2015 LEGISLATIVE SUMMARY 90TH GENERAL ASSEMBLY

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Written by: ANGELA DELILLE Director of Governmental Affairs, State Chamber/AIA TABLE OF CONTENTS KENNETH R. HALL Executive Vice President, State Chamber/AIA State Chamber/AIA Executive Committee & Staff...... 3 Message from State Chamber/AIA Governmental Affairs Team...... 5 MICHAEL O. PARKER Priority Issues...... 7 Dover Dixon Horne PLLC Lobbying Summary...... 8-13 THANE J. LAWHON Legislative Business Matters Award Recipients...... 18-19 Dover Dixon Horne PLLC Arkansas State Tax Update (Mike Parker and Thane Lawhon)...... 20-25 STEVE BRAWNER Economic Development Related Legislation (AEDC)...... 26-29 Contributor, Talk Business & Politics Session Recap (Steve Brawner)...... 30-31 Pinnacle Program...... 32-33 Edited/Organized by: JEFF THATCHER Director of Communications, State Chamber/AIA OUR LEADERSHIP Executive Committee Staff: Arkansas State Chamber Associated Industries of Arkansas Officers RANDY ZOOK of Commerce Officers Chairman of the Board President & CEO Chairman of the Board BILL J. REED RAY DILLON Riceland Foods Inc. KENNETH R. HALL, J.D. Deltic Timber Corporation Executive Vice President Vice Chairman Vice Chairman RUSSELL BRAGG ANGELA DELILLE DAVID BARTLETT OK Industries Inc. Director of Governmental Affairs Simmons First National Corp. Vice Chairman Vice Chairman HASKELL L. DICKINSON ANDREW PARKER, J.D. GERARD DEHRMANN McGeorge Contracting Company Inc. Director of Governmental Affairs Walmart Stores Inc. Vice Chairman Vice Chairman GRADY E. HARVELL JEFF THATCHER TROY KEEPING AFCO Steel, LLC Director of Communications Southland Park Gaming & Racing Vice Chairman DEB MATHIS Vice Chairman TRISH HENRY Manager, Scheduling & Events HUGH MCDONALD Russellville Steel Company Inc. Entergy Arkansas, Inc. Vice Chairman SUE WEATTER Vice Chairman DREW MCGEE Executive Director, Arkansas Institute GEORGE WHEATLEY Tyson Foods, Inc. for Performance Excellence Waste Management of Arkansas Immediate Past Chairman Treasurer State Chamber/AIA STEVE M. COUSINS BILL WATSON GARY HEAD Lion Oil Company Manager, Event Sponsorship Signature Bank of Arkansas Past Chairman of the Board MARCUS TURLEY Immediate Past Chairman BILL HANNAH Membership Development Representative MIKE CALLAN Nabholz Construction Corporation Stephens Production Company Ex-Officio CAROL MUGERDITCHIAN Past Chairman of the Board Administrative Assistant ED DRILLING RAYMOND J. BURNS AT&T Arkansas Rogers-Lowell Area Chamber of Commerce HOLLY WILSON, J.D. Director of Arkansas State Chamber Foundation

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4 DEAR STATE CHAMBER/AIA MEMBERS

Despite some significant changes in state leadership following the 2014 November General Election, the 90th General Assembly was essentially harmonious and stayed on track thanks to the strong leadership provided by Gov. , Senate Pro Tem and Speaker of the House Jeremy Gillam. The 2015 Regular Session was also a very productive one for business and industry in our state. We were able to introduce and pass several of our priority initiatives that will reduce our members’ operating costs and make our business climate more competitive. Prior to the Session, the State Chamber/AIA again hosted Business 101, providing all 135 legislators an opportunity to hear from and interact with seasoned experts on many of the issues they encountered when the Session began. Topics covered included: taxes, workers’ compensation, unemployment insurance, highways, the state budget, energy, education, workforce development and more. A week after the Session began, we hosted our Legislative Reception. This annual event, which has outgrown the confines of our building, was held in a huge tent on the State Chamber/AIA north parking lot and drew an overflow crowd including legislators, constitutional officers, State Chamber/AIA board members, State Chamber/AIA members, State Chamber/AIA governmental affairs committee members and Leadership Arkansas alumni members. Thanks to the unseasonably warm weather, attendees had the chance to spread out and visit outside the tent on the parking lot. The event provided an excellent Gov. Hutchinson announces signing of Act 893 opportunity for members of the state’s business community to network with their legislators in a one-on- creating the Office of Skills Development one setting. In addition to these one-time events, we hosted a lobbyist luncheon each week during the Session. Several prominent elected officials made presentations including Speaker of the House Jeremy Gillam, Senate President Pro Tem Jonathan Dismang, Senate Minority Leader , House Majority Leader Kenneth Bragg, Senate Education Committee Chairwoman Jane English, House Joint Budget Chairman , House Judiciary Committee Chairman Matthew J. Shepherd, Senate Transportation, Technology and Legislative Affairs Committee Chairman Bill Sample, and the Chairwoman of the House Freshman Caucus . We also continued to provide our members a Daily Legislative Update each workday throughout the Session. Thank you to all of our members who read our updates and provided feedback to our government affairs team or made contact with your legislators. Your proactive e-mails, phone calls and personal visits with legislators are what made this session such a success. This publication provides a summary of our priority issues for the Session, a chart detailing the top legislation on which we worked, an Arkansas tax update from Mike Parker and Thane Lawhon of Dover Dixon Horne PLLC, a recap of economic development-related legislation from the Arkansas Economic Development Commission, and a broad business summary of legislation provided by Steve Brawner of Talk Business & Politics. Although the 2015 regular session has reached an end, our work to support Arkansas’s businesses never stops. We now turn our focus to participating in some of the task forces that have been established including the highway work group, as well as interim proposals we are watching and Special Sessions. This will be Senate President Pro Tem Jonathan a very active interim. We will also begin work on grassroots organizing, the re-election of pro-business Dismang speaks at a Lobbyist Luncheon members and pro-business candidate recruitment in preparation for the 2016 elections. With the impact of term limits, it is essential that we work now to ensure the election of pro-business candidates. Business matters and there is more work to be done. Thank you for your confidence and trust. Your membership in the State Chamber/AIA directly led to our success during the 2015 regular session and will bring continued success in the future. With your strong commitment, the fight to secure Arkansas’s future through free enterprise goes on.

Sincerely,

Randy Zook Kenneth R. Hall President & CEO Executive Vice President

Speaker of the House Jeremy Gillam at the Legislative Reception Angela DeLille Andrew Parker Director of Governmental Affairs Director of Governmental Affairs

Randy Zook Kenneth R. Hall Angela DeLille Andrew Parker

5 6 90TH GENERAL ASSEMBLY PRIORITY ISSUES

Prior to the 90th General Assembly, the State and Economic Development. The Board’s duties Chamber/AIA developed a list of priority issues. will be to create and monitor a comprehensive, Here are the results: statewide career and workforce education • Taxpayer Fairness - SB 490 by Sen. Bill program focused on educational and career Sample and Rep. is now Act 896. opportunities. This Act will not only strengthen the standing • SB 371 by Sens. Jane English and Bobby Pierce of taxpayers in Arkansas, but we recently is now Act 994. It expands the opportunity received notification that it will dramatically for higher education institutions to provide increase Arkansas’s ranking in the Council concurrent and technical courses to students in on State Taxation (COST) Business Friendly grades 8-12. state rankings. Improving this standing was the • Sales Tax Reduction For Manufacturers’ primary goal of this legislation. The Act will stop Repair And Replacement Parts - SB 332 by pay to play, extend the tax rebate period from Sen. Jake Files and Rep. is now Act 1107. six months to one year, create transparency This Act expands the number of companies in guidance and rulings, reduce the taxpayer’s that can take advantage of a reduction in the burden of proof from “clear and convincing” to a sales taxes on their repair and replacement “preponderance of evidence” and will push the of machinery and equipment used directly in State Rep. Lane Jean state corporate income tax filing deadline back manufacturing that was adopted in the 2013 one month effective in tax year 2017. session. This will be accomplished by the • Unemployment Insurance Issues - HB 1489 creation of a Limited Direct Pay Sales Tax by Rep. Lane Jean, Sen. and Sen. Permit for manufacturers qualifying for the is now Act 412. This Act reduces reduced rate. Many employers did not want the expenses of the Arkansas Unemployment to use the existing Direct Pay Sales Tax Permit Insurance Trust Fund $46-$56 million per because of the increased exposure to audits and year by changing the calculation of the weekly the low volume of sales tax payments. UI benefit amount from the highest quarter • Capital Gains Income Tax Exemption - HB of earnings to the average of the last four 1402 by Rep. and Sen. Jake quarters of earnings. It also reduces the weeks Files is now Act 1173. This Act restores the 2013 of coverage from 25 to 20. The Unemployment capital gains tax reductions that were eliminated Insurance Trust Fund is funded entirely by early in the 2015 session. employers. This Act implements the most • Civil Justice Reform - Transparency in significant reduction in the Fund’s expenditures Private Attorney Contracts (TIPAC) - SB in decades. 204 by Sen. Jane English and Rep. • Workforce Development Issues - SB 368 by is now Act 851. This Act ensures contingency Sen. Jane English and Rep. Charlotte Douglas fee contracts in the office of the Attorney is now Act 892. This Act creates the Office General will be awarded openly and that citizens of Skills Development, provides funding for receive the maximum practicable amount of State Sen. Bill Sample the initiative and restructures the board that any settlement or award. TIPAC also promotes oversees the office for a more statewide competitive bidding and transparent contracting emphasis. The Office of Skills Development by requiring the Attorney General to request will administer and award grants to public and proposals from private attorneys to represent private organizations for the development and the state on a contingency fee basis, ensures that implementation of workforce training programs government attorneys retain control of litigation, for new and incumbent workers. It also and that consumers, victims and taxpayers replaces the State Board of Career Education receive their fair share of any recovery. with the Career Education and Workforce • Lawsuit Lending - SB 882 by Sen. is Development Board. Members are appointed now Act 915. This Act prohibits consumer lawsuit by the Governor to three-year terms and each lending or purchasing of a contingent right to a voting member will represent specific industry share of a settlement. It will also make violations sectors. Non-voting members will represent of this Act a deceptive and unconscionable trade Education, Higher Education, Career Education practice and subject to its penalties.

Arkansas Unemployment Insurance Trust Fund

Actual Actual Actual Actual Actual Actual Actual Actual Projected Projected CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016

January 1 Beginning Balance $ 160.9 $ 142.8 $ 82.5 $ (222.1) $ (292.3) $ (255.7) $ (159.5) $ (23.8) $ 236.1 $ 339.9 Collections from Employers 282.3 293.2 345.3 388.2 420.6 429.4 390.1 437.6 352.8 305.5 FUTA Increases from Employers 0 0 0 0 0 21.4 42.1 67.3 0 0 UI Claim Benefit Payments 300.4 353.5 649.9 458.4 384.0 349.7 297.2 245.0 249.3 269.8

December 31 Ending Balance $ 142.8 $ 82.5 $ (222.1) $ (292.3) $ (255.7) $ (154.6) $ (24.5) $ 236.1 $ 339.6 $ 375.6

Notes: All amounts in millions CY2015 projections include actual data through February 28. CY2014 actual data for November includes the Advance Interest Fund Rollover in the amount of $60,453,237 - additional employer charges. Projections include changes in ADWS statutes related to Collections and/or Benefit payments from the 2011 Legislative Session.

