penalty, any tax due payment must be made on or before the 15th day of the fourth month following the close of the corporation's tax year (April 15 for calendar-year corporations). According to the Department of Finance and Administration, interest at the rate of 10% per annum is due on all returns (including those with extensions) if the tax is not paid by the original return due date. Interest is computed on a daily rate of 0.00027397 (0.027397%). Failure to pay penalties at 5% per month will be assessed on all taxes unpaid after the original due date. Any tax due balance remaining after the original Arkansas return due date or the extended return due date will be subject to the penalties referenced in Arkansas Code Annotated § 26-18-208.

Source: Corporate FAQs, Arkansas DFA

Arkansas imposes an annual franchise tax on corporations, limited liability companies, banks, and insurance companies registered in Arkansas. Arkansas Code Annotated § 26-54-101 et seq., known as the Arkansas Corporate Franchise Tax Act of 1979, requires all such entities—both domestic entities (organized under Arkansas law) and foreign entities (organized elsewhere but authorized to transact business in Arkansas)—to pay the annual franchise tax. The Arkansas Secretary of State administers the franchise tax through its Business and Commercial Services Division. The franchise tax is separate from and in addition to the corporate income tax administered by the Department of Finance and Administration.

Who must file. All corporations, LLCs, banks, and insurance companies registered in Arkansas must pay the annual franchise tax. This includes domestic and foreign for-profit corporations (both stock and non-stock), limited liability companies, professional limited liability companies, banks, and insurance companies. Nonprofit organizations that are exempt from federal income tax are exempt from the Arkansas franchise tax. Organizations formed under the Uniform Partnership Act are also exempt. Limited partnerships (LPs), limited liability partnerships (LLPs), and limited liability limited partnerships (LLLPs) must file annual reports with the Secretary of State but do not pay franchise tax.

Tax rates. The franchise tax amount varies by entity type:

• Limited liability companies (LLCs and PLLCs): $150 flat annual fee.

• Corporations without authorized capital stock: $300 flat annual fee.

• Stock corporations (general rule): An amount equal to 0.3% (three-tenths of one percent) of that proportion of the par value of outstanding capital stock that the value of the corporation's real and personal property in Arkansas bears to the total value of the corporation's real and personal property everywhere. The minimum tax for stock corporations is $150. The calculation apportions the par value of outstanding capital stock based on the ratio of Arkansas property to total property.

• Insurance companies: Fixed amounts based on capital stock or assets. Life, fire, accident, surety, liability, and other insurance companies with outstanding capital stock under $500,000 pay $300; those with capital stock of $500,000 or more pay $400. Legal reserve mutual insurance corporations with assets under $100 million pay $300; those with assets of $100 million or more pay $400. Mutual assessment insurance corporations pay $300.

• Mortgage loan corporations: An amount equal to 0.3% of that proportion of the par value of outstanding capital stock that the corporation's aggregate outstanding loans made in Arkansas bears to total aggregate outstanding loans made in all states. The minimum is $300.

• Corporations in liquidation: Corporations actually and actively in the process of liquidation that do not rent or lease property but retain their corporate charter solely to wind up affairs pay the lesser of (a) the amount under the stock corporation rule (0.3% of apportioned capital stock), or (b) 0.3% of the value of real and tangible personal property in Arkansas. The minimum is $150.

Filing deadline and where to file. The annual franchise tax report and payment are due on or before May 1 each year. The franchise tax obligation begins the year after the entity is formed or authorized to transact business in Arkansas. Entities may file and pay as early as January 1 of the tax year. The report and payment are filed with the Arkansas Secretary of State's Business and Commercial Services Division. Entities may file online through the Secretary of State's Corporations/LLC/Nonprofit Online Filing System or by mail to P.O. Box 8014, Little Rock, Arkansas 72203-8014. Online filings paid by credit card incur a $5.00 processing fee.

Penalties and consequences of nonpayment. Failure to file and pay the franchise tax by the May 1 deadline results in a $35 late fee plus interest at a rate of 10% per year on the unpaid tax. The total penalty may not exceed two times the original amount due. Entities that fail to pay franchise tax are prohibited from making additional filings with the Secretary of State's Business and Commercial Services Division under Arkansas Code § 26-54-114. Continued failure to pay can result in revocation of the corporation's charter (for domestic entities) or its certificate of authority (for foreign entities). Franchise tax liability continues to accrue even after revocation until the entity is formally dissolved, withdrawn, or merged.

Relationship to corporate income tax. The franchise tax is a privilege tax for the right to exist as a corporation or LLC in Arkansas or to transact business in the state. It is distinct from the corporate income tax, which is an excise tax on net income. Entities registered in Arkansas typically must file and pay both taxes. They are administered by different agencies (franchise tax by the Secretary of State, corporate income tax by the Department of Finance and Administration), have different due dates (May 1 for franchise tax, the 15th day of the fourth month after year-end for income tax), and use different tax bases (capital stock and property for franchise tax, net income for income tax).

