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State House acts to tax-exempt covid relief

by Rachel Herzog | February 23, 2021 at 7:05 a.m.
State Rep. Les Eaves (right), R-Searcy, listens to then-Rep. Charlie Collins on the floor of the state House in the Capitol in this March 2017 file photo.

The Arkansas House on Monday passed a bill to exempt income that taxpayers received through certain federal coronavirus relief programs from individual and corporate taxes, along with two other pieces of tax legislation.

House Bill 1361, by Rep. Les Eaves, R-Searcy, would include loan forgiveness under the Paycheck Protection Program, which Eaves said was "a much-needed lifeline to our small businesses" from the federal government in early 2020, when the pandemic hit.

Now, Eaves said, thousand of business owners are discovering the "painful reality" of the state's Income Tax Act of 1929. He said the state's current approach to tax collection runs counter to how the federal government treats such relief programs.

The legislation would exclude certain federal aid from the state's definition of income. In addition to the Paycheck Protection Program, the programs include Small Business Administration grants under the Economic Injury Disaster Loan program and payments received under the Coronavirus Food Assistance Program, according to the state Department of Finance and Administration's legislative impact statement on the bill.

[CORONAVIRUS: Click here for our complete coverage » arkansasonline.com/coronavirus]

Eaves also noted that any revenue gained from taxing that aid would be "one-time money," so it could not be incorporated into the state's budget.

The bill passed 96-0, with Rep. John Maddox, R-Mena, and Rep. DeAnn Vaught, R-Horatio, voting present.

The House also passed:

• House Bill 1049 by Rep. Joe Jett, R-Success, which would allow recipients of unemployment benefits to authorize the state to withhold income taxes from those benefits, possibly starting in 2022.

• Senate Bill 236 by Sen. Jonathan Dismang, R-Searcy, which would exempt federal and state unemployment benefits from state income taxes in 2020 and 2021.

Information for this article was contributed by Michael R. Wickline of the Arkansas Democrat-Gazette.

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