Revenue & Tax - Senate

Sturch. The. We just come thank you. If if you get to is that mark from. Mr man can you hear me the area with your permission can I as president Smith to join. Yes Sir. Who's going present Senate bill. Okay. Thank you Mr chairman thank you Committee James Sturch Senate district nineteen hi you've heard this bill course before it's the one that adds coal as an exemption to manufacturing cost you recall several years back we added several different things with regard to direct manufacturing processes as tax exempt this would simply add code to that just a handful of people that use in the state fiscal impacts about eight hundred thousand dollars fully implemented but as you know in our political climate today I fully anticipate that that number to go down as few and few people are using coal and direct manufacturing so I'll be happy to take any questions. Members of the questions seeing seeing none. What. And that's in twenty three. Johnson. Johnson you have a brief question. Primarily. Citadel's so I'm not. We're not this. Our product. This was in response to a question Johnson all in favor say aye. blows NO graduate. The motion passed. Senate bill one eighty one Senator Garner. The short presentation or just. This is the. All were you using what side of the school right. One one nine. One five. Second by Senator Ingram discussion on the motion. All in favor say aye opposed no congratulations bill passed. House Bill fourteen fifty seven. For. And your presenting fourteen fifty seven correct. Give us. This will will go. You will make sure presentation. This law. it has. Packed right. There was an all that there maybe parents who are unmarried saw one thousand nine. Or the questions from firmest representative age old. I have a motion do pass. By Senator Ingram second motion to Johnson and discussion on the motion all in favor say aye. Lows NO graduations for. no spill thirteen seventy four. Senator Dismang you're wrong that. Thirteen seventy four. two times per year. Further questions. Seeing what's will of the committee. I have a motion to press the centre Johnson. Sekhemre Senator Hickey further discussion on the motion. Seeing none all in favor say aye. Opposed no. Graduations Senator the first bill. Test test test. Now is the time for all good men to come to the aid of their country. And we're in desperate need of aid. Senator Teague did you hear that. You do have your phone turned off right correct. Thank you. Senator Dismang your. S. B. six eighty. Thank you Mr chairman committee members of the Senate bill six eighty seeks to create a tax credit based scholarship program for kindergarten to twelfth grade students whose household income is below two and a percent of the federal poverty level the tax credits can only can and not exceed the entity's tax liability and the entity cannot also receive a charitable contribution when they receive the credit the program is capped at two million dollars does not contain an accelerator and will impact the lives of roughly two hundred fifty children if the credit is awarded it can only be cared for three carried forward for three years these credits will be awarded on a first come first serve basis and DFA will service the credits in the application process the scholarships we administered by scholarship granting organization it exempts those that are currently participating in a similar program in those that are currently in a private at a private institution. The scholarship shall not exceed eighty percent of the foundation funding for students applying from kindergarten through eighth grade and ninety percent of the foundation funding for nine through graduation there will be oversight of both the scholarship granting organization in the instance institutions accepting the children. This oversight includes annual audits and required annual testing the participating students further it requires an annual disclosure of this testing results. I don't want to get lost in the weeds here today what we're talking about is is really not that complicated I am simply presenting a bill that allows parents to make decisions that are in the best interest of the child to sit up lives in their particular situation. I realize we have a number of folks signed up and I and today I can pretty well anticipate we're going to hear is the camel under the at Campbell's nose underneath the tent that somehow that this is the beginning of the demise of public education the State of Arkansas that somehow that this is going to be a redirect funding that would have otherwise went to public schools. And then ultimately that again I'm just undermining public education as a whole. None of that's accurate. Again it's simple and it's not complicated this is about allowing parents to make decisions for their children poor children are not the property of our public schools. All kids are unique and all parents deserve to have the opportunity to best shape their child's future and one thing to keep in mind if everything is going well for that student in a public institution there will be no students leave public school system. I am not here to condemn public education quite the opposite. I'm a part of I'm a product of public education I graduated from the B. B. public school school system my dad was a principal and my mom was a kindergarten teacher. I believe that in most cases public schools are the best place for a child. However I don't believe and