7 PRO-BUSINESS LEGISLATION WE SUPPORTED C

Bill Number Bill Sponsor(s) Topic/Title Summary of Bill and How it Affects Your Business Outcome Taxpayer fairness bill that makes various changes to the administration of state Sen. Bill Sample ADMINISTRATION taxes, including creating transparency in guidance & rulings, reduces taxpayer's SB 490 and Rep. Ken ACT 896 OF STATE TAXES burden of proof from clear & convincing to a preponderance of evidence, pushes Bragg the corporate income tax filing back one month and other provisions. Rep. Lane Jean Changes part of the calculation for weekly unemployment benefits from the UNEMPLOYMENT HB 1489 and Sen. Jim highest quarter of earnings in the most recent year to the average of the most ACT 412 COMPENSATION Hendren recent four quarters. Reduces maximum benefits per year from 25 to 20 weeks. CAREER Sen. Jane EDUCATION AND English and Creates a new statewide workforce development system. Renames Board of SB 368 WORKFORCE ACT 892 Rep. Charlotte Career Education as The Career Education and Workforce Development Board. DEVELOPMENT Douglas BOARD TWO-YEAR COLLEGE SB 372 Sen. Jane English Eliminates specified service areas for two-year colleges and technical schools. FAILED SERVICE AREAS ELIMINATED CONCURRENT COURSES Expands public school partnering with higher education institutions using national SB 371 Sen. Jane English PARTNERING school lunch funds to provide concurrent courses or technical education options ACT 994 FOR WORKFORCE to students in alternative learning environments. DEVELOPMENT LIMITED DIRECT Sen. Jake Files PAY PERMIT FOR Authorizes limited direct pay authority to persons eligible for refund of tax, SB 332 and Rep. Joe REPAIR AND allowing the person to accrue and remit gross receipts and use taxes on ACT 1107 Jett REPLACEMENT purchases that include eligible purchases. PARTS REFUND Rep. Matthew CAPITAL GAINS HB 1402 Restores 2013 capital gains reduction removed in January 2015. ACT 1173 Shepherd TAX TRANSPARENCY Sen. Jane English Restricts the basis upon which the Attorney General may enter into contingency IN PRIVATE SB 204 and Rep. Karilyn fee contracts with private attorneys; provides enhanced transparency ACT 851 ATTORNEY Brown requirements for such contracts. CONTRACTS CONSUMER Prohibits consumer lawsuit lending or purchasing of a contingent right to a share Sen. Jason SB 882 LAWSUIT of a settlement; makes violations a deceptive and unconscionable trade practice ACT 915 Rapert LENDING and subject to its penalties. Sen. Jane English Creates a three-phase process by which the Department of Higher Education WORKFORCE SB 891 and Rep. Bill implements continuation grants designed to align workforce training programs ACT 1131 INITIATIVE ACT Gossage with employer needs. REFERRED PROPOSED TO THE Amends the Arkansas Constitution to allow county and city governments Sen. Jon Woods CONSTITUTIONAL NOVEMBER to appropriate funds to corporations or individuals to finance industrial, SJR 16 and Rep. Lance AMENDMENT 2016 manufacturing or technical facilities, corporate headquarters and related land Eads - ECONOMIC GENERAL and services. DEVELOPMENT ELECTION BALLOT. Rep. Matthew Establishes a workers' compensation insurance carrier's right to subrogation, Shepherd WORKERS' prohibiting settlements that limit the carrier's recovery of lien; provides carriers HB 1768 FAILED and Sen. John COMPENSATION must pay death and permanent total disability benefits, rather than the Death & Cooper Permanent Disability Trust Fund. Sen. Ron CONTINGENCY Prohibits state agencies and political subdivisions from engaging auditors or SB 470 FAILED Caldwell FEE CONTRACTS appraisers on a contingency fee basis. WORKFORCE Creates the Workforce Development Board, with staff support from Sen. Jeremy SB 791 DEVELOPMENT the Department of Workforce Services, charged with development and ACT 907 Hutchinson BOARD CREATED implementation of a state workforce development plan. Rep. Joe Jett Exempts from sales and use tax the services required to install parts in AIRCRAFT TAX HB 1662 and Sen. Jake commercial jet aircraft that is already tax exempt; exempts from sales and use tax ACT 1182 EXEMPTION Files the sale of aircraft within the state.

8 Bill Number Bill Sponsor(s) Topic/Title Summary of Bill and How it Affects Your Business Outcome UTILITY REGIONAL Provides that the Public Service Commission's power to regulate the debt of Sen. David SB 667 TRANSMISSION public utilities is void when a public utility is a regional transmission organization ACT 899 Sanders ORGANIZATION with debt authorized by the Federal Energy Regulatory Commission. DEBT ECONOMIC Specifies that the 5% limitation on total bonding authority for Amendment 82 HB 1825 Rep. Andy Davis DEVELOPMENT ACT 593 projects means 5% of the current general revenue of the state. AMENDMENT 82 Prohibits enforcement of a clause in a construction contract that makes a conflict Sen. Jason SB 488 CONSTRUCTION arising under the contract subject to another state's laws or requires litigation or ACT 1110 Rapert arbitration to be conducted in another state; exempts oil and gas contracts. SCHOOL Allows annual school elections to be held on the first Tuesday following the first SB 968 Sen. Jane English ACT 1281 ELECTIONS Monday of November. CHARTER Sen. Jim SCHOOL Creates the Open-Enrollment Public Charter School Facilities Funding Aid SB 789 ACT 739 Hendren FACILITIES Program. FUNDING REFERRED Sen. Bill Sample TAX PAYMENT Reduces the interest rate for deficiencies and overpayments of state tax from TO SB 1040 and Rep. Ken INTEREST RATES 10% to 6% effective January 1, 2016. INTERIM Bragg STUDY. PROPOSED REFERRED CONSTITUTIONAL TO THE AMENDMENT Proposes an amendment to the Constitution which would remove the provision NOVEMBER Sen. Eddie Joe SJR 3 - GOVERNOR that strips the Governor of his or her powers and duties when absent from the 2016 Williams RETAINS state. GENERAL POWER WHEN ELECTION TRAVELING BALLOT. UTILITY Creates the Formula Rate Review Act to require an annual review of a public Rep. Charlie HB 1655 FORMULA RATE utility's rates to determine if adjustments are needed for compliance. Provides ACT 725 Collins REVIEW ACT new language concerning Public Service Commission authority to set utility rates. Sen. Jim Requires award of attorney's fees and costs to the defendant when a claim is Hendren and LAWSUIT LOSER SB 761 dismissed because the filing party failed to state a claim under Rule 12 of the FAILED Rep. Dan PAYS Rules of Civil Procedure. Douglas Sen. Jason SALES TAX Expands the use of sand and other proppants that are exempt from sales and use SB 801 ACT 1125 Rapert EXEMPTION tax to include use to re-complete, redrill or expand an existing oil or gas well. Specifies sales of solid wastes including yard, glass, metals, plastic, paper are Sen. Jason SALES TAX SB 802 subject to sales and use tax; exempts from taxable solid waste saltwater, fracking ACT 1126 Rapert EXEMPTION fluids, pit water, etc. produced in natural resource exploration and development. CONSTRUCTION Sen. Jon Woods Prohibits public agency construction contracts from containing terms or bid COLLECTIVE SB 426 and Rep. Bruce specifications that encourage or discourage potential contractors from entering ACT 600 BARGAINING Cozart into collective bargaining agreements. AGREEMENTS Sen. Jimmy Restricts special permits for transport of sealed containerized cargo units to one Hickey and Rep. CONTAINERIZED SB 871 vehicle for one trip completed within six days of the permit or for a period of one ACT 740 Mary "Prissy" CARGO PERMITS year along a specified route. Hickerson Rep. Julie COLLEGE AND Amends the College and Career Coaches Program, removing the priority for HB 1895 Mayberry and CAREER COACHES ACT 960 participation given to school districts located in Tier 3 and Tier 4 counties. Sen. PROGRAM Rep. Camille EMPLOYER Allows employer references requested from previous employers to be delivered HB 1637 ACT 949 Bennett REFERENCE DATA in the media and format convenient to the former employer. Requires licensing bodies to make special reinstatement policies by rule that allow PROFESSIONAL HB 1823 Rep. Jim Dotson persons who were previously licensed and are otherwise in good standing to ACT 1066 RE-LICENSING more easily become re-licensed.

9 SUPPORTED LEGISLATION (CONTINUED) C

Bill Number Bill Sponsor(s) Topic/Title Summary of Bill and How it Affects Your Business Outcome Rep. Joe Jett STEEL Allows steel manufacturers to carry forward unused remainders of the tax credit HB 1201 and Sen. David MANUFACTURER for the purchase of waste reduction, reuse, or recycling equipment for up to 14 ACT 692 Burnett TAX CREDITS years. Rep. Grant TEACHER LABOR Prohibits a labor organization or an employer school district to restrict the time Hodges and HB 1957 ORGANIZATION period in which a public school employee may join or terminate membership in a ACT 964 Sen. Bart MEMBERSHIP labor union or professional employee association. Hester Rep. Bruce SCHOOL Increases per-student foundation funding for school year 2015-16 from $6,393 HB 1663 Cozart and Sen. FOUNDATION to $6,584 and to $6,646 for 2016-17. Revises other categories of school and ACT 1248 Jane English FUNDING transportation funding. NET OPERATING Allows the carry over of net operating losses for six years beginning with tax year HB 1430 Rep. Micah Neal LOSS CARRY FAILED 2016, increasing annually to 10 years beginning with tax year 2020. FORWARD NET OPERATING Allows the carry over of net operating losses for six years beginning with tax year HB 1431 Rep. Micah Neal LOSS CARRY FAILED 2016, increasing to seven years beginning with tax year 2017. FORWARD Gives the Commissioner of Education the authority to assign an academically Rep. Bruce ACHIEVEMENT distressed school or school district to the Achievement School District and to HB 1733 FAILED Cozart SCHOOL DISTRICT issue binding recommendations concerning academic practices and staffing of the school(s). LEGISLATIVE Provides for review of new administrative rules by the Rules and Regulations Sen. Jonathan REVIEW OF Subcommittee of the Legislative Council to determine their legality and SB 2 ACT 1258 Dismang ADMINISTRATIVE conformity with legislative intent. Requires allowing public comment before the RULES committee. Rep. Mark Lowers the threshold for age-based employment hours restrictions from applying HB 1116 LABOR LAWS ACT 162 Lowery to persons under 18, to persons under 17. Requires the Department of Workforce Services to prepare an annual report DEGREE of employment and earnings outcomes for degrees and certificates offered by SB 211 Sen. Alan Clark OUTCOME ACT 852 state-supported institutions and to make that information available to students REPORT and parents. Clarifies termination of unemployment benefits to persons terminated for testing Sen. Jeremy UNEMPLOYMENT SB 790 positive for an illegal drug. Makes a determination of liability for unemployment ACT 690 Hutchinson LAW tax binding unless the employer timely requests an administrative determination. Sen. Blake Deletes the requirement schools must use EXPLORE, PLAN or PSAT in student Johnson and EDUCATION SB 812 assessment, specifying instead they use a college and career readiness assessment ACT 1216 Rep. Reginald TESTING approved by the State Board of Education. Murdock Requires monthly allocation of excess gross general revenue from various sales Rep. Dan HIGHWAY HB 1346 and severance taxes when over $2.2 billion, which is earmarked for highway, road FAILED Douglas FUNDING and street maintenance and highway industry workforce training programs. Sen. Jimmy SIGNATURE Creates a Class A misdemeanor for certain signature violations, misrepresenting Hickey and Rep. MISREPRESENTA- SB 860 the purpose of a petition and other violations related to initiative and referendum ACT 1219 Mary "Prissy" TIONS ON petitions. Requires background check for paid canvassers. Hickerson PETITIONS Adds natural gas, compressed natural gas and liquefied natural gas to the Rep. Dan HIGHWAY HB 1703 definition of alternative fuels and revises the per gallon equivalent excise tax on FAILED Douglas FUNDING alternative fuels. Rep. Jon Makes technical changes, deletes obsolete provisions and makes various changes Eubanks and PUBLIC HB 1713 to Title 6 relating to pubic education, including changes related to issuing bonds, ACT 846 Sen. Uvalde EDUCATION provision for declining enrollment funding, conversion charters. Lindsey REFERRED Requires school elections be on the same voting day as general elections but SCHOOL TO HB 1743 Rep. authorizes a separate ballot if the county board determines separate ballots are ELECTIONS INTERIM necessary to avoid voter confusion. STUDY.

