§ 26-51-404
LexisNexis Practice Insights
Arkansas Taxable Income Starting Point
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; and
(F) Any payments of alimony and separate maintenance received pursuant to a court order.
(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) Section 117 of the Internal Revenue Code of 1986, as in effect on January 1, 2003, 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) Section 1033 of the Internal Revenue Code of 1986, 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) Section 121 of the Internal Revenue Code of 1986, 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) Section 101 of the Internal Revenue Code of 1986, 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, unemployment compensation benefits paid from federal unemployment trust funds, unemployment insurance benefits received from the railroad retirement boards, and unemployment compensation paid under Title IV of the Social Security Act;
(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 Director 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:
(A) The rental value of a home furnished to him or her; or
(B) The rental allowance paid to him or her, to the extent that the allowance is used by the minister to rent or to provide a home;
(10) Sections 108 and 1017 of the Internal Revenue Code of 1986, as in effect on January 1, 2009, regarding income from the discharge of indebtedness, are adopted for the purpose of computing Arkansas income tax liability;
(11) Section 125 of the Internal Revenue Code of 1986, in effect on January 1, 2009, 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) Section 129 of the Internal Revenue Code of 1986, 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) Section 79 of the Internal Revenue Code of 1986, 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) Sections 104-106 of the Internal Revenue Code of 1986, as in effect on January 1, 1999, regarding the exclusion from income of disability and health plan payments, are adopted for the purpose of computing Arkansas income tax liability;
(15) Section 82 of the Internal Revenue Code of 1986, 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) Section 119 of the Internal Revenue Code of 1986, 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) Section 126 of the Internal Revenue Code of 1986, 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) Section 131 of the Internal Revenue Code of 1986, 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) Section 132 of the Internal Revenue Code of 1986, as in effect on January 1, 2009, regarding the exclusion from income of certain fringe benefits, is adopted for the purpose of computing Arkansas income tax liability;
(20) Section 127 of the Internal Revenue Code of 1986, as in effect on January 1, 2003, 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 in an individual development account pursuant to the Family Savings Initiative Act, 20-86-101 et seq.;
(23) Section 138 of the Internal Revenue Code of 1986, 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) Section 72 of the Internal Revenue Code of 1986, 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) Section 137 of the Internal Revenue Code of 1986, as in effect on January 1, 2003, 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) Section 134 of the Internal Revenue Code of 1986, as in effect on January 1, 2009, regarding the exclusion from income of qualified military benefits provided to members of the United States military, is adopted for the purpose of computing Arkansas income tax liability; and
(28) Section 408(d)(8) of the Internal Revenue Code of 1986, 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.