February 26th Legislative Update:
The 93rd Arkansas General Assembly returned this week following a full week off due to severe winter weather that brought record low temperatures and significant snowfall across most of Arkansas. This week was busy and included significant activity on a range of measures, including the first major tax cut of the session. The activity this week begins to set the stage for the final weeks of the session, which is expected to carry through early April.
We continue to monitoring several bills, and we continue to represent our policy resolutions in regard to matters before the legislature.
Below is a brief summary of legislative matters we are following. This summary will be updated throughout the legislative session, which is expected to carry on through at least April 9th.
Plant Board
So far, two bills in the legislature propose to reform the nomination and appointment process for the Arkansas State Plant Board. SB80, introduced by Senator Dave Wallace, proposes to remove various industry organizations from the nomination and appointment process for seats at the Plant Board while granting the Governor full authority to make appointments for all seats provided the individuals selected are actively and principally engaged in the business represented by the seat. Another bill, HB1210, introduced by Representative David Hillman, proposes to allow the industry associations and organizations to maintain their respective seats on the plant board while changing the process for nomination and appointment in a manner that would increase the role of the Governor in making appointments. The Hillman bill proposes a new nomination and appointment process that would be similar to the processes for agricultural research and promotion boards in that the organizations would maintain their seats on the board, but they would have to submit two nominees to serve while giving the Governor the power to appoint based on nominees submitted.
Current law states that 9 of the 16 voting members of the Plant Board are to "elected" by their respective associations with no direct role of the Governor in the appointment process.
The Senate Agriculture, Forestry, and Economic Development Committee considered SB80 on Tuesday, January 26th. The bill failed to receive the votes needed to get out of committee. The House Agriculture, Forestry and Economic Development Committee passed HB1210 out of committee on Monday, February 1st. The full House passed HB1210 on February 2nd with a vote of 97-0. The bill is now under consideration before the Senate Agriculture Committee.
Discussions continue among Senate Ag Committee members and sponsors of the two plant board bills, and it remains possible that a third bill may emerge in the coming days to address the nomination and appointment processes of the State Plant Board as well as the general composition of the board.
HB1210 is consistent with the policy resolutions of the Ag Council, which states that "we support changing the nomination and appointment process for Plant Board seats so they are all consistent with the processes related to research and promotion boards where the industry organizations would recommend nominees to serve and the governor would appoint." The Ag Council has additional policy language related to the composition of the board that supports the addition of two additional row crop farmer seats, which reads, "we support the addition of two new row crop farmer seats to the Plant Board to represent producer interest organizations, including the Ag Council."
The Arkansas State Supreme Court is currently considering litigation that directly correlates to the Plant Board's composition as it relates to the nomination and appointment process. Oral arguments are expected to be heard in the coming weeks. It's not clear on when a decision would be reached by the court.
HB1471 a bill by Representative Hillman to amend the abandoned pesticides disposal act to allow for an increase in registration fees from $50 per registered product to up to $100 to provide additional resources to the abandoned pesticides disposal program, which helps collect unwanted pesticides throughout Arkansas. This bill was approved by the House on February 23rd with a vote of 83-9, and it now goes to the Senate Agriculture Committee for consideration. We support this program and the important benefits it provides in providing safe and environmentally responsible method of disposing of unwanted pesticides.
Tax Policy
The Arkansas General Assembly continues to consider a broad range of legislation related to tax law, with many impacting agriculture. We will continue to monitor bills under consideration and advocate for tax policy consistent with our policy resolutions. The House and Senate Revenue and Tax Committees continue to take considerable time examining various legislative proposals related to tax policy. Tax policies with budget impacts will likely be held until the legislature has more clearly determined its budget and how much room there is for tax changes that may impact revenues.
However, this week the Arkansas General Assembly did approve a significant tax relief measure for farmers and agriculture businesses that now goes to the Governor for his signature. The measure by Representative Eaves (HB1361) would exclude from the definition of income the financial aid that a taxpayer received through certain federal coronavirus relief programs, including loan forgiveness under the Paycheck Protection Program (PPP); Small Business Administration grants under the Economic Injury Disaster Loan program; and payments received under the Coronavirus Food Assistance Program (CFAP).
Below are a few of the tax policy bills we continue to follow. Additional proposed bills are still expected to be introduced in the near future.