I know that is not always the case. I just want you to put yourself in a parent's use who's struggling whose child is struggling. They're in crisis or approaching the crisis situation. All children are unique their situations are unique in their needs are unique I know each of you on a personal level you know my story. You know why I'm here. I also know that each one of you would do everything that you possibly could the better the outcome of your child's life. Each of you have the opportunity to do that you have the means to do that others are not as fortunate in they should mean that we turn a blind eye to their struggles. Experiences matter situations matter in opportunities matter and with that I'll be happy to take any questions. Are the questions Rapert. Thank you senator man appreciate the bill you know we've talked about it one of the things he keeps getting thrown up people send the an email out and and I've I've answered these and I understand that everybody is as protective and I apologize I've been run a bill so I didn't catch the first patient. The the bottom line is isn't it a false flag so to speak and somebody will say that if we allow two million dollar credit that we are somehow interrupting the education budget is it not true that you basically can say in that argument that if we do a two million dollar credit for anybody that we're somehow destroying all of the budget for everybody that a bit of a false flag yeah I would anticipate if you're going to hold true to that argument they there should be folks in this room every single time that we consider tax credit tax cut we just passed out several this morning and I didn't hear anything. And again we're talking about two million dollars. This is not the end of the world for public schools in the state of Arkansas I can assure you of that what is the beginning for two hundred fifty families. Thank you senator. Are there other questions. Seeing none we have several people to speak on the call up in order for and against I want to remind the with the people that are here to speak. Most of us have another meeting. At ten thirty and so I'm limit the your term to three minutes per side and so now we will call up my commandos. To speak against. Mr Smith will start your time. As soon as you introduce yourself. Senator Johnson motion. Limit each Speaker to two minutes of already given you one two minutes what do you have on it I gave them three I appreciate my generous chairman off concur with that thank you. She remains as chairman of the members of the committee my name's Mike Hernandez executive director for the Arkansas association of educational administrators I do appreciate the the words that Senator Dismang brought in and how this is a very contentious issue that sometimes they're they're always is this conversation of a zero sum game and you know I don't think that I'm I'm here to talk about budgets or anything like that I'm more concerned I guess the concerns were allies that I like to think that you know this body as we work through providing an adequate education to children is that we passed many regulations that they're important you know when I go back to my office and I see the law but it's about the et seq I believe all those things are important and we do those things I hope that betters lots of kids and make sure that there is accountability there is oversight there are specific things that we expect the students to learn and engage in activities that are are meaningful and help them in life I think my major concern with this is that we seem to be saying and and Senator Dismang said this is this is real simple it's not complicated not agree I feel that you know the laws that we do have on the books for schools are complicated and and sometimes districts the struggle to implement those and sometimes we don't do kids the best service But at the same time you know I feel like when I look at this bill and I see that the things that districts have to do or the schools private schools you know they have to follow health and safety laws they have to give a norm referenced test and we really focus on parent satisfaction and I think parents inspections important but I feel like you know we're abandoning what we say is important and so how do we I have trouble reconciling we say this is important for this subset of kids that everybody has to follow these regulations and over here we have a much less condensed version of what we feel that it's important for kids And so that's just one of the concerns that that you know we race with this bill. Thank you thank you. Of. Krister smarter will speak for. Come forward please. We can come around. They're gonna pass over on. Are you will pass over. Thank you we appreciate that very much of. Paul. Query is that correct. You're here to speak against. What's the genetic record you heard my instructions. You have three minutes just because of the people passed over you don't get six. Yes Sir time starts when you increase your Senate. My name is Dale query on Director of the Arkansas really education association and again as Dr Hernandez said we appreciate the the. Passion for kids that you have brought forward and what what our position is as as you had mentioned public money to private schools is always an issue with us with public schools what we would like to see doctor Hernandez and I have talked about this and Dr Abernathy has talked to the governor before he retired about