To Create The Free Market Zones Act; And To Exempt A Business Located In An Opportunity Zone From The Income Tax, The Corporate Franchise Tax, And The Elective Pass-through Entity Tax.
Summary
HB1216 creates the “Free Market Zones Act” and establishes a new tax exemption for certain business entities located in Arkansas opportunity zones. The bill defines an opportunity zone by reference to federal law and limits the exemption to businesses located in those census tracts that are required to file Arkansas corporate income tax returns or are subject to the elective pass-through entity tax. It also applies the exemption beginning with tax years on or after January 1, 2025.
The bill amends Arkansas tax law in three main areas: the Income Tax Act, the Corporate Franchise Tax Act, and the Elective Pass-Through Entity Tax Act. It adds new exemption provisions for qualifying businesses, repeals an existing opportunity-zone-related income tax provision, and updates the corporate franchise tax definition so that certain opportunity-zone businesses are not treated as corporations for that tax purpose. In practical terms, the measure would reduce or eliminate state tax liability for eligible businesses operating in designated opportunity zones.
Impact
HB1216 would narrow state tax obligations for business entities located in federally designated opportunity zones by exempting them from Arkansas income tax, corporate franchise tax, and the elective pass-through entity tax, subject to the bill’s eligibility requirements. It would also repeal Arkansas Code § 26-51-460 and replace it with new provisions tied to the same federal opportunity zone framework, thereby restructuring how Arkansas incorporates opportunity-zone tax treatment into state law. The affected parties are businesses operating in qualifying census tracts, while the state would forgo some tax revenue from those entities starting in tax years beginning on or after January 1, 2025.
Sentiment
The available record shows no committee transcript, vote tally, or recorded debate, so there is no documented public sentiment from legislative discussion in the materials provided. Based on the bill text alone, the measure appears to be framed as a pro-business, economic-development tax incentive for investment in distressed or targeted areas. The absence of recorded votes or committee action means support or opposition cannot be reliably inferred from the provided context.
Contention
The main policy tension is between economic development goals and the loss of state tax revenue. Supporters would likely argue that exempting businesses in opportunity zones encourages investment, job creation, and revitalization in underserved areas, while critics may question whether the tax break is broad enough, targeted effectively, or justified given the fiscal cost. Another possible point of contention is the bill’s reliance on federal opportunity-zone designations as of January 1, 2019, which may limit or complicate eligibility and could raise questions about which businesses and locations benefit.