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Fight Emerges Between States & Fed on State Tax Cuts

A provision included in the recent COVID-19 aid and economic stimulus package approved by Congress placed restrictions on states' abilities to cut taxes. The provision threatened to withhold federal funding from states that chose to cut taxes while receiving federal aid. States are challenging the provision with lawsuits and many, including Arkansas, are scrambling to determine what to do regarding tax policy. Arkansas is in the midst of a legislative session, in which the legislature is considering a number of tax cut proposals that may be subject to this federal restriction. The U.S. Treasury, which is tasked with issuing guidance to states for this provision, did indicate that states could cut taxes so long as they use their own funds to offset those cuts.

The Ag Council of Arkansas continues to seek additional tax cuts for its members, including legislation (HB1314) aimed at enhancing the Water Conservation and Development Tax Credit, which provides tax credits to farmers for making investments in water conservation activities and projects such as land leveling, development of surface water reservoirs and tailwater recovery systems, and irrigation monitoring and control systems and other conversion related projects. The tax credit is managed by the Arkansas Department of Agriculture's Natural Resources Division.

More below:

https://apnews.com/article/joe-biden-coronavirus-pandemic-janet-yellen-missouri-tigers-mens-basketball-laws-726254db3ed675ee361e1a9d367b7e8b

https://news.yahoo.com/ohio-sues-biden-administration-over-211204073.htmlhttps://www.cbsnews.com/news/treasury-says-states-can-cut-taxes-under-massive-covid-relief-bill-but-theres-a-catch/

http://www.tucsonsentinel.com/local/report/031521_arp_ducey_tax_cuts/federal-covid-aid-package-could-block-duceys-tax-cuts-arizona/

https://www.wsj.com/articles/democrats-to-states-no-new-tax-cuts-11615333751