26-51-815. Computing capital gains and losses — Definitions.

26-51-815. Computing capital gains and losses — Definitions. (a)(1)(A) To the extent they apply to capital gains and losses realized or incurred during income years beginning after December 31, 1996, 26 U.S.C. §§ 1211 — 1231, 1232 [repealed], 1232A [repealed], 1232B [repealed], 1233 — 1237, 1239, 1240 [repealed], 1241 — 1245, 1246 [repealed], 1247 [repealed], 1248 — 1250, 1251 [repealed], and 1252 — 1257, as in effect on January 1, 2011, and the regulations of the United States Secretary of the Treasury promulgated under 26 U.S.C. §§ 1211 — 1231, 1232 [repealed], 1232A [repealed], 1232B [repealed], 1233 — 1237, 1239, 1240 [repealed], 1241 — 1245, 1246 [repealed], 1247 [repealed], 1248 — 1250, 1251 [repealed], and 1252 — 1257, as in effect on January 1, 2011, are adopted for the purpose of computing tax liability under the Income Tax Act of 1929, § 26-51-101 et seq. (B) However, the provisions of this section shall not apply to a C corporation as defined in 26 U.S.C. § 1361, as in effect on January 1, 2011. (2) Furthermore, any other provisions of the federal income tax law and regulations necessary for interpreting and implementing 26 U.S.C. §§ 1211 — 1231, 1232 [repealed], 1232A [repealed], 1232B [repealed], 1233 — 1237, 1239, 1240 [repealed], 1241 — 1245, 1246 [repealed], 1247 [repealed], 1248 — 1250, 1251 [repealed], and 1252 — 1257 are adopted to that extent and as in effect on January 1, 2007. (b)(1) Except as otherwise provided in this subsection, if a taxpayer has a net capital gain for tax years beginning on and after January 1, 1999, thirty percent (30%) of the gain is exempt from state income tax. (2) If a taxpayer has a net capital gain, the following portion of the gain is exempt from state income tax: (A) From January 1, 2015, through January 31, 2015, fifty percent (50%); (B) Beginning February 1, 2015, forty-five percent (45%); and (C) Beginning on and after July 1, 2016, fifty percent (50%). (3) The amount of net capital gain in excess of ten million dollars ($10,000,000) from a gain realized on or after January 1, 2014, is exempt from the state income tax. (c) Title 26 U.S.C. § 1202, as in effect on January 1, 2017, regarding the exclusion from gain of certain small business stock, is adopted for the purpose of computing Arkansas income tax liability. (d)(1) If a taxpayer has a net capital gain from a venture capital investment, one hundred percent (100%) of the gain shall be exempt from the Income Tax Act of 1929, § 26-51-101 et seq., if: (A) The venture capital investment was initially made on or after January 1, 2001; and (B) The venture capital investment was held for at least five (5) years prior to disposition. (2)(A) “Venture capital” means equity financing, broadly defined, including early stage research, development, commercialization, seed capital for startup enterprises, and other risk capital for expansion of entrepreneurial enterprises doing business in Arkansas that are: (i) Qualified technology-based enterprises doing business in Arkansas; (ii) Qualified biotechnology enterprises doing business in Arkansas; or (iii) Qualified technology incubator clients doing business in Arkansas. (B) “Venture capital” does not include the purchase of a share of stock in a company if, on the date on which the share of stock is purchased, the company has securities outstanding that are: (i) Registered on a national securities exchange under § 12(b) of Title I of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, as it existed on January 1, 2001; (ii) Registered or required to be registered under § 12(g) of Title I of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, as it existed on January 1, 2001; or (iii) Required to be registered except for the exemptions in § 12(g)(2) of Title I of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, as it existed on January 1, 2001. (C) “Qualified biotechnology enterprise” means a corporation, partnership, limited liability company, sole proprietorship, or other entity that is certified by the Arkansas Economic Development Commission pursuant to § 2-8-108 [repealed]. (D) “Qualified technology incubator” means a business incubator certified by the Director of the Arkansas Economic Development Commission with the advice of the Board of Directors of the Division of Science and Technology of the Arkansas Economic Development Commission as being a facility operated in cooperation with an Arkansas college or university to foster the growth of technology-based enterprises. (E) “Qualified technology incubator client” means a corporation, partnership, limited liability company, sole proprietorship, or other entity that, as of the date of the venture capital investment, is certified by an Arkansas college or university as currently receiving, or having received within the previous three (3) years, the services of a qualified technology incubator. (F) “Qualified technology-based enterprise” means a corporation, partnership, limited liability company, sole proprietorship, or other legal entity whose primary business directly involves commercializing the results of research in fields having long-term economic or commercial value to the state and having been identified in the research and development plan approved by the board.