Arkansas Proposed Rules 2006-3

The Arkansas Department of Finance and Administration has filed proposed rule 2006-3, “Withholding on Nonresident Members of Pass-Through Entities. The public hearing will be held Wednesday, January 3, 2007, at 1:00 p.m. in the second floor conference room (#2330) of the Ledbetter Building, 1800 West Seventh Street, Little Rock, Arkansas. All interested parties may attend and present their views on the subjects and issues involved.

This proposed rule will require all pass-through entities that make a distribution to a non-resident member to deduct and withhold Arkansas income tax from the distributions that would be taxable as Arkansas source income. Pass-through entities include (not limited to) S-corporations, partnerships, limited liability companies and trusts. The tax would be withheld at the highest tax rate levied under the code for that type of entity. Distributions aggregating less than $1,000 a year would not be subject.

Each pass-through entity that makes distributions subject to Arkansas income tax would be required to register, with the Department, using form AR4ER. Annually, the pass-through entity would be required to file a Form AR 941PT with the Department to report distributions and withholdings, and Form AR1099PT must be provided to the non-resident member who received the distribution and was subject to withholding.

If you would like more information contact Roxie Benincosa 501.753.9700 or e-mail roxie.benincosa@bellandcompany.net.