Source: Franchise Tax / Annual Report Forms, Arkansas Secretary of State

Source: Frequently Asked Questions, Arkansas Secretary of State

Arkansas corporations must make quarterly estimated income tax payments if the estimated tax liability exceeds $1,000 for the tax year. Every corporation subject to Arkansas income tax must file a declaration of estimated tax with the Department of Finance and Administration if it can reasonably expect the estimated tax to exceed this threshold.

Payment timing and installment structure. The Arkansas Department of Finance and Administration Corporate FAQs state that estimated tax payments for C corporations are due on the following schedule for tax years beginning on or after January 1, 2003:

• First installment (Voucher 1): due on or before the 15th day of the fourth month of the tax year.
• Second installment (Voucher 2): due on or before the 15th day of the sixth month of the tax year.
• Third installment (Voucher 3): due on or before the 15th day of the ninth month of the tax year.
• Fourth installment (Voucher 4): due on or before the 15th day of the last month of the tax year.

For a calendar-year corporation, these due dates are April 15, June 15, September 15, and December 15. Fiscal-year corporations must use the corresponding dates relative to their fiscal year. These dates differ from the federal corporate estimated tax schedule; the fourth Arkansas installment is due in the last month of the tax year (December for calendar-year filers), whereas the fourth federal installment is due in the twelfth month (generally one month earlier for the calendar year).

Electronic funds transfer requirement. Arkansas law requires any corporation with an estimated quarterly income tax liability equal to or greater than $20,000 to pay its estimated quarterly income tax by the Electronic Funds Transfer (EFT) method. The Corporation Income Tax Section determines which corporations must remit estimated payments through EFT based on the corporation's average quarterly tax liability for the prior tax year. A corporation may voluntarily participate in the EFT payment method using the Arkansas Taxpayer Access Point (ATAP) website at www.atap.arkansas.gov. Corporations with quarterly estimated liability below $20,000 may elect to pay by EFT or may use Form AR1100ESCT payment vouchers submitted by mail or in person. A corporation authorized to file and pay estimated quarterly income tax payments through EFT does not need to mail paper estimated vouchers to the Corporation Income Tax Section. Failure to remit estimated tax by EFT when required results in a 5% penalty based on the amount of taxes due, in addition to any other penalty authorized under Arkansas law.

Underpayment penalty and safe harbors. Arkansas imposes a penalty on corporations that fail to pay estimated tax in an amount equal to at least 90% of the amount actually due on any quarterly due date. The penalty is 10% per annum on the amount of the underestimate, applied on a quarterly basis. According to the DFA Corporate FAQs, the underpayment penalty shall not be imposed if:

• The tax liability for the current tax year is $1,000 or less;
• Current-year payments made equal or exceed 90% of the current year's tax liability;
• Current-year payments equal or exceed 100% of the prior year's tax liability (provided the prior year was a full 12-month year and the taxpayer filed an Arkansas return showing a tax liability); or
• The taxpayer had no tax liability for the preceding tax year, the preceding tax year was a full 12 months, and the taxpayer was domiciled in Arkansas throughout the preceding tax year.

The underpayment penalty is calculated by multiplying the underpayment for each quarter by 0.00027397 (the daily rate equivalent of 10% per annum), then multiplying this product by the number of days from the date the estimate payment was due until the date payment is actually made, or until the original return due date, whichever is earlier. The penalty may be waived if the Commissioner determines that because of casualty, disaster, or other unusual circumstances the imposition of the penalty would be against equity and good conscience, or if the taxpayer retired after age 62 or became disabled and the underpayment was due to reasonable cause and not willful neglect.

Relationship to annual return and extensions. Estimated tax payments reduce the balance due when the annual corporate income tax return (Form AR1100CT) is filed. To avoid interest and penalty, any tax due payment must be made on or before the 15th day of the fourth month following the close of the corporation's tax year, even if the corporation has filed an extension to file the return. Interest at 10% per annum is due on all returns (including those with extensions) if the tax is not paid by the original return due date. Interest is computed on a daily rate of 0.00027397 (0.027397%). Failure-to-pay penalties at 5% per month will be assessed on all taxes unpaid after the original due date. An extension of time to file does not extend the time to pay; corporations must estimate and pay any remaining tax liability by the original due date to avoid interest and penalties.

Source: Corporate FAQs, Arkansas Department of Finance and Administration

Source: AR1100ESCT Corporation Estimated Tax Vouchers 2024, Arkansas Department of Finance and Administration