10 Bill Number Bill Sponsor(s) Topic/Title Summary of Bill and How it Affects Your Business Outcome ETHICS Rep. Warwick Authorizes the Ethics Commission to issue advisory opinions and guidelines on COMMISSION HB 1002 Sabin and Sen. the requirements of Amendment 94 (Article 19, Sections 28, 29 and 30) of the ACT 47 ADVISORY Jon Woods Arkansas Constitution. OPINIONS Sen. Jonathan MIDDLE CLASS Makes various changes to income tax tables that lowered the rates for middle Dismang and SB 6 INCOME TAX income earners. (Made changes to capital gains tax reductions passed in 2013 ACT 22 Rep. Jeremy RELIEF that were reinstated by HB 1402/Act1173 later in the session.) Gillam WELDING Sen. Keith Appropriates $1,000,000 to Mid-South Community College from the General SB 390 FACILITY ACT 440 Ingram Improvement Fund for costs of a Welding Annex facility. APPROPRIATION UTILITY Rep. Charlie Allows businesses to opt out of required utility-sponsored energy conservation CONSERVATION HB 1191 Collins and Sen. programs if they meet existing criteria, and if they have accepted, but have also ACT 78 PROGRAM (OPT- returned, money or financing from the utility for installation of those programs. OUT) Rep. Sue Scott MILIARY Requires licensing boards and commissions to accept the military training and HB 1723 and Sen. Jeremy PERSONNEL experience of applicants for licensure returning from active military service as a ACT 848 Hutchinson LICENSURE satisfactory substitute for education and experience required for licensure. REFERRED Rep. Jon CONTINGENCY Requires public entities to place a copy of each executed contingency fee TO HB 1804 Eubanks FEE CONTRACTS contract with a private attorney on the state transparency website. INTERIM STUDY. Rep. Warwick DISTRIBUTED Creates the Arkansas Distributed Generation Act requiring electric utilities to HB 1885 Sabin and Sen. ENERGY develop standard distributed generation contracts for the purchase of electricity FAILED David Burnett GENERATION ACT from renewable generation facilities. Creates the Arkansas Blue Ribbon Committee on Highway Finance charged with HIGHWAY SB 61 Sen. Bill Sample defining an equitable and adequate system to finance highways, roads and streets FAILED FUNDING and recommending legislation. ECONOMIC DEVELOPMENT Appropriates to the Economic Development Commission from the General Joint Budget SB 276 QUICK ACTION Improvement Fund $50,000,000 for the Quick Action Closing Fund and ACT 150 Committee CLOSING FUND $30,500,000 for grants and other projects. APPROPRIATION Sen. David Assigns solid waste recycling tax credits to a public retirement system when Burnett and SB 844 TAX CREDITS derived from an Amendment 82 project in which the public retirement system is ACT 862 Rep. Monte a proprietor or shareholder; requires the system to sell the credits to the state. Hodges Rep. Mary Directs a portion of commercial driver license fees to the Highway Department. Hickerson and HIGHWAY HB 1613 Creates a driver monitoring program in the Office of Driver Services to report ACT 702 Sen. Jimmy FUNDING the driving records of individuals at the request of an insurer. Hickey POLITICAL Sen. Eddie Joe ACTION Provides for electronic registration and reporting to the Secretary of State by SB 817 ACT 909 Williams COMMITTEE political action committees. REPORTING Authorizes civil action against a person who disseminated electronic INFLUENCING communication without the consent of the person who originated the SB 509 Sen. Alan Clark A LEGISLATIVE ACT 1111 communication, when the purpose is to influence a legislator's floor or VOTE committee vote. Sen. Alan Clark SCHOOL Requires school districts under a desegregation order to notify the Department SB 179 and Rep. Bruce DESEGREGATION of Education in writing; makes various procedural changes to the Public School ACT 560 Cozart ORDERS Choice Act.

11 ANTI-BUSINESS LEGISLATION WE OPPOSED D

Bill Number Bill Sponsor(s) Topic/Title Summary of Bill and How it Affects Your Business Outcome Rep. Richard RIGHT TO Womack and Requires a new occupational regulation to explicitly state that it supercedes a HB 1158 LAWFUL FAILED Sen. Bart person's right to a lawful occupation that is established by this Act. OCCUPATION Hester INDEPENDENT Authorizes two or more persons to file an agreement with the Department Rep. Mickey HB 1679 CONTRACTOR of Workforce Services that a party to a contract is an independent contractor, FAILED Gates STATUS rather than an employee, with regard to service performed for another party Sen. Ronald PHARMACY Requires pharmacy benefits managers to update their maximum cost list within Caldwell and BENEFIT SB 688 7 days from an increase of 10% or more in acquisition costs; enhances appeal ACT 900 Rep. Michelle MANAGERS DRUG procedure; enhances disciplinary authority off the Board of Pharmacy. Gray PRICING Rep. Richard RIGHT TO Womack and Requires a new occupational regulation to explicitly state that it supercedes a HB 2001 LAWFUL FAILED Sen. Bart person's right to a lawful occupation that is established by this Act. OCCUPATION Hester Sen. Jake HOLD HARMLESS Files and CLAUSES IN Revises the unenforceability provision of construction contracts that include hold SB 726 ACT 1120 Rep. Reginald CONSTRUCTION harmless provisions. Murdock CONTRACTS Rep. Mary INTENTIONAL HB 1448 Intentional Torts Statute of Limitations Exempted FAILED Broadaway TORTS INCOME TAX Rep. Greg CREDITS FOR Provides an income tax credit of up to $4,000 per employee per tax year for HB 1275 Leding and Sen. FAILED PAID MEDICAL employers providing paid family and medical leave to employees. Jon Woods LEAVE Rep. Greg PAY STUB Requires employers of 4 or more employees to provide a detailed pay stub to HB 1276 FAILED Leding REQUIREMENTS each employee eat least once per month. Requires employers to pay without condition the entire amount of wages that Rep. Greg they concede to be due to an employee in a dispute over wages; provides the HB 1277 WAGE DISPUTES FAILED Leding acceptance of such pay by an employee does not constitute a release of their claim to wages. ENHANCED Requires that enhanced notice of new environmental permits issued by the Rep. Warwick NOTICE OF NEW HB 1701 Department of Environmental Quality that impact the local physical environment FAILED Sabin ENVIRONMENTAL must be sent to a named list of potentially affected parties. PERMITS GUNS ON Prohibits a private employer from prohibiting or attempting to prevent an SB 573 Sen. Alan Clark EMPLOYERS' employee who is a concealed carry licensee from having a handgun in his or her FAILED PARKING LOTS private vehicle on the employer's parking lot. Sen. Jimmy GUNS ON Prohibits most private employers from creating a policy that disallows concealed SB 492 Hickey and Rep. EMPLOYERS' carry permitees to keep a properly stored handgun in a vehicle on the employer's FAILED DeAnn Vaught PARKING LOTS property. INDEPENDENT Rep. Warwick HB 1903 CONTRACTOR Treatment of Independent Contractors Workforce Services Law Amended FAILED Sabin STATUS Rep. Richard LEGISLATIVE Specifies that the authority to administer oaths, take depositions and issue Womack and COMMITTEE HB 1643 subpoenas extends to the chair or a member acting as chair of all committees of FAILED Sen. Bart SUBPOENA the General Assembly. Hester POWER LEGISLATIVE Requires school districts to provide at least five legislative days per school year to Rep. Charlotte HB 1596 DAY LEAVE FOR allow a licensed teacher to attend meeting of the Education Committees and to FAILED Douglas TEACHERS compensate participating teachers for mileage and meals. Strikes procedures for using eminent domain by various entities, making all Rep. Bob EMINENT HB 1490 subject to procedure prescribed in new code created at § 18-15-103 (Bill Section FAILED Ballinger DOMAIN 87), in which a circuit court jury will decide compensation of land owner.

12 Bill Number Bill Sponsor(s) Topic/Title Summary of Bill and How it Affects Your Business Outcome WASTE Allows counties and municipalities to set by ordinance landfill host fees not to Rep. Bob HB 1872 MANAGEMENT exceed $2 per tonnage of refuse if all or part of a landfill is located within the city FAILED Johnson HOST FEES or county. Requires state agencies to attempt to regulate industry in the least restrictive Rep. Bill STATE AGENCY HB 1582 means possible while still protecting public health and safety, avoiding FAILED Gossage REGULATIONS burdensome laws, regulations, and licensing requirements. Requires entities exercising eminent domain to compensate property owners for reduced property value on property that is not the subject of the EMINENT SB 753 Sen. eminent domain proceeding; provides major utility facilities are not entitled FAILED DOMAIN to eminent domain if the utility requires parties to enter into nondisclosure agreements. Prohibits employers from reviewing an applicant's criminal record until the Rep. Donnie BAN THE BOX HB 1618 employer names the applicant as a finalist for the position. Sets bounds on the FAILED Copeland LEGISLATION effect of the criminal record on employment. Rep. Jon PRODUCTION Eubanks and CONTRACT Establishes the Production Contract Arbitration Procedure Act to govern the HB 1963 FAILED Sen. Bobby ARBITRATION arbitration process between poultry and livestock growers and contractors. Pierce PROCEDURE ACT Authorizes the owner of property subject to condemnation by a public utility Rep. Charlotte EMINENT HB 1809 to require the utility to condemn other owned, adjacent property that is FAILED Douglas DOMAIN commercially viable. Rep. Mickey PRIVATE OPTION Ends acceptance of all Health Care Independence Act applications on July 1, 2016; HB 1311 FAILED Gates TERMINATED ends all coverage on December 31, 2016. Rep. Josh Miller Terminates the Medicaid Expansion program and creates the Arkansas Health PRIVATE OPTION HB 1262 and Sen. Bryan Reform Legislative Task Force to recommend alternative healthcare coverage FAILED TERMINATED King models. Sen. Linda PRIVATE OPTION Terminates the Health Care Independence Program and Arkansas's participation SB 144 FAILED Collins-Smith TERMINATED in Medicaid Expansion; repeals the Health Care Independence Act of 2013. PRIVATE OPTION Ends health care coverage under the Health Care Independence Program SB 312 Sen. Alan Clark FAILED TERMINATED effective Dec. 31, 2016. Restores previous Medicaid waiver programs. HEALTH REFERRED Rep. Mary INSURANCE TO HB 1492 Repeals the Arkansas Health Insurance Marketplace and its board of directors. Bentley MARKETPLACE INTERIM REPEALED STUDY LEGISLATIVE OVERSIGHT OF Requires legislative review and “approval” of all rules proposed by state agencies, Rep. David CONSTITUTION- HB 1737 Game and Fish Commission, Highway Commission and Department, and FAILED Branscum ALLY institutions of higher education. INDEPENDENT AGENCIES Changes the State Board of Education's membership to consist of 8 elected REFERRED STATE BOARD Rep. Justin members and 1 appointed member; changes the term of office for Board TO HB 1271 OF EDUCATION Harris members to 4-year staggered terms from 7-year terms; sets date for Board INTERIM MEMBERSHIP member elections. STUDY

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17 2015 BUSINESS MATTERS LEGISLATIVE LEADERSHIP AWARD

On behalf of our nearly 1,300 member businesses, business associations, local economic developers and local chambers of commerce, the Arkansas State Chamber of Commerce and the Associated Industries of Arkansas, Inc. are pleased to recognize the following members of the 90th General Assembly with our 2015 Business Matters Legislative Leadership Award. These legislators partnered with us in the promotion and adoption of a pro-business legislative agenda. They were selected for their roles in legislative leadership and their service as lead sponsors of Arkansas State Chamber/AIA priority legislation. Thanks to their tireless efforts, most of our priority bills agenda became law.