getting together and Education Commission working together and if if a voucher program is part of what this what's best for kids in the State of Arkansas instead of trying to have one little piece one little piece there do a comprehensive education program for all kids in the state of Arkansas excuse me are you speaking on the bill. Yes Sir. I didn't I didn't take it that way. if you will speak on the bill yes Sir. My my. Position that. Is to be here to represent my schools as opposed to a voucher program. Thank you thank you. Of Kay and Valerie. The Norte's please come for police. Good morning Mr. I'm sorry I. Valorie Phillips in our bass. Good morning Mister chair and members of the committee today thank you for having given me this opportunity to speak on behalf of myself Valerie Phillips an artist and my seven year old daughter Vivian grace he was attended by the private and now the public school sector in Bentonville Arkansas as well as many other students and families across Arkansas as a mother with a second grader Vivian Gracie was seven years old currently and public school in a Bentonville school district school system she is failing miserably she is in kindergarten she is on kindergarten level the only answer I get from the administration is that they do not bill students or give high marks but they send them on to the next level and hope the next teacher can catch them at. A small group and special education and public school consists of fifteen to eighteen students were as private as one on one and the private school sector where my daughter formally agenda northrock Catholic academy Division grace was tested the first week of school for any educational development don't developmental delays Vivian received occupational therapy twice a week for sixty minutes one on one and the entire year the private school sector has an average of eighteen point one percent higher reading scores and three point one percent higher standardized scores than public schools I'm asking you today Mister chair to give every student a chance at getting a superior education attics. An experience whether it be in the parent private or public school system are we going to wait five ten years from now. What the students to do it to have a better education smaller classrooms because the average class ring. Nineteen students. At one teacher and a teacher's aide is in private schools and twenty seven of thirty students and public schools with one teacher John Davis John Davis said education is not preparation for life education is life itself thank you. Thank you also have and my daughter's math scores which have gone down tremendously for this act year I also have her report card and the rights under the idea for and getting Health and this is her picture thank you. Secretary key. Would you mind going to the end table please. Mr Johnny Cade part of education thank you and. We have heard testimony for and against I'd like to hear. From you as to whether you think this is going to be detrimental to the School Fund okay yes Mr chairman of in our review of Senate bill six eighty of the Department finds a bill be reasonable and responsible approach to providing additional educational choices for low income families in Arkansas. Because the aggregate tax credit is capped at two million dollars this bill does not create an impediment to our responsibility under the constitution to fund our public schools and if you look at it as a matter of policy it's consistent with what the state has done For for a number of years with respect to state funding of vouchers for private pre case as well as state funded scholarships for private institutions of higher education so to your to your question we we don't see this bill is getting in the way or interfering with our constitutional duty. I Senator Ingram you have a question for. Secretary K.. Secretary of the tax credit does that just hit general revenue or do they come back in of credit of the eighties Fund it is just a general revenue. Other questions. Seeing thanks Secretary of Mr hearing. Thank you Mr chair Paul hearing department of finance administration. If a I worked on the language of Senate bill six eighty without that Senator Dismang as well as our partners with department education this bill would create a income tax credit for one hundred percent of cop eligible contributions to a scholarship granting organization the credit is capped at two million dollars per year D. if they would be responsible for issuing and maintaining the the inventory of credits. A the Credits are eligible for tax years beginning January one to two thousand twenty two and following so the revenue impact that DFA has a two million dollar FY twenty three revenue impact we are also anticipating our tax credit section that we would need some additional personnel the additional cost for those personnel are indicated within the fiscal impact statement approximately one hundred thousand dollars a year in payroll costs of course of the division of Education would depart Education probably also have some cost well but we did not have those available for purposes of this fiscal impact statement we'd be happy to answer any questions or or other questions for Mr. Saying thank you thank you senator just want your clothes please. Members that be on a personal level. This probably is not going to pack each of us very much after we adjourn. we can sit here when do nothing when vote no. And on