Senate bill moves franchise tax administration back to Secretary of State from DF&A

Two years ago, the state Legislature thought it would be prudent to have the Arkansas Department of Finance and Administration take control of the administration and collection of franchise taxes. The transfer of those responsibilities has not gone smoothly.

SB 525, co-sponsored by Sen. Jonathan Dismang, R-Beebe, would move those duties back to the Arkansas Secretary of State’s office. The Senate Revenue and Tax Committee voted Monday (March 15) to send SB 525 before the entire legislative body.

Before the vote, Dismang told the committee that “in theory it is a great idea” to have only one state entity collecting taxes, but the transfer has not gone well. The software used at DF&A has caused some tax filers hours long delays, which in turn has led to greater tax preparer costs for businesses. It has also led to greater call volume than in the past.

“The switch to DF&A has been pretty burdensome,” Dismang said.

Prior to the vote, Sen. Mark Johnson, R-Little Rock, complimented legislators on shifting so quickly to correct a problem that arose from what was previously considered a good idea.

“I always think it’s great when the government admits it made a mistake,” he said.

DF&A noted there will be no fiscal impact from the bill. It was also noted that no jobs were lost when the original bill was passed, and it will only require a re-arrangement of job duties within the offices.

The committee listened to HB 1457, a bill that would give parents of a stillborn child a $500 tax credit. Rep. Les Eaves, R-Searcy, presented emotional testimony concerning the bill that has been dubbed Paisley’s law, in honor of his granddaughter who passed away just hours before she was supposed to be born.

Paisley’s parents found out in the summer of 2018 that she would be born on Feb. 6, 2019. A day before her birth, the couple learned that her heart had stopped beating.

Eaves said that parents of stillborn children still go through the enormous costs associated with having a child such as medical care and buying things such as clothes and diapers that will be needed once the child is born. Parents of stillborn children have additional costs such as a funeral which is an unbelievable burden at the worst moment in a parent’s life.

DF&A estimated it will cost the state $139,000 per year in lost tax revenue if the bill is passed. There are an estimated 275 stillborn babies born in Arkansas annually.

The committee did not take a vote on the bill. Earlier in the session, members opted to wait until closer to the end of the session to vote on bills in committee that will impact the state’s budget.