Section 26-51-404 - Gross income generally(a)(1) "Gross income" includes: (A) Gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid;(B) Gains, profits, and income derived from professions, vocations, trades, business, commerce, or sales;(C) Gains, profits, and income derived from dealings in property, whether real or personal, growing out of the ownership of, use of, or interest in the property;(D) Gains, profits, and income derived from interest, rent, royalties, dividends, annuities, securities, or the transaction of any business carried on for gain or profit;(E) Gains or profits and income derived from any source whatever;(F) Any payments of alimony and separate maintenance received pursuant to a court order;(G) Except as provided in subdivision (b)(31) of this section, unemployment compensation benefits paid from federal unemployment funds; and(H) Except as provided in subdivision (b)(32) of this section, unemployment insurance benefits received from unemployment compensation paid under Title IV of the Social Security Act, 42 U.S.C. § 601 et seq., except for unemployment or sickness payments made pursuant to 45 U.S.C. § 352, as it existed on January 1, 2017.(2) The amount of all such items shall be included in the gross income of the taxable year in which received by the taxpayer.(3) Any recovery of an amount which was deducted from gross income in a prior year must be treated as taxable income in the year recovered to the extent that the deduction resulted in a reduction in income tax liability.(4) Title 26 U.S.C. § 117, as in effect on January 2, 2017, regarding the taxability of scholarships, fellowships, grants, and stipends, is adopted for the purpose of clarifying and calculating Arkansas income tax liability.(b) "Gross income" does not include the following items, which shall be exempt from taxation under the Income Tax Act of 1929, § 26-51-101 et seq.: (1) Title 26 U.S.C. § 1033, as in effect on January 1, 2009, relating to the exclusion from gross income of gain resulting from the involuntary conversion of a taxpayer's property, is adopted for the purpose of computing Arkansas income tax liability;(2) Title 26 U.S.C. § 121, as in effect on January 1, 2009, relating to the exclusion from gross income of gain from the sale or exchange of property owned and used as the taxpayer's principal residence, is adopted for the purpose of computing Arkansas income tax liability;(3) Title 26 U.S.C. § 101, as in effect on January 1, 2007, relating to the exclusion from gross income of proceeds or benefits paid upon the illness or death of the insured, is hereby adopted for the purpose of computing Arkansas income tax liability;(4) The value of property acquired by gift, bequest, devise, or descent, but the income from such property shall be included in gross income;(5) Interest upon obligations of the United States or its possessions or upon obligations of the State of Arkansas or any political subdivision of the State of Arkansas;(6) Any: (A) Amounts received through accident or health insurance or under workers' compensation acts as compensation for personal injuries or sickness, plus the amount of any damages received, whether by suit or agreement, on account of such injuries or sickness; or(B) Social Security payments, railroad retirement benefits, and unemployment insurance benefits received from the railroad retirement boards;(7)(A) Income from domestic corporations when earned from sources without the state, and these sources shall be defined to mean places of manufacture or production and places of merchandising.(B) When books of account do not clearly and accurately reflect the income earned from sources without the state, the Arkansas income shall be determined by processes or formulas of general apportionment prescribed by the Secretary of the Department of Finance and Administration and approved by the Governor;(8) Dividends received by a corporation doing business within this state from a subsidiary if at least eighty percent (80%) of the subsidiary's capital stock is owned by a corporation doing business within this state;(9) In the case of an ordained, commissioned, or licensed minister of a recognized church, 26 U.S.C. § 107, as in effect on January 2, 2013, regarding the rental value of parsonages, is adopted for the purpose of computing Arkansas income tax liability;(10) Title 26 U.S.C. §§ 108 and 1017, as in effect on January 1, 2019, regarding income from the discharge of indebtedness, are adopted for the purpose of computing Arkansas income tax liability;(11) Title 26 U.S.C. § 125, as in effect on January 1, 2011, is adopted in computing amounts excludible from gross income under the Income Tax Act of 1929, § 26-51-101 et seq., for payments received under a cafeteria plan;(12)(A) Title 26 U.S.C. § 129, as in effect on January 1, 2005, regarding the exclusion from income for dependent care assistance, is adopted for the purpose of computing Arkansas income tax liability.