the way out the door you probably get a correct congratulations are in at a border Pat on the back like we someone we don't like we want something. This is in the game. And it matters. If you vote yes. Your vote will mean everything to two hundred fifty families this bill seeks the impact. Your vote will help a family make a financial decision that will potentially forever impact the outcome of their child's future. You'll probably never be thanked they're not gonna patch on the back they're not going to give you that a boy. But they're always be grateful for the help that you were able to provide with your vote. Into them this is in the game. We can sit here and pretend that we know better. That these folks behind me know better and folks that testified no better. But we don't and they don't the parents do. And with that I'd ask for you to vote yes Committee do pass I have a motion to press person this morning the second by Senator Johnson is your discussion on the motion. Seeing none was will of committee or excuse me all in favor say aye. Opposed no. Your ruling that said the bill is passed. Senator Dismang you have. Okay would you like Medical Center in or out Senator Hammer we're here to hear Senate bill two forty four. For. Hammer. Thank you Mr Kim Hammer state senator district thirty three. Okay go and present if you want to consent. Thank you. Currently the way the law right sorry currently the way the law reads textbooks are excluded from having taxes charged on them the problem is that with the current trend that we are experiencing a public schools or all schools for that matter we are moving away from textbooks and moving more toward electronics we've realizes more than ever during the pandai Dan make with distance learning the requirement for additional purchases of either tablets or other Chromebooks to be able to go out to students so that they can get their required homework done has increased substantially and it's a direction that we're not going to go back to they should keep limited number of textbooks as I understand it but the trend is going toward electronic some of that also I might throw in this thought is somewhat in the form of an unfunded mandate that we require certain courses to be taught that you have to have those tablets or have those devices in order to be able to teach those on and so it was presented to me and representative eleven to present this bill that would add electronic devices to that group or category which would not have checks charged on them or did meet this morning with the FAA to act get a better explanation of the fiscal impact also head of the department of ed in the room and also our fiscal fiscal analysis individual from the bureau was in the meeting along with representatives eleven and I had superintendent Karen Walters from Bryant school district who presented this idea to me on the phone to get a better understanding some of the things I'd like for you to know that may help you make an informed decision but also all hopefully a positive decision is that right now and ask in all of the technology advices are grouped into one category one coating. So that would include the student devices in instructional materials which would be the tablets and the items that I reference but also it would include your printers it would include devices that are bought for administration or for teachers it's all grouped into one category so what makes it difficult is to determine exactly how much of that is separated out to just reflect that of the student device instructional materials the tablets or chrome devices and so the number that you have before you is a worst case scenario because you got to throw all that stuff in there and they did the best yes they could because they didn't have the code to split those devices out the other thing elector when there and the question was raised by representative eleven and that is we need to understand also that schools purchase on a cycle and so they might purchase devices now it might be four years before they did it so the number you have on you is a worse cantor's case scenario snapshot of what it was like based on what they could get for information now it be a little bit risky to say but I think it's fair to say this would be the ceiling and would go down from there but they're gonna put codes in order start tracking this Mister chair I would prefer if the chair would allow maybe somebody from the Department just come up substantiate everything I said because I took that out of a meeting that happened nine o'clock this morning make sure I haven't stated anything in accurately. Mr. Thank you Mr chair members of the committee. We did earlier in this year released a fiscal impact statement for Senate bill two forty four and we have had a follow up conversation with senator Hammer as well as representatives from the department of education and we did rely upon data that was derived from the department of education as to their technological expenditures so we have no reason to disagree that currently there coding does not differentiate on their expenditures between staff computers and technology verses hi computer that would be used for instructional materials so we agreed that the revenue impact that we provided approximately four and a half million would be a hi number. Likely would be less because those staff computers would not be eligible for the exemption. Mr. Any idea about what percentage at