InvestArk phaseout goes to governor

The House on Monday voted to phase out the InvestArk tax-credit program in exchange for providing a new sales-tax exemption for manufacturers.

Senate Bill 362, by Sen. Lance Eads, R- Springdale, passed 85-2. It now heads to Gov. Asa Hutchinson.

“This is something that’s going to help manufacturers in the state regardless of their size,” said Rep. Andy Davis, R-Little Rock, who presented the bill.

Under the InvestArk program, a manufacturer is eligible for a sales and use tax credit if the manufacturer has been in continuous operation in Arkansas for at least two years and invests a minimum of $5 million in a project to construct, expand or modernize a facility.

Davis said later in an interview that there was also concern about a November 2015 Arkansas Legislative Audit report.

It said: “InvestArk- only projects do not return positive cost-benefit ratios because they do not require job creation; therefore, the only potential tax benefits identified are construction benefits.”

Under current state law, manufacturers’ purchases of repair, replacement and modification parts and services for existing machinery and equipment are eligible for a tax refund of 1 percent of Arkansas’ 6.5 percent sales and use tax, the finance department said.

SB362 would increase gradually the tax refund amount each year until the purchases become fully exempt from taxation.

Randy Zook, president of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, told a legislative committee that his groups support the legislation.

Arkansas is alone in the region in levying sales tax on manufacturers’ purchases for repairs and replacement, which has increased their costs, and “helps prevent them from being as competitive as possible in selling their products,” Zook said.