Under certain circumstances, as set forth below in Income Tax Regulation 1977-5, the income of residents of Texarkana, Arkansas and Texarkana, Texas, which would normally be subject to Arkansas income tax, will be exempt from Arkansas income tax due to Arkansas' "border city tax exemption" as established by ACA 26-52-602.
The Commissioner of Revenues of the State of Arkansas, pursuant to the authority vested in him by Act 118 of 1929, and Act 132 of 1965, with the approval of the Governor, does hereby promulgate the following regulations and rules for the orderly administration of Act 48 of 1977, as amended by Act 177 of 1977.
Definitions. The following words shall have, when used in this regulation, the following meaning:
Texarkana, Arkansas, Resident -- Shall mean an individual who maintains a place of abode within the city limits of Texarkana, Arkansas.
Texarkana, Texas, Resident -- Shall mean an individual who maintains a place of bode within the city limits of Texarkana, Texas.
Individual Taxpayer -- Shall mean a natural person.
1. Texarkana, Arkansas residents are exempt from the Arkansas Income Tax on income received while a bona fide resident of Texarkana, Arkansas, but they shall be required to file an Arkansas Income Tax return.2. Texarkana, Texas residents are subject to the Arkansas Income Tax on taxable income earned in Arkansas, other than income earned in Texarkana, Arkansas.3. All other residents of Texas, other than those residents of Texarkana, Texas are subject to the Arkansas Income Tax on taxable income earned in Arkansas, including Texarkana, Arkansas.4. Texarkana, Arkansas residents are subject to the Arkansas Income Tax on taxable income earned in Arkansas while a resident of any city other than Texarkana, Arkansas.5.* Employers shall verify to the State of Arkansas the residency of those employees on whom they do not withhold Arkansas Income Tax. Employees shall file the Employee's Withholding Exemption Certificate with the employer if the employee is claiming a Texarkana, Arkansas, residency exemption or a Texarkana, Texas, residency exemption for income earned in Texarkana, Arkansas. The employer shall keep this certificate with his records, under the penalty of being liable for any taxes not properly withheld on his employees. Employers shall also list the names and addresses of all employees during the course of the quarterly tax period or at the time a report is due from the employer.6. Information furnished by the employee to the employer shall include the physical location of the employee if his mailing address is different from his residence address.7. An individual taxpayer who is claiming an exemption from Arkansas Income Tax because of a Texarkana, Arkansas, or a Texarkana, Texas residence shall verify to the State of Arkansas that he is indeed a bona fide resident of Texarkana, Arkansas or Texarkana, Texas in a manner that is acceptable to the State of Arkansas. The effective date of this regulation shall be January 1, 1978.
* Withholding forms associated with this exemption are:
AR-4EC (TX) -- Texarkana employee's withholding exemption certificate.
AR-TX -- Completed by employer and provided to employee, shows wages paid during the preceding tax year that are exempt from Arkansas income tax because of the border city exemption.
AR-3Q-Tex -- Completed by employer. All of the employees' Form AR-TXs (a copy of one for each employee) are attached to the AR-3Q-Tex form and sent in to the Withholding Unit.
1.26 Ark. Code R. 51-403(b)(13)