the show don't try to guesstimate. That would I'm not asking to hold anything true analysis or but. We understand it's very valid question we drove obtain this data from education they would probably I'd be the best ones to be able to provide an estimate of of what the percentage actually would be of instructional technology versus staff related technology but our our our estimate was based upon their data it's my understand they do not currently differentiate between the two types of staff for purchases between staff computers and and educational computers. Okay. And senator Hammer we don't work with them if if this passes that we're gonna work with them between now and before this goes across Florida. Try it is a more exact number yes Sir but cannot do my favorite text from great Rogers from the part of it because. That okay and it might you will if you can read the in important part that. It's important the only part I said could you put a code in and start tracking or would you need this bill to start he said I need to check with my folks to see how soon we could add codes and then I said what could you do it now without legislation he said yes I would need time to get it out and notice to the destruction of the change for the districts to start and I'm and I'm and not now for the districts to start doing that he also follows a great bill cultural of passion but anyway not that part but the so we really don't know until they put those coach him because it's not anything that's ever been asked for okay thank you in this sector key SO you nodding yes you're okay all right. Or other questions from Sen here. Seeing none. Which will the body. I have a motion do pass or center. Teague. Second by Senator Dismang discussion on the motion saying none all in favor say aye. PostsNo graduation certificates to fill thank you Mr chairman of the committee and I'll get. With. Discussion one we let people get out okay non controversial. Okay Senator Wallace. S. the five sixty six and there is an amendment to your. Is the. Thank you Mr mon let me get amendment passed out. Members if the you saying the amendment. I have a motion to. Motion to adopt the scent this mind second both Senator Teague all in favor say aye. Repose NO change what you're about to present five sixty six as amended yes Sir thank you Mr members. That. We have a promotion we have a motion do pass. I have a second. I have a second Senator Rapert. Discussion on the motion. Seeing none all in favor say aye closed opposed no progress thank you senator. Is amended. Thank you all again members with that we are adjourned till Monday. For your. Sorry about that. Getting a little ahead of myself Senator Dismang has. four eighty four. Gavel back in I'm sorry I'm. I misunderstood what I was told. Yes I'm sorry and I apologize so if I can just to. Yeah okay. All. Bring your check make sure we're maximizing. What were because this won't be pertinent to the camera if we can I like to go in run seventeen forty three that was a bill that was agriculture yesterday there it does not have revenue impact utilizes what we've traditionally used for the rebates in the past four million dollars so they can get that bill pretty quick and then forty four is one that we do need to discuss and. I mean I think we should take action on four eighty four but I want to make sure but is comfortable with what it does sorry Committee. We're still check and see for or we live our lives okay Senator per se and your presenting for eighty four dollars if we can jump to seventeen eighty four forty three because that one shouldn't be controversial I hope the. Until she's come back. If we're gonna go okay members this bill was originally signed to the active committee because it does utilize economic development I resources there was discussion that ever I want to be comfortable on the revenue impact so that was why it was re referred to this committee the bill seeks to amend the state's current film tax incentive to allow productions the choice to either apply for a rebate or transferable tax credit this change provides the state flexibility in the types of incentives we offer to attract new investments into Arkansas this bill caps the amount of tax credits the state can issue at four million dollars per year which is the historical average that DFA reported to be have be provided through rate rebates to the incentive program the majority the bill the substance of the the incentive remains unchanged it does just Pacific Lee twenty percent Senate for qualified expenditures seems current law additional ten percent for in state hires that's the same as the current law an additional ten percent for veteran hires that part is new an additional ten percent for qualified clean expenditures with majority on veteran businesses that part is awesome and but again members this is historically what we've sent out in the rebates in the past wonder creates instability and I guess greater certainty when folks are looking to do this type of work in Arkansas the rebate system I was pretty muddy to work itself through and that's the reason to pivot to other credit The rebate portion would still be viable in particular for larger projects if those were to be funded they would come before us said A. L. C. in the government request much like we did on true detective Times let me maybe two years ago. But with that I'll be happy to take any questions and if they may be able to help with some