The 2015 Business Matters advocates are:

Senate President Pro that addressed transparency in private attorney 490, making it much easier to pass. SB 368 was Tempore, Senator contracts. She was the lead sponsor on SB 891, one of our key workforce development bills that Jonathan Dismang now Act 1311, which was another workforce is now Act 892. HB 1489 was our unemployment (R-Searcy) provided development bill. She also sponsored three insurance bill that is now Act 412. Rep. Bragg outstanding leadership on other bills and co-sponsored three bills that served as chairman of the House Republican all of the State Chamber/ the State Chamber/AIA supported including HB Caucus and was a constant source of information AIA’s priority legislation 1402/Act 1173, which restored capital gains tax and guidance before and during the session. He bills and was a co- reduction. Sen. English worked tirelessly with also provided key communication for us with his sponsor of our workers’ State Chamber/AIA staff prior to the session and Caucus members throughout the session, which compensation bill, HB was outstanding in leading key bills through the helped gain support for our bills and opposition 1768. Sen. Dismang and Speaker Gillam met with legislature. She continues follow-up work with us on bills that were bad for business. Rep. Bragg us long before the session, which helped guide us on the workforce development issue. was a co-sponsor of five other bills the State in the development of issues and bills. During the Chamber/AIA supported. session, Sen. Dismang provided recommendations Senator Bill Sample for bill sponsors, helped rally votes and (R-Hot Springs) served as Representative coordinated bill consideration. lead sponsor in the Senate Lane Jean (R-Magnolia) of SB 490, now Act 896, was the lead House Speaker of our taxpayer fairness bill. sponsor of HB 1489, now the House, Act 896 will dramatically Act 412. This was our Representative increase Arkansas’s ranking unemployment insurance Jeremy Gillam in the Council on State bill that will lower the (R-Judsonia) provided Taxation (COST) Business business community’s outstanding leadership on Friendly State Rankings. expenditures on UI claims all of the State Chamber/ Sen. Sample was lead sponsor on SB 1040, which paid from the UI Trust AIA’s priority legislation was originally part of SB 490 but was removed Fund by between $46 and $56 million per year. bills. He was a co-sponsor to eliminate a negative state revenue impact on This is the most significant reduction in the of HB 1768, our workers’ SB 490, which made SB 490 much easier to pass. Fund’s expenditures in decades. Rep. Jean was compensation bill. Speaker Gillam joined Sen. Sen. Sample was also co-sponsor of HB 1402, also a co-sponsor of HB1402/Act 1173 (capital Dismang in meetings with us long before the now Act 1173, which reinstates capital gains tax gains reduction restoration) and SB 490/Act 896, session helping to guide us in the development reductions. Sen. Sample was also a co-sponsor our taxpayer fairness bill. Rep. Jean has been a of issues and bills. Speaker Gillam suggested bill of two other bills the State Chamber/AIA successful lead sponsor on State Chamber/AIA sponsors and directed his leadership team in supported. Sen. Sample has worked with us and priority legislation in previous sessions and co- cooperating with us as our priority bills were led passage of other important State Chamber/ sponsored one other bill this session that the filed and moved through the legislative process by AIA issues in previous legislative sessions, as well State Chamber/AIA supported. coordinating when bills would be considered and as helping block bills of concern. rallying votes. Representative Representative Ken Matthew Shepherd Senator Jane English Bragg (R-Sheridan) (R-El Dorado) was the (R-North Little Rock) served as lead sponsor in lead sponsor of HB 1402, was the lead sponsor of the House of SB 490, now which is now Act 1173. SB 368, SB 369, SB 370, Act 896, our taxpayer This Act restores the 2013 SB 371 and SB 372. All fairness bill. Act 896 will capital gains tax reductions were State Chamber/AIA dramatically increase that were eliminated early priority bills addressing Arkansas’s ranking in the in the 2015 session. He workforce development. COST Business Friendly was also the lead House Two of these bills became State Rankings. Rep. Bragg sponsor of the State Chamber/AIA’s workers’ law. SB 368 is now Act was lead sponsor on SB 1040 and a co-sponsor compensation bill, HB 1768. Rep. Shepherd 892 and SB 371 is now Act 994. Sen. English was of SB 368 and HB 1489. SB 1040 addressed an was a co-sponsor of the State Chamber/AIA’s also lead sponsor of SB 204, now Act 851, which original piece of SB 490 that was removed to unemployment insurance bill, HB 1489/Act 412. was one of our two civil justice reform bills eliminate a negative state revenue impact on SB He also was co-sponsor of another pro-business

18 bill. His advice and counsel was critical in making Senator Bart Hester capital gains reduction. Rep. Douglas also was the the difficult decision to stop pursuit of our (R- Cave Springs) was the lead sponsor of two bills and co-sponsor of two workers’ compensation bill. co-lead Senate sponsor of additional bills that were supported by the State HB 1489, now Act 412, our Chamber/AIA. Senator Jim Hendren unemployment insurance (R-Gravette) was the co- bill. This Act lowers the Senator Ronald lead Senate sponsor of HB expenses of the Arkansas Caldwell (R-Wynne) 1489, now Act 412, our Unemployment Insurance was the lead sponsor of unemployment insurance Trust Fund $46-$56 million SB 470, our contingency (UI) bill. Act 412 will reduce per year, which is the most fee contracts bill. He was the business community’s significant reduction in the Fund’s expenditures a co-sponsor on SB 204, expenditures on UI claims in decades. Sen. Hester was a co-sponsor of now Act 851, the State paid from the UI Trust Fund our taxpayer fairness bill, SB 490/Act 896, HB Chamber/AIA’s civil justice by between $46 and $56 1402/Act 1173, which restored capital gains tax reform bill. Sen. Caldwell million per year—the most significant reduction in reductions, and co-sponsor of four bills the State also co-sponsored one the Fund’s expenditures in decades. Sen. Hendren Chamber/AIA supported. other pro-business bill that was also lead Senate sponsor of SB 761, our loser pay the State Chamber/AIA supported. bill. He was lead sponsor of one bill we supported Senator Jon Woods and co-sponsor of another pro-business bill. (R-Springdale) was lead Senator John Cooper Senate sponsor of SJR (R-Jonesboro) was lead Senator Jake Files 16, which became one Senate sponsor of our (R-Fort Smith) was the of three constitutional workers’ compensation lead Senate sponsor of amendment issues referred bill, HB 1768. Sen. Cooper SB 332, which is now Act by the 90th General also co-sponsored HB 1107. This bill was a State Assembly to the 2016 1402/Act 1173, the Chamber/AIA priority and Arkansas General Election restoration of capital expands the number of ballot. SJR 16 will improve gains tax reductions and companies that can take economic development efforts in Arkansas. Sen. was co-sponsor of one advantage of a reduction Woods also co-sponsored HB 1402/Act 1173, additional bill that the in the sales taxes on the restoration of capital gains tax reductions, State Chamber/AIA supported. their repair and replacement of machinery and was lead sponsor of two pro-business bills, and equipment used directly in manufacturing that co-sponsor of one additional bill that the State Representative was adopted in the 2013 session. Sen. Files, Chamber/AIA supported. Karilyn Brown who was chairman of the Senate Revenue and (R-Sherwood) was the Tax Committee, was co-sponsor on SB 490/ Representative Lance lead House sponsor on the Act 896, our taxpayer fairness bill and HB 1402/ Eads (R-Springdale) was State Chamber/AIA’s civil Act 1173, the capital gains income tax exemption lead House sponsor of justice reform bill, SB 204, restoration bill. He was lead sponsor of one pro- SJR 16 which became one which is now Act 851. This business bill and co-sponsor of another. Sen. Files of three constitutional Act addressed the issue has been a great help to the State Chamber/AIA amendment issues referred of transparency in private in past sessions on priority legislation. by the 90th General attorney contracts. Rep. Assembly to the 2016 Brown was a co-sponsor on HB 1402/Act 1173, Representative Joe Arkansas General Election the restoration of capital gains tax reductions and Jett (D-Success) was the ballot. SJR 16 will improve one other bill the State Chamber/AIA supported. lead House sponsor on SB economic development efforts in Arkansas. Rep. 332, now Act 1107. This Eads also co-sponsored the State Chamber/AIA’s Senator Bobby Pierce was a State Chamber/AIA priority bills on unemployment insurance, HB (D-Sheridan) was a co- priority bill that expands 1489/Act 412; workforce development, SB 368/ sponsor of SB 371 which the number of companies Act 892, and taxpayer fairness, SB 490/Act 896. is now Act 994. This was that can take advantage He also co-sponsored one other bill supported by a State Chamber/AIA of a reduction in the sales the State Chamber/AIA. workforce development taxes on their repair and bill that expands the replacement of machinery and equipment used Senator David opportunity for higher directly in manufacturing that was adopted in the Sanders (R-Little Rock) education institutions to 2013 session. Rep. Jett served as chairman of the was a co-sponsor of the provide concurrent and House Revenue and Taxation Committee and was State Chamber/AIA’s technical courses to students a co-sponsor on HB 1402/Act 1173 that restored workers’ compensation in grades 8-12. Sen. Pierce was also co-sponsor of a tax reduction on capital gains. He was also lead bill, HB 1768. Sen. Sanders two other bills the State Chamber/AIA supported. sponsor of two bills and co-sponsor of one bill was a co-sponsor of SB that the State Chamber/AIA supported. 368 and SB 372 that were Representative Charlotte Douglas two of our workforce (R-Alma) was the lead Senator Jason Rapert development bills. He was House sponsor of SB (R-Conway) was lead the lead sponsor of another pro-business bill and 368, now Act 892, which sponsor of SB 882, co-sponsor of two additional bills that the State was one of the State which is now Act 915. Chamber/AIA supported. Chamber/AIA’s workforce This State Chamber/AIA development bills. Rep. supported bill prohibits Representative Dan Douglas was a co-sponsor consumer lawsuit lending or Douglas (R-Bentonville) on HB 372, HB 1489/ purchasing of a contingent was House lead sponsor Act412 and HB 1402/ right to a share of a of SB 761, the State Act 1173, which were the settlement. Sen. Rapert was Chamber/AIA’s loser pay other State Chamber/AIA a co-sponsor of HB 1402/Act 1173, the restoration bill, co-sponsor of HB workforce bills, our unemployment insurance of capital gains tax reductions, lead sponsor of 1489, our unemployment bill and the bill that restored a capital gains tax three bills and co-sponsor of one additional bill insurance bill, and HB reduction. She also was co-sponsor of three supported by the State Chamber/AIA. 1402 that restored the other pro-business bills.

19 ARKANSAS STATE TAX UPDATE

Prepared by: Act 709 Mandates that at such time as federal law authorizes the state to collect income tax Michael O. Parker from “sellers that do not have a physical presence and Thane J. Lawhon in the state,” then collections in excess of $70 million will be applied to reduce income tax rates 2015 LEGISLATIVE for all taxpayers subject to the 4.5% income tax SESSION rate. Effective for tax years beginning on and after The 90th General Assembly 2015 Regular January 1, 2015. Session convened January 12, 2015, recessed on April 2, 2015, and adjourned sine die on April Act 837 Provides a prosecuting attorney with the 22, 2015. New legislation is generally effective authority to satisfy a court-ordered restitution in a 90 days following final adjournment unless an criminal case through interception of state income “emergency clause” is attached, or the start date tax refunds. for one or more provisions within the legislation Act 864 Exempts an out of state business that is delayed. Unless a specific date is noted, the conducts operations within the state for the Acts listed below were passed during the 2015 purpose of performing work or services related Regular Session, and are effective 90 days following to a declared state disaster or emergency during a adjournment sine die (July 22, 2015). disaster response period from state a local income The 90th General Assembly 2016 Fiscal Session taxes. See further discussion of the Business Rapid House Majority Leader Rep. Ken Bragg is scheduled to convene on April 13, 2016, primarily Response to State Disasters Facilitation Act (Act for the purpose of reviewing and adjusting agency 864) below. budgets and appropriations. Act 891 Exempts cattle farmers and cattle I. Income/Franchise Taxes ranchers from state income tax for payments received from certain agricultural disaster Act 22 Fulfills a key campaign promise of newly- programs. Effective for tax years beginning on or elected Governor Asa Hutchinson (R) and enacts after January 1, 2015. the Middle Class Tax Relief Act of 2015. For tax year 2015, the Act makes minor changes (.1%) Act 893 Allows the Arkansas Public Defender’s in the tax rates along with bracket adjustments Commission to seek a claim for a setoff against a for taxpayers having taxable incomes less than person’s state income tax refund to recover public $21,000. Beginning in tax year 2016, the Act defender fees for legal service. reduces tax rates for taxpayers having taxable incomes between $21,000 and $75,000 by 1% Act 896 To Improve the Fairness of Tax compared to 2014 bracket levels. The 6.9% top Administration changes, among other things, the rate adopted in the 2013 session is restored for due date for corporate income tax returns from taxpayers with taxable incomes over $75,000 March 15 or 2 ½ months following the close of beginning in 2016. The Act also reduced or a fiscal year to April 15 or 3 ½ months following eliminated substantial elements of the capital gains the close of a fiscal year. Effective for tax years tax relief enacted during the 2013 Regular Session, beginning on or after January 1, 2017. but additional action on these changes was taken at the end of the Session. See Act 1173 below. Act 1173 The final word on capital gains following Effective February 6, 2015. enactment of Act 22 above. Reduces the portion of net capital gain that is exempt from income tax Act 399 Creates an income tax refund check-off from 50% to 45% beginning February 1, 2015, and Business 101 drew a capacity crowd of program for contributions to the Arkansas Game restores the exempt portion to 50% effective July and Fish Foundation, and repeals the check-off 1, 2016. Also restores the complete exemption for Arkansas legislators option for contributions to the U.S. Olympic net capital gains in excess of $10 million (eliminated Committee Program. Effective for tax years to help pay for the Middle Class Tax Relief Act of beginning on or after January 1, 2015. 2015), as of its original effective date of January 1, 2014. Act 580 Updates the Arkansas Tax-Deferred Tuition Savings Program to comply with the Act 1238 Establishes the Achieving Better Life provisions of the Internal Revenue Code (IRC) Experience Program (ABLE) in Arkansas. Creates in effect as of January 1, 2015. Makes technical a program of tax favored savings accounts for updates to Arkansas’ income tax laws by Arkansas residents who are blind or disabled readopting the following sections of the IRC in and diagnosed before age 26. The tax treatment effect as of January 1, 2015: §§ 108, 1017, 132, for ABLE accounts will be the same for Arkansas 1361 et seq., 72, 209, 402-404, 406-416, 457, 163, tax purposes as for federal tax purposes. That 170, 167, 168(a)-(j), 851 et seq, Subchapter S, and is, interest, dividends, capital gains and qualified Subchapter M. Effective for tax years beginning on distributions are exempt from tax. or after January 1, 2014.

