Act 586 creates 3-member tax appeals commission

The combustible state legislative session that ended in overtime last week could yet produce one practical outcome — a new commission set up to bring independence in examining Arkansans’ tax appeals.

The legislative initiative, Act 586, creates a three-member tax appeals commission that will be housed within the Department of the Inspector General. Arkansas joins 34 other states that have similar independent bodies to review tax appeals from residents and businesses.

To date, tax appeals were decided by administrative law judges in the Department of Finance & Administration, a process that was not very friendly for those challenging the state on tax concerns.

Little Rock tax lawyer Matt Boch, who helped craft the legislation and is an advocate for the independent commission, says about 90% of cases have been decided in favor of the state.

With the new panel, Arkansans may at least have a fighting chance in any disputes with the state over a variety of tax concerns, including income tax, sales use taxes and excise taxes, among others.

“The state does have some skin in the game in tax controversies,” Boch says. “The idea is to move administrative appeals out of the revenue office to a more independent body with a panel of tax experts reviewing appeals to give taxpayers more confidence in the process. The panel will have deep knowledge of Arkansas tax law and give both sides a fair shake.”

A chief commissioner, who will be duly licensed as a certified public accountant and lawyer, will head the panel. Of the other two, one must be a CPA and the other a lawyer. All three will be appointed by the governor, who has until July 1, 2022, to make his picks.

The commissioners will be selected by the governor from recommendations provided by the Arkansas Supreme Court, the Arkansas Society of CPAs and the Arkansas Bar Association.

It’ll be another 18 months before the commission becomes active; the legislation calls on it to begin hearing cases Jan. 1, 2023.

A single commissioner or all three, depending on the nature and significance of the challenge, may hear cases. Cases under $25,000 of tax value will be heard by a single commissioner while disputed cases valued above $250,000 will be heard by the entire three-member panel.

The new law does mandate that a taxpayer’s disputed claim must be heard before any tax amount has to be paid.

To contest an assessment or refund claim denial, taxpayers have 90 days to challenge DF&A’s decision. The commission has the option to conduct on-site inspections. For example, if the dispute involves an exemption related to machinery or equipment, the panel or an individual judge could visit the facility to look over the equipment to see how it’s used and assess its value.

Even though decisions will be publicized, all appeals will be confidential: taxpayer information and details will be redacted.

SUPPORTING YOUNG COMPANIES

Arkansas researchers and early-stage companies can learn more about tapping into the highly competitive Small Business Innovation Research funding program by participating in a multi-week accelerator initiative.

The federal program, often called America’s Seed Fund, annually awards about $3.7 billion in grants and contracts to small, early-stage companies. The Arkansas program is a summer cohort hosted by the Arkansas Small Business and Technology Development Center.

Applications close on May 28 and the program begins in June. The accelerator, which will focus on U.S. Department of Agriculture programs, will help participants prepare and submit funding proposals to the Agriculture Department.

“USDA has broad research topics that generally repeat from one funding cycle to the next,” said Rebecca Todd of the Arkansas small business center. “One of the regular topics is rural and community development, which encompasses a range of project ideas leading to solutions that will ultimately improve quality of life for rural America.”

More information is available at asbtdc.org.

WINNING RATES

Arkansas has the nation’s sixth lowest average electric rates, according to a national study, which also said the state had the lowest average residential rates in the United States.

The April 2021 Energy Affordability Report by the American Legislative Council evaluated each state’s electric pricing in cents per kilowatt-hour (KWh) with data sourced from the U.S. Entergy Information Administration.

Pricing was broken down into residential, commercial, industrial and transportation sectors.

“While the ‘total’ price of electricity is the main focus of this report, the sector-specific prices are important to note because they can directly impact a state’s economic competitiveness,” the report said. “Electricity prices in these sectors serve as important business inputs, helping to determine how many and which types of businesses choose to operate in that state.”

When looking at the prices broken down by sectors, Arkansas tied for first with the lowest average price in the residential sector and was noticeably competitive in the other sectors.

ECONOMIC SUPPORT

Arkansas small businesses and nonprofits suffering economic losses caused by the pandemic can now apply for aid through the Southern Opportunity and Resilience Fund.

SOAR provides low-interest loans of up to $100,000 and free technical support for small businesses. The program is a new initiative with more than $50 million in initial commitments provided by philanthropic, private and corporate investors.

The fund works with local Community Development Financial Institutions (CDFIs) and focuses on female- and minority-owned businesses in rural areas and other underbanked entrepreneurs who have historically had trouble accessing capital.

“At Communities Unlimited, we know how to get needed capital into the hands of entrepreneurs of color and rural small business owners in the South. It requires trusting relationships, intensive technical assistance and, well, capital to lend,” said Ines Polonius, chief executive officer of Communities Unlimited, a CDFI serving small businesses in Arkansas.

Participants will be matched with a participating lender that will assist the business owner with the application process and provide advisory support. Applicants will be able to sign up online and get matched to a lender in less than five minutes.

More information is available at thesoarfund.org.