clarification I didn't wasn't able to provide further questions. Promotions motion do pass as soon the Senator Rapert to second class and write the second by Senator Rapert. Discussion on the motion. All in favor say aye. opposed no congratulations you passed house bill seventeen forty three. I still gonna Corps. They have. Senator not so this is Senate bill forty four we kind of heard half the coin the other day in committee were we talked about at the company was owned out of state held out of state and we would if they are in the income of the state of Arkansas then we would allow the employer to withhold or mandate that the employer withhold Arkansas state income taxes I mean that makes sense but you also then have to consider the flipside of the coin and that is a recent ruling that the FAA issued that said that if the corporation is based in Arkansas or the entity's base in Arkansas on their employed out of the state then we would impose income taxes on those folks also this is a complicated issues one that the even the feds try to wrangle with a thing for ten years essentially with no avail and so states have been trying to do their best to manage the situation so first there's two components there's the mobile work forces so you can think about that is someone that works in multiple states in another job Arkansas is one of the most restrictive in regards to that in the country to work one day in Arkansas you would be subject to income tax state of Arkansas this seeks to expand that out I would ask mapbox map to clarify anything I say to thirty days which is in line with what some other states have done that and again we can elaborate on that more later it also deals with remote work force which is essentially what we kind of lead with in the discussion I right now only six states tax based on the location of the employer so again that's an Arkansas based company that has someone working out of state were one of only six states that have been in place in the country at this point. With that I'd like to that I think it be beneficial to have Matt Bachand public DFA provides and testimony. Thirty one. Sure Sir for the record please. Thank you Mr chair of Matthew Bach tax counsel Mister chairman of the committee tak mapbox tax counsel for the state chamber. so these to this bill as I agree with everything Senator Dismang said these are are tricky technical issues going on how how we tax income of employees who are crossing state lines you got to so the general rule in Arkansas Justice background we tax residence on worldwide income. And you get a credit for taxes paid to other states so that there's no double tax hopefully the flip side of that is for non residents you tax them on income from Arkansas sources. So you just women working Arkansas straightforward but once you start dealing with interstate things it gets tricky right now Arkansas is considered to be one day state for non residents if you're coming into the states you know like a trades person construction worker technically the law says that you need to immediately file you should you might be filing hundred dollar income tax return. The reality is that that's probably not realistic people generally aren't doing that unless they're one days as a superstar performer with serious money behind it but at some point and we don't have a bright line rule. They've got a file. What this does the background Senator Dismang said is that for ten years I've been trying to get this done at the federal level most of the Arkansas delegations been co sponsor of it it passed out of the house but uncertain senator from New York's always been able to kill it in the Senate given the current makeup of Congress that's not going to happen at that bill's not going to go through any time soon at the federal level. So what's happened is national taxpayer groups the American institute of CPAS the council on state taxation from y'all got a letter this morning are suggesting states to do this on a reciprocal basis so what this would do would say if the other state either doesn't have an income tax or adopts a similar bill in Arkansas will give a bright line thirty day threshold before you have to start paying Arkansas income tax but only so long as the other states doing it for us it's reciprocal so you right now it would probably apply to eight nine ten states the states without an income tax Illinois and a handful of others the hope is to build momentum to get to a situation where you know in Arkansas we've got lots of great skilled trades people are into businesses frequently all the time where they're sending people across the region across the country for a day or two to to work on complex machinery do some sort of skilled trade this again it in some states it will go into effect immediately with respect to others they would have to do something reciprocal but what it does what it would make them have to file hopefully only one maybe two or three returns if you're just doing a little job somewhere else instead of technically your CPA telling you well the law says you need to be finally returns in ten or fifteen states thousands of dollars of return cost but the reality is that well we just kind of got to be realistic ball park on it see what your employer wage withheld it puts employers in a tough spot puts employees in a tough spot since it's reciprocal the hope is that this would be relatively revenue revenue neutral on the mobile workforce