(B) However, no amounts excluded from gross income pursuant to subdivision (b)(12)(A) of this section shall be taken into account in computing the dependent care credit contained in § 26-51-502;(13) Title 26 U.S.C. § 79, as in effect on January 1, 1989, regarding the exclusion from income for group term life insurance is hereby adopted for the purpose of computing Arkansas income tax liability;(14) The following sections of the Internal Revenue Code, 26 U.S.C. § 1 et seq., regarding the exclusion from income of disability and health plan payments, are adopted for the purpose of computing Arkansas income tax liability: (A) Title 26 U.S.C. §§ 104 and 106, as in effect on January 1, 2011; and(B) Title 26 U.S.C. § 105, as in effect on January 1, 2017;(15) Title 26 U.S.C. § 82, as in effect on January 1, 1995, regarding the inclusion in gross income of moving expense reimbursements, is adopted for the purpose of computing Arkansas income tax liability;(16) Title 26 U.S.C. § 119, as in effect on January 1, 1999, regarding the exclusion from gross income of meals or lodging furnished for the convenience of the employer, is adopted for the purpose of computing Arkansas income tax liability;(17) Title 26 U.S.C. § 126, as in effect on January 1, 1995, regarding the exclusion from gross income of certain cost-sharing payments, is adopted for the purpose of computing Arkansas income tax liability;(18) Title 26 U.S.C. § 131, as in effect on January 1, 2003, regarding the exclusion from gross income of amounts received by a foster care provider as qualified foster care payments, is adopted for the purpose of computing Arkansas income tax liability;(19) Title 26 U.S.C. § 132, as in effect on January 1, 2017, regarding the exclusion from income of certain fringe benefits, is adopted for the purpose of computing Arkansas income tax liability;(20) Title 26 U.S.C. § 127, as in effect on January 1, 2017, regarding the exclusion from gross income for employees whose education expenses were paid by an employer, is adopted for the purpose of computing Arkansas income tax liability;(21) Interest or dividends earned or capital gains recognized on a long-term intergenerational security trust created pursuant to this subchapter, except as provided in this subchapter;(22) Interest or dividends earned on an individual development account and matching funds deposited into an individual development account pursuant to the Family Savings Initiative Act, § 20-86-101 et seq.;(23) Title 26 U.S.C. § 138, as in effect on January 1, 1999, regarding a pilot program permitting eligible senior citizens to establish Medicare Plus Choice medical savings accounts, is adopted for the purpose of computing Arkansas income tax liability;(24)(A) Title 26 U.S.C. § 72, as in effect on January 1, 2007, relating to the exclusion from gross income of certain proceeds received under life insurance, endowment, and annuity contracts, is adopted for the purpose of computing Arkansas income tax liability.(B)(i) Annuity income received through an employment-related retirement plan shall not be subject to the provisions of this subsection.(ii) The income shall instead be subject to the retirement income provisions of § 26-51-307;(25) Title 26 U.S.C. § 137, as in effect on January 2, 2013, regarding the exclusion from gross income of benefits received under an employer's adoption assistance program, is adopted for the purpose of computing Arkansas income tax liability;(26) Contributions by an employer to an employee's health savings account within the limitations established in § 26-51-453 shall not be included in the employee's gross income;(27) Title 26 U.S.C. § 134, as in effect on January 1, 2009, regarding the exclusion from income of qualified military benefits provided to members of the United States Armed Forces, is adopted for the purpose of computing Arkansas income tax liability;(28) Title 26 U.S.C. § 408(d)(8) as in effect on January 1, 2007, relating to tax-free distributions from individual retirement plans for charitable purposes for taxable years 2006 and 2007, is adopted for the purpose of computing Arkansas income tax liability;(29) Child support payments shall not be included in the gross income of the recipient;(30) Title 26 U.S.C. § 118, as in effect on January 1, 2019, regarding the recognition or nonrecognition of income for contributions to capital, is adopted for the purpose of computing Arkansas income tax liability;(31) Unemployment compensation benefits paid from federal unemployment funds for calendar year 2020 or 2021;(32) Unemployment insurance benefits described in subdivision (a)(1)(H) of this section and paid for calendar year 2020 or 2021;(33)(A) The following, which are adopted for purposes of computing Arkansas income tax liability: (i) Title 15 U.S.C. § 636A(i), as in effect on January 1, 2021, after the redesignation provided by § 304(b) of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, and the amendment provided by § 276(a) of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, regarding the Paycheck Protection Program loan forgiveness;(ii) Section 276(b) of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, regarding subsequent Paycheck Protection Program loan forgiveness;(iii) Section 277 of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, concerning the tax treatment of certain emergency financial aid grants; and(iv) Section 278 of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, concerning the clarification of tax treatment of certain loan forgiveness and other business financial assistance.(B) Amounts excluded under this subdivision (b)(33) are includable in the adjustments specified in § 26-51-427(2).