20 II. Transactional Taxes (Sales/Use Taxes) litigation based on alleged failure of the Legislature to follow prescribed procedures in adopting the Act 236 Repeals the exemption given to wineries legislation. from collection of local sales taxes on direct shipments of wine. Effective July 1, 2015. Act 1126 Narrows the definition of “solid waste” for purposes of sales tax on the collection Act 536 Redirects a portion of natural gas and disposal of solid waste to mean only severance tax revenues now deposited to general putrescible and non-putrescible wastes in solid revenues to a the newly created Road and Bridge or semi-solid form. Specifically excludes materials Repair, Maintenance, and Grants Fund to be used generated from oil, gas or other natural resource for grants to counties for damages resulting from development unless disposed of in a permitted trucks and machinery used in the extraction of landfill, in which case only the disposal fee is subject natural gas. Effective July 1, 2015. to tax. Effective October 1, 2015.

Act 691 Exempts a lessee of an intermodal Act 1182 Exempts purchases of certain parts facility from state, county and municipal sales and services related to commercial jet aircraft and use taxes on the purchase of tangible components and subcomponents from sales and personal property and services if (i) the facility is use tax, and exempts the sale of an aircraft that is constructed after July 22, 2015, (ii) the lessee has located in the state from sales and use tax, so long not ceased or substantially reduced operations as the sale is between non-residents of the state State Represenatives Robin Lundstrum and at an establishment within fifty (50) miles of the and the aircraft will be based outside of the state. Rick Beck facility that are similar to those being performed at Effective April 7, 2015. the facility, (iii) the property or service purchased by the lessee is used or consumed within the Act 1411 of 2013 Reduces the state sales and intermodal facility and (iv) the property or service use tax rate for electricity and natural gas used in is used to carry out the essential governmental manufacturing by eligible manufacturers classified functions of the intermodal authority. in section 31 through 33 of the North American Industry Classification System (NAICS), eligible Act 864 Exempts state and local sales and use high efficiency generators of electric power, and taxes on property temporarily brought into the cotton gins classified under NAICS code 115111. state for use during a disaster response period. See The state rate for manufacturers under NAICS further discussion of the Business Rapid Response code section 31 through 33 and 115111 is currently to State Disasters Facilitation Act (Act 864) below. 1.625% effective July 1, 2014, dropping to 0.625% beginning July 1, 2015. Eligible high efficiency Act 1107 Authorizes the Department to issue generators of electric power using combined cycle limited direct pay permits to manufacturers that turbine technology currently have a reduced state qualify for the reduced tax rate on repairs and rate of 1.625% that went into effect January 1, 2015. partial replacements of machinery and equipment used directly in manufacturing established in Act Act 757 of 2011 Provides for a sales tax holiday 1404 of 2013. Act 1404 reduced the regular tax in Arkansas during the first weekend of August rate on repairs and partial replacements from 6.5% each year. A sales tax holiday is a temporary period to 5.5% and also established an incentive program when state and local sales taxes are not collected providing a much reduced tax rate of .625% for or paid on the purchase of certain products. The major maintenance and improvement projects Arkansas sales tax holiday for 2015 will begin on in excess of $3 million. Both provisions may only Saturday, August 1, 2015 at 12:01 AM and will be utilized by taxpayers that hold direct pay, or continue through Sunday, August 2, 2015 at 11:59 now limited direct pay sales and use tax permits, PM. Randy Zook welcomes legislators to and use the permits to claim the benefits of the Business 101 reduced rates. Effective April 7, 2015. III. Property Taxes

Act 1119 Specifies that the tax on the first sale Act 59 Extends the last day to assess personal of tobacco products includes, and the tax must be property without incurring a penalty from May paid on, the first possession of a tobacco product 31st to the next business day if May 31st falls on within the state that was purchased outside the a Saturday, Sunday, or postal holiday. Effective state and brought into the state for the purpose of February 13, 2015. selling the tobacco product at retail to consumers in the state. Effective April 6, 2016. Act 573 A billboard advertising tax relief act. Classifies permits and licenses to place, operate, Act 1125 Reenacts an exemption for sand and or maintain structures or fixtures at specific other proppants used in unconventional oil and gas locations as intangible personal property exempt production that was enacted as “special language” from assessment of ad valorem tax. Provides that in the 2014 Fiscal Session. The 2014 Act is in the market value of off-premises advertising signs must be determined based on the cost approach

21 ARKANSAS STATE TAX UPDATE (CONTINUED)

and not the income approach or sales comparison Act 1230 Requires owners of tax-delinquent land approach or based on traffic count or other that has been sold for taxes to deposit funds into considerations for purposes of ad valorem tax the registry of the court before filing a complaint, and sets out the depreciation method to be used. counterclaim, cross-claim, third-party complaint or Effective for assessment years beginning on or after any other pleading to set aside the sale. January 1, 2015. IV. Other Taxes Act 683 Provides for a judicial action to confirm a tax sale of real property. Provides that a judicial A. Miscellaneous Taxes confirmation eliminates any additional time to redeem the real property or challenge the tax Act 346 Prohibits the board of commissioners of deed. a fire protection district from assessing timberland at a rate over 25% of the forest fire protection tax. Act 1057 Requires a taxpayer who appeals a Effective March 16, 2015. personal property tax assessment to circuit court to pay the amount the taxpayer claims is owed Act 1046 Amends gas assessment fees to under the tax assessment to the county collector designate the first four and one-half (4 ½) mills and pay the remaining balance due under the tax of each gas assessment levied to general funds assessment to the registry of the court. until July 1, 2017, and the remainder to be used to State Rep. Laurie Rushing pay expenses related to the administration of gas Act 1098 Extends the exemption from real assessment laws. Effective July 1, 2015. property transfer taxes to transfers resulting from non-judicial foreclosure. B. Tax Credits and Incentives

Act 1118 Prescribes the method of valuing Act 164 Amends the Equity Investment Incentive property held by broadband communications Act of 2007 to permit convertible financing entities for purposes of ad valorem taxation, and structures and allow the original investor that excludes intangible assets purchased after January earned tax credits to sell its tax credits only one 1, 2015 from such valuation. (1) time, in whole or in part, the balance of which shall be used by the original investor within the Act 1167 Clarifies the homestead property tax time frame allowed under the Act. exemption for disabled veterans to be prorated to the date of purchase and the seller is liable Act 567 Defers the sunset for the Arkansas for the taxes related to the balance of the year. Historic Rehabilitation Income Tax Credit Act Expands the exemption to apply once eligibility from December 31, 2021 to December 31, 2027. is established regardless of the original date of Limits the use of the historic rehabilitation income the lien and regardless of where the person’s tax credit to one (1) time in a twenty-four-month homestead is located. period for each eligible property. Clarifies the definition of “Certified rehabilitation” to mean the Act 1225 Reduces the time from 30 days to 10 total of appropriate and approved rehabilitation days after the sale of a tax-delinquent homestead work on an eligible property. Effective March 20, by the office of the Commissioner of State Lands 2015. that the homestead owner may redeem the property by paying all taxes and costs. Act 692 Extends the carry forward period to fourteen (14) consecutive years for any Act 1226 Expands the 2-year redemption unused income tax credit earned by a qualified period for persons “under disability” to redeem manufacturer of steel under Arkansas’ Recycling Karen McKinney, Arkansas Workers’ tax delinquent property to include persons with Equipment Tax Credit Program (A.C.A. 26-51- Compensation Commissioner a mental incapacity, minors and members of the 506). Expands eligibility requirements under A.C.A. U.S. Armed Forces. Removes the right to redeem 26-51-506(d) to allow Arkansas steel producers under the 2-year redemption period for persons additional flexibility in the percentage of recycled in confinement. Repeals accounting, bonding and materials that must be used. Conforms the refund record keeping provisions related to land subject to protocol if a qualified manufacturer of steel the 2-year redemption period. reduces use of the recycling equipment, changes ownership or control, or fails to comply with or Act 1227 Releases the Commissioner of State disregards environmental regulation to legislation Lands from any responsibility to maintain, repair adopted in 2013. Applies to recycling equipment or abate a condition regarding tax-delinquent income tax credits certified on or after January real property certified to the commissioner for 1, 2015. collection.

22 Act 862 Assigns control over solid waste and administrative decisions in redacted form recycling tax credits derived from an Amendment on the Department’s website for opinions and 82 project in which the public retirement system determinations issued after January 1, 2016. is an investor to the retirement system. Requires c. Eliminates “pay to play” by providing taxpayers the public retirement system to sell the credits the option of filing suit for judicial relief from to the state at 80% of face value, and at a rate of a final assessment or determination without $20 million in credits per year. Otherwise limits paying the proposed tax, penalties or interest recycling tax credits from an Amendment 82 before filing suit if filed within 180 days of the project that a taxpayer may claim to $20 million date of the final assessment. Effective October per year. Effective March 31, 2015. 1, 2015. d. Clarifies the “rule of strict construction” V. Procedure and distinguishes between the rule of strict construction and burden of proof of facts. Act 71 Amends Arkansas Code concerning Amends the standard of proof applied to record retention practices for county tax and matters of fact and evidence in controversies assessor’s offices. Adds inactive homestead credit regarding the application of a state tax law from documents to the list of records that county clear and convincing evidence to preponderance assessors are required to maintain for at least 5 of the evidence. Emphasizes elements of fair and years. reasonable construction and legislative intent that are often overlooked in judicial declarations Arkansas Highway and Transportation Act 165 Repeals obsolete provisions of the that “to doubt is to deny.” Also clarifies that Director Scott Bennett Arkansas Code related to the handling of real nonsuit and commencement of new actions property transfer tax affidavits by counties. is permitted as in other cases at law. Effective October 1, 2015. Provides an exception to the county Act 406 e. Changes the due date for corporate returns quorum court appropriation process to allow a from March 15 or 2 ½ months following the quorum court, when the court deems it financially close of a fiscal year to April 15 or 3 ½ months necessary, to appropriate for any one (1) year in following the close of a fiscal year. Effective for excess of the statutory limit of ninety percent tax years beginning on or after January 1, 2017. (90%) of the commissions and tax revenues f. Extends the period businesses may claim rebates anticipated for that year for the county general of payments of excess local taxes to vendors fund operation of the offices of assessor, collector, (taxes in excess of the $2,500 base for local tax and treasurer. purposes in effect prior to 2008) from 6 months to 1 year. Effective October 1, 2015. Act 834 Provides the Secretary of State with the authority to settle or compromise a dispute Act 1254 Allows taxpayers that are subject to an concerning interest or penalties associated with audit to file an amended return or verified claim for corporate franchise taxes if the taxpayer disputes credit or refund for an overpayment of a state tax the proposed amount or is insolvent or bankrupt. that occurred during the time period for which the Also permits waivers of interest and penalties audit is performed. based on reasonable mistake or inability to pay, and waiver of fees if a taxpayer seeks to dissolve a VI. Abandoned And Unclaimed Property corporation. If the parties cannot resolve a dispute, then the Arkansas Administrative Procedure Act Act 563 Provides that Savings applies. Bonds are presumed abandoned if not claimed Dr. Charles L. Welch, Dr. Donald within 5 years following maturity of the bonds and Act 896 To Improve the Fairness of Tax Bobbitt, Steve Sparks and Bill Stovall will escheat to the State as unclaimed property Administration. following an additional 2 year waiting period. Also a. Makes limitation periods for assessments by the authorizes hiring of outside legal counsel. Act is Department and refund claims by taxpayers an apparent attempt to join in pending litigation more consistent by eliminating an extended 8 against the United States to claim the proceeds of year assessment period upon a taxpayer’s failure matured savings bonds, and hire outside counsel, to notify the Department of an adjustment presumably on a contingent fee basis, to pursue by the IRS, and permitting taxpayers to claim the claims. offsets and refunds during any extended assessment period claimed by the Department Act 592 Changes the method of notice to the based on substantial understatements of tax or public that unclaimed property is held by the State failure to file. Auditor and is subject to claim. Eliminates the b. Improves transparency by requiring the Director requirement that names of apparent owners of of the Arkansas Department of Finance and unclaimed property be published in newspapers of Administration to post written legal opinions general circulation on an annual basis and instead