peace. Centering or you have a question. Yes What me through how you got to border communities of here taxes in Tennessee that neither have an income tax with that of exasperated exasperating the of. People working across the state line that didn't have an income tax. Working on Arkansas projects immediate would drive people from your community to go across the border where there what an income tax. But the fiscal business because you are that the physical business would be in Arkansas I mean. Am I missing something there yeah I I hear what you're saying and and I appreciate that it's or there's two sides of the coin here could you also have a rest for what employers do on the mobile workforce probably your concern is less I'd I'd suggest the concern might be less so because you're talking about a short period of time only up to thirty days after that the Arkansas Tax kicks in and so typically I mean if someone's in a someone's fixing some sort of skill piece of machinery for twenty days in the state I don't know if the Arkansas tax burden is driving them to live in Tennessee versus Arkansas that So on that side because it's it's effectively you're giving everyone a reciprocal to minimus rule so I don't I don't know if that would drive tax migration beyond that the issue we generally face with the concern about our Kansans moving too low or no income tax states. Are there other questions Senator Blake. So how if I work in Dallas and I got to come back and fix air conditioner and National. And it's a one day project god then fix it go back under the Arkansas ever know I was there. Okay so the question again is it going down the road Texas to do so yes I'm coming down for long you wherever you want to say and I come in Arkansas to fix air conditioner at a manufacturing plant there day maybe two days out of Arkansas ever know you're there right that that's a great question realistically right now a lot of that is trains passing in the night me I'm getting a W. two form from the company and just they just pay me normally and and how do how do they know that I was there yes so if you're in Texas employer ever got audited by Arkansas maybe Arkansas the sales tax on it or in it or a business income tax audit decides to check employee wage withholding and ask there's a did you ever send any employees to up the Arkansas probably it becomes an issue more for the employer on the wage withholding and failure to withhold wages the chances of the individual employee getting caught I would do if I can speak on it more and more detail but I'd suspect quite low but you also you tease that out what's how does Arkansas ever find that someone came in for five days how to someone ever find that Arkansas came in for twenty days and we find that they came in for thirty forty fifty or sixty my suspicion frankly is that this may help to close care tax gap by giving even if you're not in a reciprocal state at least you know darn well if you hit thirty days you better do it and even below that you probably ought to be paying tax to if the reciprocal states are getting the thirty day safe harbor is the reality is if we're a one day state. One day is not realistic for a middle class normal human being employee so then what is realistic and CPA's and house tax people have to advise that and in a puts them in a tough position puts companies in a tough position where Arkansas was effectively impossible to comply with I mean and frankly we don't want DFA process seen a one day return for a fifty or sixty thousand dollars a year employee. Are there other questions. Senate could I just speak on the second half sure now that the this is. The trickier part if anything so so far we've been talking about people moving around what about employees working from home working from co working spaces working from coffee shops where nowadays a lot of the knowledge workers can really work from anywhere states are split on this of the roughly forty thirty eight thirty nine forty states follow physical presence rule you look to where the employees located where they work and and pay where they live and work minority states New York Pennsylvania Rhode Island Delaware Nebraska temporarily and then temporarily in Massachusetts are considered to be what's called convenience of the employer states which is of a technical term of art what it means is you tax remote workers based on their managing office location if the remote worker is not in the their home is not in the state in which they live for business purpose so if you're in on the road sales person it doesn't affect you but if you're like a back office program or a finance person in this. At the end till. Up until February of last of twenty twenty the Arkansas employers Arkansas taxpayers thought Arkansas was in that list individual income tax rule the individual income tax rules as you look to where work is performed the The guidance on the wage withholding suggested that day counts at that point DFA opinion letter was published saying that a remote software programmer and Washington working for an Arkansas employer was still subject to Arkansas income tax since then I believe there's also a opinion from twenty fifteen saying that a remote professor in Ohio was subject to the tax that one's pre transparency so no one ever told taxpayers about that and there's never been any change to the rule which dates back to nineteen ninety seven. what's this part of the bill does is