The Arkansas Senate on Thursday approved a bill that would extend for two years, until July 1, 2023, the sunset date for the 2017 state law mandating all sellers of medical marijuana collect and remit the special 4% privilege tax on sales.
The University of Arkansas for Medical Sciences is a major beneficiary of these tax collections.
The Senate voted 35-0 to send Senate Bill 465 by Sen. Jonathan Dismang, R-Searcy, to the House for further action.
Dismang told senators these medical marijuana tax collections are targeted to help UAMS achieve the National Cancer Institute designation. He said the institute has a director and has hired about 10 employees, "so we should all be proud of them."
The state Department of Finance and Administration projected that the bill would raise $13.3 million, with $12.4 million deposited to the UAMS National Cancer Designation Trust Fund in fiscal 2022, which begins July 1.
Act 580 of 2019 aimed to use funds raised from medical marijuana taxes and new tobacco taxes to help UAMS in its attempt to get a National Cancer Institute designation. UAMS received $9.1 million in fiscal 2020 because of Act 580. It also received $10 million in October 2019 from the state's rainy day fund for the institute, according to the finance department.
Arkansans voted to legalize medical marijuana in 2016, but it took more than two years for the program to get off the ground.
In other tax-related action, the Senate voted to send the governor legislation that would impose a voluntary individual income tax on pass-through business entities, such as partnerships and S corporations, if they opt to be subject to the tax, and it would exclude certain income from gross income for pass-through entities.
House Bill 1209, by Rep. Joe Jett, R-Success, approved 35-0, could provide federal tax benefits for the affected business entities while potentially increasing state tax collections.
The finance department projects the bill would raise $4.24 million in increased state general revenue, but Dismang said it would provide an estimated $50 million worth of federal tax savings for these same taxpayers.
The federal Tax Cuts and Jobs Act of 2017 imposed a cap on the deduction for state and local income taxes paid or accrued during tax years 2018 through 2025, and the IRS recently indicated that it expects to propose regulations to clarify that amounts paid by a partnership or S corporation to a state, a political subdivision of a state or the District of Columbia to satisfy its liability for income taxes are not subject to the cap on the deduction, according to the finance department.
House Bill 1209 would provide a 5.9% rate on total net taxable income on certain business entities that elect to be subject to the tax, while providing a corresponding exclusion from gross income for members of the affected business entity. The bill would become effective for tax years beginning on or after Jan. 1, 2022.