23 ARKANSAS STATE TAX UPDATE (CONTINUED)

requires only a single annual notice be published VII. Other Notes Of Interest in each county in the state directing interested persons to the state website or Auditor’s Act 79 Clarifies that fire protection premium office for additional information. Represents tax funds are state funds that are not subject to an additional departure from the principle that county appropriation or county claims processes. the administrator’s role is to return unclaimed Creates a fund in each county to be known as the property to its rightful owners, and minimizes “county fire protection premium tax fund” through the chance that owners will become aware that which premium tax moneys shall be credited property is held; all for the purpose of diverting and disbursed by the country treasurer to the unclaimed property to general revenues. appropriate fire department.

Act 905 Establishes the Unclaimed Life Insurance Act 385 Repeals the Multistate Tax Compact Benefits Act to prescribe procedures for cross- Advisory Committee, and requires the Arkansas checking existing policies against death master Department of Finance and Administration to files maintained by governmental authorities, prepare an annual report detailing the activities of taking steps to confirm death, notifying potential the Multistate Tax Commission. beneficiaries that policies are held, and escheating Ron Calkins, Director, Unemployment unclaimed policy proceeds, excluding interest, to Act 531 Adds the Arkansas State Highway and Insurance Division, ADWS the Auditor of State. Transportation Department to the definition of “claimant agency” for the purpose of obtaining a Act 1039 Reduces the period of time for setoff against state tax refunds for debts owed to property to be presumed abandoned from 5 the state. years to 3 years for several classes of property including matured or unclaimed bank deposits, Act 864 Creates the Business Rapid Response property payable as a result of demutualization to State Disasters Facilitation Act. Exempts an out of an insurance company and other property of state business that conducts operations within not specifically listed in the Unclaimed Property the state for the purpose of performing work Act. Also reduces the period for presumption or services related to a declared state disaster of abandonment from 5 to 3 years for mineral or emergency during a disaster response period proceeds and provides that on petition of the from certain taxes and regulatory requirements, county attorney, proceeds from leases executed by including registering, filing, and remitting state receivers appointed by a court will be deposited or local taxes, complying with state licensing, into the county general fund. certification, and registration requirements, unemployment insurance contributions, state and Act 1139 Deems personal property left on land local occupational licensing fees, state and local or in a structure on land sold at a judicial or tax sale income taxes, and state and local sales and use abandoned if the owner of the personal property taxes on property temporarily brought into the received notice of the sale and did not notify the state for use during a disaster response period. State Sen. Keith Ingram purchaser of a claim to the personal property within Out of state businesses shall pay state and local 30 days of recording the tax sale deed or within 30 transaction taxes and fees. days of posting notice after the sale.

ARKANSAS GENERAL ASSEMBLY BILL FILINGS AND JOINT RESOLUTIONS, SINCE 1997 Bill Type ^2015 2013 2011 2009 2007 2005 2003 2001 *1999 1997 House Bills 1007 1300 1231 1275 1813 1981 1906 1655 1291 1284 Senate Bills 1055 1192 1005 1010 1004 1195 979 988 967 756 House Joint Resolutions 27 19 13 14 21 28 30 22 21 15 Senate Joint Resolutions 16 19 12 12 14 17 21 18 13 9

Totals 2105 2530 2261 2311 2852 3221 2936 2683 2292 2064

* 1999 first session impacted by term limits law in the House ^2015 first session after adoption of term limits extension but no impact on General Assembly

24 MICHAEL O. PARKER is a member of the Little Rock law firm of Dover Dixon Horne PLLC where his practice emphasizes taxation, business law and regulatory issues. He received his B.A. degree from Vanderbilt University and his J.D. degree, with honors, from the School of Law at Fayetteville. Organizational activities include service as special tax counsel and legislative representative on tax issues for the Arkansas State Chamber of Commerce and Associated Industries of Arkansas. Mr. Parker is a past chairman of the Section on Taxation of the Arkansas Bar Association and has been appointed by the Governor as a Special Justice to the . Honors include continued selection for Best Lawyers in America in Tax Law, Litigation and Controversy-Tax and Trusts and Estates. He is the author of the Arkansas chapter of the American Bar Association’s Sales and Use Tax Deskbook, and is a frequent author of articles on Arkansas tax issues.

THANE J. LAWHON is a member of the Little Rock law firm of Dover Dixon Horne PLLC where his practice emphasizes taxation, business law and regulatory issues. He received his B.A. degree from the University of Arkansas at Fayetteville, his M.B.A. degree from the University of Arkansas at Little Rock, and his J.D. degree, with honors, from the William H. Bowen School of Law. Mr. Lawhon is a member of the American and Arkansas bar associations. State Rep. Matthew Shepherd

Worker’s Compensation Premium Index Rates 2014 Arkansas has the third lowest ranking, with an index rate of $1.08.

WA MA MT ND VT MN OR NH ID SD WI NY MA WY MI RI CT IA PA NJ NV NE OH DE UT IL IN CO WV MD KS VA CA MO KY NC TN AZ OK AR SC NM Under $1.50 MS AL GA LA $1.50 - $1.99 TX $2.00 - $2.49

FL $2.50 - $2.99 AK $3.00 - $3.49

HI

25 ECONOMIC DEVELOPMENT RELATED LEGISLATION

Prepared By: 7. Act 896 (SB 490) Sen. Sample – Fairness of Tax Administration – Eliminates Arkansas Economic prepayment conditions for appeal; adjusts Development Commission the taxpayer burden of proof from clear and convincing to a preponderance of evidence; equalizes the limitation periods for refunds; promotes transparency in guidance and rulings TAXATION by requiring that final determinations of DFA 1. Act 1173 (HB 1402) Rep. Shepherd – hearing officers and the DFA Director after Amends Capital Gains Tax – Restores January 1, 2016 be posted to Arkansas.gov; exemption to 50% beginning January 1, 2016 conforms due dates for income tax returns by and exempts capital gains completely for pushing the state corporate income tax filing capital gains in excess of $10,000,000. deadline back one month effective in tax year 2. Act 834 (HB 1406) Rep. Bentley – Franchise 2017; and, extends the rebate period for local Tax Disputes – Allows the Secretary of taxes from six months to one year. State to settle certain disputes concerning 8. Act 1046 (SB 554) Sen. Sanders – Gas Allan Gates, Mitchell, Williams, Selig, Gates & interest or penalties associated with the Assessment Fees - Amends laws corporate franchise tax due to reasonable Woodyard concerning the collection, deposit and use of mistakes, insolvency or bankruptcy. gas assessment fees and designates certain gas 3. Act 580 (HB 1427) Rep. Jett – Income Tax assessment fees as general revenue. Changes – Adopts recent changes to the 9. Act 862 (SB 844) Sen. Burnett – Recycling Internal Revenue Code; amends the Arkansas Tax Credits/Public Retirement Tax-Deferred Tuition Savings Program; and System – Prescribes procedures for makes technical corrections to income tax laws distribution of recycling tax credits when a for tax years beginning on or after January 1, public retirement system is an investor. 2014. 10. Act 22 (SB 6) Sen. Dismang – Middle Class 4. Act 1182 (HB 1662) Rep. Jett – Sales Tax Tax Relief Act of 2015 – Amends the Exemptions – Exempts from sales/use tax income tax rates and brackets for individuals, certain parts and services to incorporate the trusts, and estates; amends the income tax on parts or other tangible personal property capital gains. (EC) into commercial jet aircraft components and subcomponents; provides sales and use tax Personal Income Tax: exemptions for aircraft sold within the state and for aircraft sold by a person that is the 2015 resident of another state to a purchaser that Taxable Income Tax Rate is a resident of another state and will base the aircraft outside of the State of Arkansas. $0 - $4,299 0.9% Wayne Turney of Nucor The fact that a purchaser takes possession of Next $4,100 2.4% an aircraft in Arkansas does not prevent the application of the exemption if the purchaser Next $4,200 3.4% takes possession of the aircraft for the sole Next $8,400 4.4% purpose of removing the aircraft from this state under its own power or locating the Next $14,100 6.0% aircraft at a maintenance facility in Arkansas $35,100+ 7.0% for the time period necessary to complete maintenance or modifications to the aircraft 2016 if the aircraft is removed from this state upon For Incomes less than $21,000 per year completion. (EC) Taxable Income Tax Rate 5. Act 692 (HB 1201) Rep. Jett – Carry- Forward of Recycling Tax Credits – $0 - $4,299 0.9% Allows for alternate qualifications for qualified $4,300 – $8,399 2.4% manufacturers of steel to access extended carry-forward of recycling tax credits for up $8,400 - $ 12,599 3.4% to 14 years for credits certified on or after $12,600 - $20,999 4.4% January 1, 2015. 6. Act 1107 (SB 332) Sen. Files – Sales/ Use Tax on Partial Replacement and Repair of Equipment – Allows for a limited direct pay permit needed to claim a sales/use tax exemption on repair or replacement parts. (EC)

26 For incomes between $21,000 and $75,000 agricultural, community, and residential activities. Exemption begins the first date of Taxable Income Tax Rate the calendar quarter following the effective $0 - $4,299 0.9% date of the Act. $4,300 - $8,399 2.5% $8,400 - $12,599 3.5% AEDC RELATED ACTS $12,600 - $20,999 4.5% 1. Act 164 (HB 1235) Rep. Sabin – Equity Investment Tax Credit - Allows for $21,000 - $35,099 5.0% convertible debt to count as equity investment $35,100 - $75,000 6.0% under certain circumstances. The act also clarifies credit transferability by stating that the original investor earning EITC tax credits For incomes more than $75,000 may sell its tax credits only one (1) time, in Taxable Income Tax Rate whole or in part, the balance of which shall be used by the original investor within the time Arkansas Oil & Gas Commission Director $0 - $4,299 0.9% frame allowed and extends the date for which Lawrence Bengal $4,300 - $8,399 2.5% credits are allowed from December 31, 2028 to December 31, 2037. $8,400 - $12,599 3.5% 2. Act 593 (HB 1825) Rep. A. Davis – $12,600 - $20,999 4.5% Amendment 82 Changes – Applies 5% $21,000 - $35,099 6.0% limitation to general revenues as opposed to net general revenues available for distribution; $35,100 and above 6.9% expands definition of “project costs” to include all costs incurred by the sponsor in developing Incomes between $75,000 and $80,000 shall a proposed project or qualified Amendment reduce the amount of income tax due by 82 project, whether before or after the deducting bracket adjustment as set forth Amendment 82 agreement has been executed below and bonds have been issued. Taxable Income Tax Rate 3. Act 879 (HB 1788) Rep. Bell – Acquisition of State Property – Requires that state $75,001 - $76,000 $440 agencies seeking property consult the AEDC’s $76,001 - $77,000 $340 available sites inventory before acquiring state property. $77,001 - $78,000 $240 4. SJR 16 (Sen. Woods) – Provides common $78,001 - $79,000 $140 definition for “economic development”, $79,001 - $80,000 $ 40 “economic development infrastructure” and “economic development services” for Article 11. Act 412 (HB 1489) Rep. Jean – 12, Section 5 and Amendment 62, clarifying the Scott Smith, Dr. Tony Wood and Gary Newton Unemployment Insurance – Amends use of sales tax for economic development in the maximum benefit period and weekly the Arkansas Constitution; removes the 5% benefit amount under the Workforce Services cap currently on Amendment 82 projects. law. For initial claims filed on or after the first day of the calendar quarter following the TRAINING effective date of this act, an insured worker’s 1. Act 960 (HB 1895) Rep. Mayberry – College weekly benefit amount shall be an amount and Career Coaches – Expands scope equal to one-twenty-sixth (1/26) of his or her of the College and Career Coaches Program average wages for insured work paid during from Tier 3 and 4 counties to all counties the four (4) quarters of his or her base period. statewide and requires that coaches hold a Maximum potential benefits are reduced from career development facilitator certification, or 25 weeks to 20 weeks. complete certification within one year of being 12. Act 1126 (SB 802) Sen. Rapert – Sales and hired. Use Tax Exemption for Certain Solid 2. Act 989 (SB 226) Sen. Irvin – College and Waste Services – “Solid wastes” means all Career Readiness Planning Program putrescible and nonputrescible wastes in solid – Provides public schools with the options or semisolid form, including without limitation of administering either EXPLORE (grade 8), yard or food waste, waste glass, waste PLAN or PSAT (grade 10) or administer ACT metals, waste plastics, wastepapers, waste in grades 10, 11 and/or 12. In addition, public paperboard, and all other solid or semisolid schools may administer the Aspire Assessment wastes resulting from industrial, commercial, System in grades 10, 11 and 12.