(C) The Department of Finance and Administration may provide an exception from any requirement to file an information return with respect to any amount excluded from gross income under this subdivision (b)(33);(34)(A) Payments received under the Coronavirus Food Assistance Program 1 or Coronavirus Food Assistance Program 2, described in 7 C.F.R. Part 9, as it existed on January 19, 2021, or under any successor program or programs.(B) A tax deduction or a basis increase shall not be denied as a result of the exclusion from gross income provided in subdivision (b)(34)(A) of this section.(C) Amounts excluded under this subdivision (b)(34) are includable in the adjustments specified in § 26-51-427(2).(D) The department may provide an exception from any requirement to file an information return with respect to any amount excluded from gross income under this subdivision (b)(34); and(35)(A) For a person that is subject to the tax imposed under this chapter and that is a member of an affected business entity, an amount equal to the product of:(i) The income subject to the tax paid under the Elective Pass-Through Entity Tax Act, § 26-65-101 et seq., by an affected business entity of which the person is a member; and(ii) The person's pro rata interest, as reported to the secretary under § 26-65-108, in the affected business entity of which the person is a member.(B)(i)(a) A person that is subject to the tax imposed under this chapter as a resident or part-year resident and that is a member of an affected business entity may exclude from the taxable income subject to the tax imposed by this chapter the person's pro rata share of income subject to a tax paid to another state or the District of Columbia on income of any affected business entity of which the person is a member, if the taxes paid to the other state or the District of Columbia result from a tax that is substantially similar to the tax imposed under the Elective Pass-Through Entity Tax Act, § 26-65-101 et seq.(b) A tax is substantially similar to the tax imposed under the Elective Pass-Through Entity Tax Act, § 26-65-101 et seq., if it is levied on the aggregate taxable income of each of the persons that have an ownership interest in an entity that is engaged in business for profit.(ii) The amount excluded under this subdivision (b)(35) shall be calculated in a manner established by the secretary, which shall be consistent with § 26-51-504.(C) With respect to a company that is a member of an affected business entity, the amount excluded under this subdivision (b)(35) is applied after all other applicable exclusions under this chapter and is not subject to any limits otherwise imposed by law.(D) The exclusion under this subdivision (b)(35) does not apply to taxes imposed under the Arkansas Income Tax Withholding Act of 1965, § 26-51-901 et seq.(E) As used in this subdivision (b)(35), "affected business entity" and "member" mean the same as defined in § 26-65-102.Amended by Act 2021EX2, No. 2,§ 8, eff. 12/9/2021.Amended by Act 2021EX2, No. 1,§ 8, eff. 12/9/2021.Amended by Act 2021, No. 362,§ 1, eff. for tax years beginning on or after 1/1/2022..Amended by Act 2021EX2, No. 2,§ 8, eff. 12/9/2021.Amended by Act 2021EX2, No. 1,§ 8, eff. 12/9/2021.Amended by Act 2021, No. 248,§ 2, eff. for tax years beginning on or after 1/1/2019..Amended by Act 2021, No. 154,§ 2, eff. 3/1/2021.Amended by Act 2021, No. 154,§ 1, eff. 3/1/2021.Amended by Act 2019, No. 910,§ 3712, eff. 7/1/2019.Amended by Act 2019, No. 870,§ 2, eff. for tax years beginning on or after 1/1/2019.Amended by Act 2019, No. 870,§ 1, eff. for tax years beginning on or after 1/1/2019.Amended by Act 2017, No. 141,§ 5, eff. for tax years beginning on and after 1/1/2018.Amended by Act 2017, No. 141,§ 4, eff. for tax years beginning on and after 1/1/2018.Amended by Act 2017, No. 884,§ 15, eff. 8/1/2017.Amended by Act 2015, No. 580,§ 14, eff. for tax years beginning on or after January 1, 2014.Amended by Act 2015, No. 580,§ 13, eff. for tax years beginning on or after January 1, 2014.Amended by Act 2013, No. 1254,§ 4, eff. 8/16/2013, op. for tax years beginning on or after 1/1/2013.Amended by Act 2013, No. 1254,§ 3, eff. 8/16/2013, op. for tax years beginning on or after 1/1/2013.Amended by Act 2013, No. 1254,§ 2, eff. 8/16/2013, op. for tax years beginning on or after 1/1/2013.Amended by Act 2013, No. 1254,§ 1, eff. 8/16/2013, op. for tax years beginning on or after 1/1/2013.Acts 1929, No. 118, Art. 3, § 8; Pope's Dig., § 14031; Acts 1939, No. 324, § 1; 1941, No. 129, § 6; 1953, No. 230, § 1; 1957, No. 144, §§ 1, 2; 1965, No. 570, § 1; 1967, No. 222, § 1; 1969, No. 462, § 1; 1971, No. 226, § 2; 1975, No. 683, § 1; 1977, No. 898, § 2; 1981, No. 817, § 1; 1981, No. 914, § 3; 1983, No. 379, §§ 3, 6; 1985, No. 486, § 5; A.S.A. 1947, § 84-2008; Acts 1987, No. 382, §§ 4, 7-11, 32; 1987 (1st Ex. Sess.), No. 48, § 1; 1989, No. 826, §§ 9, 10, 18-21; 1995, No. 560, § 1; 1995, No. 732, § 1; 1995, No. 1160, §§ 8, 10, 11; 1995, No. 1303, § 4; 1997, No. 328, § 7; 1997, No. 951, §§ 3-5, 6, 22, 23; 1997, No. 1189, § 1; 1999, No. 1126, §§ 16-23; 1999, No. 1217, § 10; 2001, No. 773, § 3; 2003, No. 663, §§ 2-6; 2005, No. 94, §§ 2, 3; 2005, No. 189, § 2; 2005, No. 675, §§ 2-5; 2007, No. 196, § 1; 2007, No. 218, §§ 16, 17; 2009, No. 372, §§ 4-9; 2011, No. 787, §§ 9-14.Subdivisions (b)(31) and (b)(32) were added byAct 2021, No. 248 effective for tax years begining on or after January1, 2019.