HB1314 a bill by Representative Hillman to enhance the Water Resource Conservation and Development Act. This bill proposes to expand on tax credits available for landowners looking to make land improvements and investments in eligible irrigation systems to reduce groundwater consumption. This bill is consistent with Ag Council policy resolutions.
HB1361 a bill by Representative Eaves to exclude from income for state income tax purposes income derived from certain federal disaster aid programs beginning in tax year 2019, including paycheck protection program (PPP) and other COVID related emergency aid such as the Coronavirus Food Assistance Program (CFAP). Market Facilitation Program (MFP) payments in tax year 2020 are already exempt from state taxes under Arkansas law 26-51-316. This bill was approved by the House on February 22nd (96-0) and the Senate on February 25th (33-0), and now heads to Governor Hutchinson for his signature. This bill is consistent with Ag Council policy resolutions.
SB253 a bill by Senator Beckham to amend the sales tax treatment for certain utilities used by certain qualifying agriculture structures. The bill expands eligible utility uses in agriculture. It is pending before the Senate Revenue and Tax Committee. This bill is consistent with Ag Council policy resolutions.
HB1209 a bill by Representative Jett to Create The Elective Pass-through Entity Tax Act; To Impose A Tax On Pass-through Entities; And To Exclude Certain Income From Gross Income For Pass-through Entities.
Analysis from Arkansas State Chamber of Commerce: This bill will help about 40,000 Arkansas businesses reduce their federal taxes by an estimated $50 million or more while generating $4 million in state revenue. The businesses impacted are those set up as passthrough entities—the owners pay tax at the individual level on their business income. Most businesses are set up this way. Under federal law, businesses can deduct state and local taxes (“SALT”) they have paid without a cap, but the individual SALT deduction is limited to $10,000 for individuals—this is the “SALT cap.” HB 1209 would let passthrough businesses choose (elect) to instead pay Arkansas tax at the entity level, as a flat tax at the top rate of 5.9%, such that the Arkansas tax should be 100% deductible for federal purposes. The IRS recently blessed the validity of this approach in Notice 2020-75. Several states have already adopted such options, including Oklahoma and Louisiana, and more are expected to adopt them in the coming year. This bill awaits consideration in the House Revenue and Taxation Committee. This bill is consistent with Ag Council policy resolutions.
HB1468 a bill by Representative Jett to create an Independent Tax Appeals Commission for Arkansans. This bill would lead to the creation of a new commission to provide for an independent appeals process to resolve disputes between the Arkansas Department of Finance and Administration and taxpayers. The legislation proposes to create a three person commission comprised of individuals nominated by the Society of Certified Public Accountants, the Arkansas Supreme Court, and the Arkansas Bar Association. The Governor would appoint the individuals to serve on the commission from a list of nominees provided by each entity. This bill awaits consideration in the House Revenue and Taxation Committee.
Flood Control
HB1251 a bill by Representative Bentley to amend the Law Concerning Improvement District And Protection District Reporting Requirements For Collection Of Assessments By County Collectors. This bill was approved by the House Agriculture Committee on February 3nd and the full House on February 4th with a vote of 94-3. It now awaits consideration before the Senate Agriculture Committee. The Senate Agriculture Committee referred the bill out of committee for consideration before the full Senate.
HB1250 a bill by Representative Bentley to amend the Law Concerning Assessments In Certain Levee Or Drainage Improvement Districts. This bill was approved by the House Agriculture Committee on February 3nd and the full House on February 4th with a vote of 75-15. It now awaits consideration before the Senate Agriculture Committee. The Senate Agriculture Committee referred the bill out of committee for consideration before the full Senate.
HB1249 a bill by Representative Bentley to Create A Procedure For The Dissolution Or Abolition Of A Levee District. This bill was approved by the House Agriculture Committee on February 3nd and the full House on February 4th with a vote of 75-15. This bill was approved by the House Agriculture Committee on February 3nd and the full House on February 4th with a vote of 96-0. It now awaits consideration before the Senate Agriculture Committee. The Senate Agriculture Committee referred the bill out of committee for consideration before the full Senate.