27 ECON. DEV. RELATED LEGISLATION (CONTINUED)

3. Act 994 (SB 371) Sen. English – School owners within the area to be annexed wish and Necessity - Gives the Public Service District Partnerships with Higher to have their property annexed. The city or Commission, after a hearing, to grant or deny Education – Allows the provision of town is not bound by the petition to annex part or all of an application. The PSC shall concurrent or technical education options for the property, but may choose to annex the not issue a certificate of public convenience students in alternative learning environments; property by an ordinance or resolution. The and necessity to any person or corporation allows school districts to use National School petition shall include a schedule of services that: 1) is not a public utility; 2) primarily Lunch Student state or categorical funds of the annexing city or town that will be transmits electricity; and 3) has not been for concurrent courses or other technical extended to the area within three years after directed or designated to construct an education academic learning opportunities. the annexation. If the governing body accepts electric transmission facility from a regional 4. Act (SB 812) Sen. B. Johnson – College the petition, the annexation will become final transmission organization. (EC) and Career Readiness Program – in 30 days. 4. Act 1088 (HB 1633) Rep. Sabin – Allows Allows a public school to use a college and 4. Act 567 (SB 570) Sen. Sample – Arkansas a Utility to Enter Into a Power career readiness assessment approved by the Historic Rehabilitation Income Tax Purchase Agreement – Describes the State Board of Education. Credit Act – Provides that the income tax conditions under which a regulated electric 5. Act 1131 (SB 891) Sen. English – Workforce credit for rehabilitated historic properties be utility, cooperatives exempted, may enter Initiative Act of 2015 – Designates claimed only one time in a twenty-four month into a power purchase agreement, which are the Department of Higher Education as period and is effective for tax years beginning generally limited to five years. the disbursing entity for all funds for the on or after January 1, 2009 and ending on or 5. Act 725 (HB 1655) Rep. Collins – Reform Workforce Initiative Act and allows DHE to before December 31, 2027. (EC) Rate Making of Public Utilities – Adds prescribe procedures for awarding grants; 5. Act 1118 (SB 683) Sen. Files – Arkansas new language to existing code regarding the describes the duties of the workforce Broadband Infrastructure Incentive process by which utilities and the Public Service investment boards; provides for phase one Act – Prescribes methods for calculating Commission establish rates for service. (EC) planning grants, phase two implementation property tax valuations on broadband 6. Act 382 (SB 183) Sen. E. Williams – grants and phase three continuation grants. communications entities. The act outlines Procedures for Oversight of Fossil- 6. Act 1133 (SB 913) Sen. Hester – Defines that intangible assets purchased after January Fuel-Fired Electric Generating Units “employment” - Defines “employment” 1, 2015 are excluded from property tax - Requires ADEQ to perform studies related under the Department of Workforce Services valuations. to a state plan to regulate carbon dioxide law as “services described in 26 U.S.C. § emissions; creates procedures for an approval Total costs of tangible and intangible operating 3306(c)(20), as it existed on January 1, 2015. of a state plan by the Legislative Council. property 7. Act 892 (SB 368) Sen. English – ADEQ shall coordinate with the Arkansas - Intangible assets acquired after 1/1/15 Comprehensive Statewide Economic Development Commission, in the = Adjusted Cost Indicator Value Workforce Development System preparation of a report that assesses the - State Board of Career Education changed effects of the state plan on the electricity 6. Act 1002 (SB 757) Sen. J. Hendren – to Career Education and Workforce consumers within the state, including: (A) Restricts the Ability of Local Development Board. Creates the Office Disproportionate impacts of electricity and Governments and Other Entities to of Skills Development to administer and other replacement energy price increases on Regulate Private Property Rights award grants. Coordinates training activities middle-income and lower-income households; – Aims to protect private property rights; by various entities. AEDC is a non-voting (B) Employment within the state, direct creates the Private Property Protection member of the Board and is a consultant to the and indirect employment effects and jobs Act; regulates the power of eminent domain Office of Skills Development in the review of potentially lost within affected sectors of the for transmission lines by public utilities. A applications for workforce training grants. (EC) state’s economy; (C) Economic development property owner must prove in circuit court within the state, including effects on that a government unity has permanently manufacturing, commercial, and other sectors COMMUNITY reduced the fair market value of the owner’s of the state’s economy; (D) The competitive real property by at least 20%. If the court DEVELOPMENT position of the state in relation to neighboring finding is in favor of the property owner, the 1. Act 1093 (HB1688) Rep. Ballinger – states and other economic competitors; and utility must compensate for the reduction in (E) State and local governments, including Municipal Referendum Petitions fair market value or invalidate all or part of Provides that, except for municipal bonds, potential impacts resulting from changes in tax - the regulatory program within 30 days of the a sponsor of a municipal referendum shall revenues and higher government outlays for judgment. (EC) be given 60 days to circulate a municipal electric service. referendum petition. 7. Act 186 (SB 197) Sen. Cooper – Exempts 2. Act 845 (HB 1680) Rep. Gates – ENERGY Certain Customer and Critical Annexation of Territory Under 1. Act 827 (HB 1004) Rep. S. Meeks – Infrastructure Records of Municipal Municipal Territorial Jurisdiction – Requires Electric Utilities to Utilities from Disclosure – Exempts Requires that a municipality initiate annexation Compensate Net-Metering from the Freedom of Information law certain proceedings within five years of the stated Customers – Prescribes the procedures for customer and critical infrastructure records of intent; territorial jurisdiction over the area electric utilities to compensate net-metering municipally owned utilities. (EC) intended for annexation may be exercised customers including limitations of service, rate 8. Act 736 (SB 645) Sen. J. Hendren – during this five- year period; if annexation does structure, excess generation credits, non- Authorizes the PSC to Allow a Public not occur within five years of the stated intent, residential net-metering customers, etc. Utility to Obtain Certain Properties a five-year waiting period shall exist before 2. Act 380 (HB 1433) Rep. Jett – Modifies – Allows a public utility to acquire, lease annexation can be reconsidered. the Definition of “Public Utility” – or rent a plant or property constituting an 3. Act 991 (SB 305) Sen. J. Cooper – Declares that the term “public utility” does not operating unit or system, including plants or Annexations by 100% Petition include a person or corporation that furnishes property owned by a utility’s affiliate or other – Prescribes the procedures for annexing compressed natural gas as a motor fuel. entities. property to a city or incorporated town via a 3. Act 842 (HB 1592) Rep. Beck – Clarifies 9. Act 1000 (SB 727) Sen. Rice – Modifies petition. Petition must assure that all property Requirements for Obtaining a the Regulation of Public Utilities by Certificate of Public Convenience the PSC – Allows for the recovery of costs

28 through an interim rate schedule approved of natural gas. The grants will be awarded Agencies into Principal Departments by the PSC. The interim surcharge may be to counties on a pro-rata basis based on the – Act for General Assembly to provide adjusted by the PSC at a later date. (EC) number of active gas well. In each county (EC) for a study regarding the reorganization 10. Act 1275 (SB 869) Sen. D. Johnson – 4. Act 855 (SB 556) Sen. Files – Notification of the executive branch of Arkansas state Enabling Legislation for Energy of Funding for Arkansas Port, government (127 entities defined including the Efficiency Bonds – Known as the “Local Intermodal, and Waterway Arkansas Economic Development Commission, Government Energy Efficiency Project Bond Development Grant Fund – Requires the Arkansas Economic Development Act”, this legislation prescribes the process the Chief Fiscal Officer to notify the Executive Council and The Federal Housing and Urban and requirements for the issuance and use of Director of the Waterways Commission when Development Community Development Block bonds authorized under Amendment 89 to the funding is deposited into the fund. Grant program of the Arkansas Economic Arkansas Constitution. Rules governing this 5. Act 898 (SB 613) Sen. Irvin – Arkansas Development Commission); and the merger of program will be promulgated by the Arkansas Unpaved Roads Program Act – A governmental operations into ten (10) principal Energy Office under §19-11-1207. new program is established to help provide departments. The Act stipulates that the 11. Act 917 (SB 935) Sen. Rice – Amends Laws funding for unpaved road projects throughout Governor may appoint provisional department Concerning Certificate of Public the state using best management practices. secretaries to assist with the study. (EC) Convenience and Necessity – Describes After completing training in best management 4. Act 1258 (SB 2) Sen. Dismang – Act conditions under which a certificate of public practices, a county may submit an application Concerning the Review and Approval convenience and necessity may be required to receive funding for an unpaved road of Administrative Rules – Implements prior to the undertaking of new construction project to the Department of Rural Services. Amendment 92 to the Arkansas Constitution or operation of equipment for supplying a Donations from private entities and funding regarding legislative review and approval of public service. or in-kind goods and services committed agency rules. by the county proposing the unpaved road TRANSPORTATION project shall equal at least fifty percent (50%) FISCAL ACTS of the estimated total costs of the project. 1. Act 985 (SB 111) Jt. Budget – AEDC 1. Act 691 (HB 1178) Rep. Pitsch – Sales and The Unpaved Roads Program does not have Use Tax Exemption for Lessee of General Operations Act FY 2016 a designated funding source. Several entities General Revenue Funding $10,670,432. Sec an Intermodal Authority – Prescribes including states agencies, county judges, and conditions under which a lessee of tangible 256 is effective immediately, the remainder U.S. Fish and Wildlife Services have been takes effect July 1, 2015. property held by an intermodal authority may encouraged to offer support and funding of be exempt from the sales and use tax: The 2. Act 117 (SB 240) Jt. Budget – AEDC the program. Reappropriation Act lessee’s facility is constructed after the effective 6. Act 740 (SB 871) Sen. Hickey – Special date of this act and has not been occupied by 3. Act 150 (SB 276) Jt. Budget – AEDC GIF Permit for the Transportation of a Appropriation Act any other authority lessee; at an establishment Containerized Cargo Unit – Prescribes within fifty (50) miles of the intermodal facility, 4. Act 819 (HB 1469) Rep. Jean – Senior the conditions under which the Arkansas Citizen Centers - GIF $1,000,000 the lessee has not ceased or substantially Highway Commission can authorize the reduced operations of a nature similar to those funded issuance of a special permit for containerized 5. Act 240 (SB 303) Sen. Teague – Capital being performed at the lessee’s facility within cargo units. The Highway Commission may the intermodal facility; the tangible personal Improvements – GIF $40,000 funded issue a special permit per vehicle valid for 6. Act 255 (SB 353) Sen. Maloch – Capital property or service is consumed, used, or one single trip to be executed or performed performed at the lessee’s facility within the Improvements – GIF $ 5 0 , 0 0 0 f u n d e d within six consecutive days of the issuance 7. Act 418 (SB 324) Sen. Woods – Arkansas intermodal facility; and the lessee’s facility is or for a one-year period along a specified used to carry out the essential governmental World Trade Center – GIF route that authorizes the movement of sealed $40,000 funded functions of the authority under § 14-143- containerized cargo units upon highways 104(b). 8. Act 419 (SB 326) Sen. D. Johnson – under the commission’s jurisdiction. The cargo Statewide Non-Profits– GIF 2. Act 166 (HB 1258) Rep. Pitsch – Re- units must be part of international trade and establishes Legislative Task Force $25,000 funded be moved on the highways due to importation 9. Act 428 (SB 359) Sen. Cooper – Capital on Intermodal Transportation and from or exportation to another country. Commerce – Adds members to Task Improvements – GIF $20,000 funded Force, including a representative from AEDC, 10. Act 650 (SB 621) Sen. Pierce – Capital identifies specific duties of the Task Force and MISC AFFECTING AEDC Improvements Reappropriation – GIF 11. Act 922 (HB 1103) Jt. Budget – Department extends its authority to December 1, 2016. 1. Act 187 (HB 1183) Rep. Gossage – Task of Workforce Services Appropriation Act – 3. Act 536 (HB 1436) Rep. G. Hodges – Force to Review and Recommend Section 24 provides that $2,500,000 from the Amends Distribution and Use of Computer Science Courses – Department of Workforce Service Training Severance Taxes – Makes changes to the Establishes the 15-member Computer Science Trust Fund that was previously sent to AEDC distribution of severance taxes from natural gas and Technology in Public School Task Force and included in BITP will be sent instead to the to add road and bridge repair and maintenance to include the AEDC Executive Director’s Skills Development Fund (provisions of this to the funds allocated to the Arkansas Highway designee, Tom Chilton. section shall be in effect only from July 1, 2015 and Transportation Department. The act 2. Act 370 (SB 370) Sen. Hester – Amend through June 30, 2016). states the first $675,000 of the 5% of the the Productivity Reporting 12. Acts 553 (SB 462) Jt. Budget – AEDC severance tax collected on natural gas will be Requirements for State Agencies Appropriation to Innovate Arkansas as funded deposited in general revenues. The remainder and Institutions of Higher Education by Act 885 (SB 31, Section 13) Jt. Budget shall be deposited as special revenues into – Slight modifications to monthly reporting to – ASTA Appropriation – Funding source the Road and Bridge Repair, Maintenance and Bureau of Legislative Research regarding staff uncertain. Grants Fund. The fund will be used for grants positions. to counties for damages resulting from trucks 3. Act 1202 (SB 382) Sen E. Williams – Study and other machinery used in the extraction the Restructuring of Various State

