Ark. Code Ann. § 26-51-307 (2026)
Retirement or disability benefits — Definition
History. Acts 1985, No. 486, §§ 1, 2; A.S.A. 1947, §§ 84-2008.5, 84-2008.6; Acts 1987, No. 521, § 3; 1989, No. 512, § 1; 1989 (3rd Ex. Sess.), No. 27, § 1; 1999, No. 817, § 1; 2001, No. 773, §§ 1, 2; 2005, No. 189, § 3; 2007, No. 218, § 12; 2009, No. 372, § 2; 2017, No. 141, § 3.
A.C.R.C. Notes. Acts 2005, No. 189, § 1, provided:
“The purpose of this act is to clarify current law regarding cost recovery for annuitants under the Income Tax Act of 1929, Arkansas Code § 26-51-101 et seq.”
Amendments. The 2009 amendment substituted “January 1, 2009, is” for “January 2007, shall provide” in (c)(1).
The 2017 amendment, in (b)(1)(A), inserted “and subsection (e) of this section” and substituted “program is” for “program shall be”; added (e) and (f); and made stylistic changes.
Effective Dates. Acts 2017, No. 141, § 63, as amended by Acts 2017, No. 596, § 1: “Sections 2 through 61 of this act are effective for tax years beginning on and after January 1, 2018.”
Research References
U. Ark. Little Rock L. Rev.
Legislative Survey, Taxation, 8 U. Ark. Little Rock L.J. 601.
Survey, Taxation, 14 U. Ark. Little Rock L.J. 401.
Survey of Legislation, 2001 Arkansas General Assembly, Tax Law, 24 U. Ark. Little Rock L. Rev. 613.
Case Notes
Constitutionality.
The state income tax discriminated against retirees of the governments of other states and military retirees based upon the source of the payment; therefore the tax violated 4 U.S.C. § 111 and the doctrine of intergovernmental tax immunity. Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), cert. denied, 509 U.S. 921, 113 S. Ct. 3034, 125 L. Ed. 2d 721 (1993), overruled, State, Dep't of Fin. & Admin. v. Staton, 325 Ark. 341, 942 S.W.2d 804 (1996) (decision under prior law).
Finding that the state income tax was unconstitutional, as applied to the retirees of the governments of other states and military retirees, was applied retroactively. Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), cert. denied, 509 U.S. 921, 113 S. Ct. 3034, 125 L. Ed. 2d 721 (1993), overruled, State, Dep't of Fin. & Admin. v. Staton, 325 Ark. 341, 942 S.W.2d 804 (1996).
Because the returns of after-tax contributions to a retirement plan were property, pursuant to Ark. Const. art. 16, § 5, not income, the Department of Finance and Administration attempted tax of the returns under this section was unconstitutional given the prohibition in Ark. Const. Amend. 47 that prohibited an ad valorem tax being levied on property; thus, the trial court properly granted partial summary judgment in favor of the taxpayers. Weiss v. McFadden, 353 Ark. 868, 120 S.W.3d 545 (2003).
Emergency Income Tax Rule, which was enacted by the Department of Finance and Administration in response to the declaration that § 26-51-307(c) was unconstitutional, was also unconstitutional because it was clear that the General Assembly never intended I.R.C. § 72 be applied to recovery of after-tax contributions in employment-related retirement plans. Weiss v. Maples, 369 Ark. 282, 253 S.W.3d 907 (2007).
Construction.
Subsection (c) of this section clearly provides that cost of contributions to a retirement plan may not be deducted in computing income for State tax purposes, and § 26-51-404(b)(24)(B) provides that annuity income from retirement plans is subject to this section rather than § 26-51-404(b); a retirement plan could contain pre-tax contributions upon which no income tax has ever been paid, employer contributions upon which no income tax has ever been paid, after-tax contributions upon which income tax has been paid, and the gain from pre-tax contributions and after-tax contributions upon which no income tax has ever been paid, and the above quoted statutes speak to income. Weiss v. McFadden, 353 Ark. 868, 120 S.W.3d 545 (2003).
Cited: Weiss v. McFadden, 356 Ark. 123, 148 S.W.3d 248 (2004).