essentially codifies the rule if you go into the the text of the bill. So Page Page two lines three through seven that's almost verbatim we're just code to find the rule that's in the DFA regulations and then lines eight and nine put in what business businesses employers consider to be the plain meaning of this rule that nonresident individual performs work in Arkansas when when that individuals physically located in Arkansas when performing the work so that would bring us back into line with about the thirty eight thirty nine forty other states take us out of this list with with New York Pennsylvania and cetera I understand we DFA's come from essentially there's a kind of a dispute between DFA and the taxpayers DFA sees general language and section to a tour of the statute about taxing any trade or business or occupation in Arkansas and so as allowing and indeed requiring them to tax remote work in at least some instances and and they can they can speak for themselves are articulate that's my understanding the the taxpayer business cut side the community sees DFA's work performed regulation as something that's been given its plain meaning just like just about every other state all our neighboring states and B. B. based on work performed you all got a letter from the tax foundation also this morning I can give give copies out if you wanna I was told can hand out copies but essentially these they say they are in support of this bill both on the mobile work force and the remote workforce and their interest in stir the policy reasons they give for supporting the physical presence test for where an employee should be taxed where they can live a two reasons one to per. Event double taxation because like right now for example if you have an Arkansas employer so you've got someone up in north Arkansas and here's and Crossey who decides to use to work in the office now working from home in Missouri Missouri's got clear guidance that an employer if the employees in living and working in Missouri Missouri gets tax on the employer has to wait withhold Arkansas guidance which again is isn't as well formed it's really just to opinion letters that were primarily directed at specific taxpayers but that's all we got to go on I suggest that Arkansas would tax that and so you've got a real risk of double taxation that puts them lawyer in the employee and the jam so there's that double taxation risk and then the other piece highlighted you see in the tax foundation letters competitiveness which also the concern of the state chamber if we're one of a handful of states that make that tax remote employees more more it's going to be important for Arkansas businesses to be able to tap remote employee talent across the country it's going to make it harder to recruit and retain that talent thank you Sir thank you have a question. No Sir thank you you might still. Senator Ingram. Is this section you referred to and then back to something you said or of some of the major states have an entertainment tax of the three major league sports comes in up in place I mean is that what we're talking about here that's a good question Senator Ingram so there is a special safe harbor for professional after one not a safe harbor there's a special exception to the thirty day rule on mobile work force for professional athletes professional entertainers and public figures and also people getting film incentives to make sure that if you have a super star who's coming into Arkansas for one day they would still pay Arkansas income tax on their income from that performance and that goes back to your earlier statement in that the middle wage fifty or sixty thousand it costs more to track that and read that tax benefit verses. The superstar the entertainer yes so I've I've got a a friend of mine from from back in the day who's a sports journalist and before COVID hit he was having a file in the seven or eight states and that's you're probably that point from talking about thousands of dollars of at least a thousand return costs to to do that. Mr. Thank you Mr chair members of the committee Paul hearing with the FAA. DFA's issued a fiscal impact statement for Senate bill forty four and is noted in the fiscal impact statement this is an undetermined fiscal impact on two thousand nineteen returns we were had to nonresident returns we had approximately two point one billion dollars and wage income that was reported on those returns there were approximately sixty seven thousand returns that were filed DFA is unable because that information is not captured on the turn the number of days that I nonresident spent in within the state of Arkansas working we would not be able to differentiate between what of those returns for the professional athletes the professional entertainers that would be We will continue to pay tax without the benefit of the thirty day a proposed exemption so we did collect tax on those nonresident return for two thousand nineteen of twenty two point four million but in terms of providing an actual dollar figure we just don't have the information from this returns to be able to apply with these law changes would do to come up with an actual dollar figure for the fiscal impact but would be happy to answer any questions. Members are the question Mr. Seeing none thank you. Members as as you can see we're hello Sir corpsman so we're going German and we will take this back up next Monday or Monday I should say. We are adjourned.