29 LEGISLATIVE SUMMARY RECAP

82 DAYS AT THE CAPITOL Do you remember, not so long ago, when the Republican majorities – 64-36 in the House, 23-11 private option was supposed to be the legislative in the Senate, with one vacant. session’s most controversial issue? That was before Republicans were determined to demonstrate anyone had heard of “re-homing” or thought much that they could govern, and as part of doing about what a state Religious Freedom Restoration that, they followed the governor’s lead on issue Act would look like. after issue – the private option, Common Core, A lot can change in 82 days – a short session by the highway funding bill, the Religious Freedom recent historical standards. And a lot can change Restoration Act. Meanwhile, Hutchinson had no when legislators consider 2,200 bills, pass 1,288 of trouble passing his signature campaign proposals them into law, and vote to spend $5.18 billion for – a one percent income tax cut for Arkansans fiscal year 2016, an increase of $133 million over earning between $21,000 and $75,000, and a the year before. requirement that high schools teach computer By Steve Brawner When the session began, it was unclear what science courses. Gov. Asa Hutchinson would do with the private Proposed Amendments Talk Business & Politics option – the program that uses federal Medicaid For a while, it appeared that legislators might dollars through the Affordable Care Act to not refer any proposed constitutional amendments purchase private health insurance for lower-income to voters, until Hutchinson made it clear he Arkansans. The program had barely mustered supported one that would allow him to keep his enough votes to be created in 2013 and had barely powers when leaving the state, rather than them survived the fiscal session in 2014, and it didn’t being transferred to the lieutenant governor, and seem to have the votes this time. But it also brings another that would increase the fund that Arkansas in a billion federal dollars to the state’s economy, uses to attract economic super projects, such as which Hutchinson needed if he hoped to pass auto plants. the middle class tax cut he’d promised Arkansans Those proposals now will be on the ballot, along during the 2014 campaign. with a third that would increase county officials’ So he bought time. During a speech at UAMS terms from two to four years. on January 27, Hutchinson asked the Legislature This also was the first session where legislators to fund the private option for two years while operated under Amendment 94, the so-called it studied the issue in the context of overall “ethics amendment” passed by the voters in 2014, healthcare reform. The idea passed easily in both which among other provisions was supposed the House and Senate. Hutchinson’s nephew, state to limit gifts by lobbyists to legislators. Instead, Sen. Jim Hendren, R-Sulphur Springs, a private lobbyists took advantage of a provision in the option opponent whose stance has become more amendment allowing them to provide legislators conciliatory, sponsored Act 46 creating the task gifts such as meals as long as they were planned force and is co-chair along with state Rep. Charlie events serving official government bodies. Collins, R-Fayetteville. The amendment also extended term limits for Task Forces legislators from three two-year terms in the House Appointing task forces and study commissions and two four-year terms in the Senate to 16 years became one of the most effective tools in overall – up to 18, in fact, for some. Speaker of Hutchinson’s toolbox. He diffused another the House Jeremy Gillam, R-Judsonia, who before controversial issue – the Common Core – by the amendment would have been term-limited, appointing a 16-member review panel chaired by recently announced he is running for re-election Lt. Gov. to make recommendations on to that post. His fellow Beebe High School how Arkansas should proceed with the education alum, Senate Majority Leader Jonathan Dismang, standards. The standards have become a lightning R-Searcy, has not yet announced if he also will seek rod for some conservatives who believe they are re-election to his position. an example of federal overreach. The ethics amendment also led to a pay Hutchinson also promised to appoint a task raise for legislators. The Independent Citizens force to study highway funding after a bill he didn’t Commission created by the amendment increased support advanced out of the House Committee on legislative salaries from $15,869 to $39,400 and Public Transportation that would have transferred also increased the salaries for all statewide elected some general revenues to highways. Under officials except the lieutenant governor. Legislators Hutchinson’s gentle persuasion, the sponsor, state agreed to do away with a $14,400 office expense Rep. Dan Douglas, R-Bentonville, agreed to kill the account used by many as a supplemental salary. bill, but Hutchinson said he would appoint the task They still will receive daily per diem expenses as force and hinted that a special session on highway well as mileage reimbursements. funding could be in the state’s future. Workforce Legislation This was a historic session. For the first time The Legislature also passed what Hutchinson since shortly after the Civil War, a Republican described as “foundational” changes to the state’s governor worked with a Legislature composed of workforce education efforts. Among those was Act

30 The weekly Lobbyist Luncheons drew capacity crowds.

892 by state Sen. Jane English, R-North Little Rock, also increased to add parole and probation officers. who in 2014 switched her vote on the private Education Legislation option from a “no” to a “yes” in exchange for a promise from then-Gov. to focus on Public education received a small funding the workforce issue. increase, to $2.12 billion. The financially troubled English – along with others such as the Arkansas Arkansas Scholarship Lottery will now be State Chamber of Commerce – argue that the administered by the Department of Finance state’s education system must better prepare and Administration rather than the Lottery students for jobs that exist in the workforce. Act Commission as a result of Act 218 by state Sen. 892 creates the Office of Skills Development Jimmy Hickey, R-Texarkana. To save costs, Act 1105 within the Department of Career Education to by Hickey directs freshman lottery scholarship award workforce training grants to public and winners’ awards to be cut in half, to $1,000, while private organizations. sophomore awards will be increased from $2,000 It also establishes a Career Education and to $3,000. Workforce Development Board composed of Another noteworthy education law passed this representatives from various industrial sectors, session was Act 377 by state Rep. Bruce Cozart, along with nonvoting members from various state R-Hot Springs, which lets the Department of agencies. The board will create a comprehensive Education grant waivers allowing schools that program for career education and workforce fall below the 350-student minimum to avoid development and will supervise all vocational, consolidation. Also, Act 525 by Sen. Alan Clark, technical and occupational education programs. R-Lonsdale, removed the requirements for the It and the State Board of Education together will state’s education commissioner to be a 10- administer state and federal adult education funds. year educator, paving the way for Hutchinson’s Hutchinson also sought to make foundational handpicked choice, former state Sen. Johnny Key, changes to the state’s prison and parole system. to occupy the post. With 2,500 state prisoners housed in county jails All in all, there was plenty of activity in this year’s because of prison overcrowding, the Legislature regular legislative session, but with the number of passed reforms that, among others, will transfer aforementioned task forces and the work they will prisoners to a county facility in , require do in the interim, a lot of heavy lifting is still yet to eligible prisoners to enroll in Medicaid for drug and be done. mental-health treatment, fund re-entry programs for prisoners leaving prisons, and create alternative courts for certain types of offenders. Funding was

31 Apex

The Pinnacle program recognizes the state’s outstanding corporate citizens – State Chamber/ AIA members who desire Summit to make a significant statement about their participation in Arkansas’s future. These leading companies are helping make the state a better place to live, work and conduct business by supplying the leadership and financial support necessary for the State Chamber/AIA to effectively represent the Arkansas business community.

Through the involvement and leadership of senior representatives of their firms, Pinnacle members Peak actively participate in our grassroots action network, work on policy committees and lead the State Chamber/AIA on the Board of Directors. In doing so, these Pinnacle members provide resources necessary for our organization to achieve success while helping to shape the future of Arkansas and enhance its economic climate.

32 Crown

Arkansas Petroleum Council

Mainstream

33 BE THE FORCE BEHIND ARKANSAS’S WORKFORCE.

Join us as we bring a new generation of pride, progress and professionals to Arkansas’s skilled workforce.

Right now, tens of thousands of manufacturing jobs are un lled in Arkansas. And with many skilled professionals at or near retirement age and fewer people encouraging our young people to pursue a career in manufacturing, that number is likely to climb.

But there is an answer: you.

With the collective eorts of Arkansas’s manufacturers, we can position the industry as a viable career option and improve the overall image of manufacturing by:

•Opening your doors to students at every level

•Connecting with two-year colleges and trade schools in your area

•Engaging with community leaders to demonstrate the opportunities for skilled workers

join us: To find out more about how you can make a difference visit ArkansasStateChamberFoundation.com or call us at (501) 372-2222.

34 BE THE FORCE BEHIND ARKANSAS’S WORKFORCE.

Join us as we bring a new generation of pride, progress Vivien-Sara Fechner, 2015 Grad Esteban Rodriguez, 2015 Grad Gus Leeper, 2015 Grad and professionals to Arkansas’s skilled workforce. Major: Photography Major: Civil and Construction Major: International Business Donaghey Scholar Engineering Basketball Student-Athlete Right now, tens of thousands of manufacturing jobs are Employer: Verizon Employer: CDI Contractors Employer: Stephens Investment un lled in Arkansas. And with many skilled professionals Banking at or near retirement age and fewer people encouraging our young people to pursue a career in manufacturing, that number is likely to climb. The Pipeline to Arkansas’s Future But there is an answer: you.

With the collective eorts of Arkansas’s manufacturers, we can position the industry as a viable career option and improve the overall image of manufacturing by:

•Opening your doors to students at every level

•Connecting with two-year colleges and trade schools in your area

•Engaging with community leaders to demonstrate the opportunities for skilled workers

Sam Vogel, 2015 Grad Lauren McNeaill, 2015 Grad Josh Hendricks, 2015 Grad Major: Biology Major: Business finance Major: Civil and Construction Baseball Student-Athlete and psychology Engineering Employer: Stryker Orthopaedics Donaghey Scholar Employer: U.S. Army Corps Employer: Simmons First of Engineers National Bank join us: To find out more about how you can make a difference visit ArkansasStateChamberFoundation.com or call us at (501) 372-2222. UNIVERSITY OF ARKANSAS AT LITTLE ROCK

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