HB1248 a bill by Representative Bentley to amend the Law Concerning Consolidation Of Certain Levee Districts And Boards. This bill was approved by the House Agriculture Committee on February 3nd and the full House on February 4th with a vote of 95-0. The Senate Agriculture Committee referred the bill out of committee for consideration before the full Senate.
Broadband
SB74 (Now Act 67) a bill by Senator Hill to amend The Telecommunications Regulatory Reform Act Of 2013; And To Declare An Emergency. This bill proposes to expand on government entities abilities to invest in and develop broadband communications systems. This bill has passed the Senate and House, and it was signed by Governor Hutchinson as Act 67. This bill is consistent with Ag Council policy supporting expansion of broadband services in Arkansas.
Other:
Sale of State Lands
SB241 A bill by Senator Caldwell to Amend The Law Concerning The Sale Of State Land; To Establish A Process To Sell State Land; And To Declare An Emergency. Referred to the Senate State Agencies and Governmental Affairs Committee.
Ownership of Agricultural Lands by Foreign Entities
SB312 A bill by Senator Blake Johnson to restrict foreign ownership of agricultural lands in Arkansas. Bill referred to the Senate Agriculture Committee for consideration.
Daylight Savings Time
HB1017 A bill by Representative Rye to provide a process for permanent adoption of daylight savings time. Bill approved by the House on February 9th with a vote of 71-5. Bill now before the Senate State Agencies and Government Affairs Committee for consideration.
State Meat Inspection Program
HB1315 A bill by Representative Vaught to create a State Meat Inspection Program; To Amend The Arkansas Meat And Meat Products Inspection Act; To Transfer Authority Over Meat Inspection To The Department Of Agriculture; And To Declare An Emergency. This bill is consistent with Ag Council policy, which supports establishing a meat inspection program to expand on feed markets in Arkansas. This bill was approved by the House Agriculture Committee on February 3nd and the full House on February 4th with a vote of 95-0. This bill is now pending before the Senate Agriculture Committee.
Energy & Public Service Commission
SB23 A bill by Senator Johnson to establish the Electric Cooperative Corporation Self-regulation Act. This bill proposes to exempt electric cooperative utility providers from being subject to Public Service Commission (PSC) regulations. This bill is pending before the Senate Insurance and Commerce Committee.
HB1055 A bill by Representative Fite (same as SB23). This bill is pending before the House Insurance and Commerce Committee.
Arkansas Economic Development Commission & Trade Policy
SB252 A bill by Senator Garner to prohibit the Arkansas Economic Development Commission (AEDC) from establishing or maintaining an office in China. This bill was voted down in the State Agencies Committee on February 4th. This bill is not consistent with Ag Council policy as it aims to diminish government resources supporting the trade of agricultural commodities to one of the largest export markets for Arkansas grown commodities.
Constitutional Amendments
February 10th marked the final day to file measures aimed at amending the Constitution of the State of Arkansas. In total, 43 such measures were filed for consideration. The legislature will consider the measures. They may refer up to three of the proposed amendments for voter consideration.
Full List of Proposed Constitutional Amendments
Appropriation Acts
HB1084 An Act For The Arkansas Rice Research And Promotion Board Appropriation For The 2021-2022 Fiscal Year.
HB1075 (Act 13) An Act For The Arkansas Corn And Grain Sorghum Promotion Board Appropriation For The 2021-2022 Fiscal Year.
HB1074 (Act 12) An Act For The Arkansas Soybean Promotion Board Appropriation For The 2021-2022 Fiscal Year.
HB1073 (Act 11) An Act For The Arkansas Wheat Promotion Board Appropriation For The 2021-2022 Fiscal Year.
SB37 (Act 4) An Act For The Arkansas Catfish Promotion Board Appropriation For The 2021-2022 Fiscal Year.
SB221 An Act For The University Of Arkansas - Division Of Agriculture Appropriation For The 2021-2022 Fiscal Year.
HB1178 (Act 39) An Act For The Department Of Agriculture - Arkansas Natural Resources Commission Appropriation For The 2021-2022 Fiscal Year.
SB164 An Act For The Department Of Agriculture Appropriation For The 2021-2022 Fiscal Year. The appropriation bill was amended on February 23rd to allow for the use of spending up to $750,000 for a meat inspection program and $200,000 for purposes of carrying out peanut inspections for the peanut industry.