FAQ - Franchise Tax

FAQ

Who do I Contact?

Who must file?

Which forms to file?

When to file and pay franchise tax?

How to file and pay franchise tax?

How is the amount of franchise tax calculated?

How are penalties & interest calculated?

Am I required to have a valid FEIN/SSN? How does my business obtain a FEIN?

Should I incorporate my business?

How to update Articles of Incorporation?

Why must a corporation pay franchise tax even if it is no longer in business?

What does it mean when a corporation is revoked?

How do I obtain proof of clearance?

What is the “registered agent’ of a corporation?

How can I change the registered agent of my corporation?

How do I change the officer(s) of a corporation?

What are the different types of clearance?

How to Obtain Copies of Past Reports

 

Contact us

Hours of Operation are Monday-Friday 8:00am to 4:30pm. Offices are closed on state holidays.

ATAP:    Users can submit questions via the website when logged in.
Email:   franchisetax@dfa.arkansas.gov
Location: 1900 W 7th St, Ragland Bldg., Suite 1130, Little Rock, AR  72201
Phone: 501-682-7920

FAQ

Who do I Contact?

DFA Franchise Tax Office

  • Account information such as filing history, balances, payment history.
     
  • Filing a franchise tax report and paying the tax
     
  • Obtain copies of franchise tax returns (filed with DFA)
     
  • Franchise Tax Clearance letters
     

Secretary of State (https://www.sos.arkansas.gov/business-commercial-services-bcs)

  • Forming a business in Arkansas
     
  • Obtain copies of SoS prior franchise tax reports.
     
  • Application for Certificate of Authority
     
  • Miscellaneous Corporate filings
     
  • Fictitious name registration
     
  • Annual report filing
     
  • Dissolutions
     
  • Certificate of good standing
     
  • Changing the registered agent

Who must file?

Corporations, including banking corporations and limited liability companies, that conduct business in Arkansas are required to pay an annual franchise tax.  This tax is owed regardless if a profit is made for the tax year.

A newly formed corporation is not required to file a franchise tax return until the calendar year following the year of incorporation.

Arkansas nonprofits, Co-ops, LPs, LLPs, and LLLPs do not have to file a tax return; however, they do need to submit an annual report. All annual reports must be filed with the Arkansas Secretary of State.

Which forms to file:

  • Limited Liability Company (LLC) entities will use form AR1200-LLC.
  • Corporations with and without stock will use form AR1200-C.
  • Banks will use form AR1200-BK.
  • Insurance entities with Authorized Capital Stock will use form AR1200-INS.
  • Legal Reserve Mutual Insurance entities will use form AR1250-INS.

Please note:  While we encourage taxpayers to file electronically through ATAP, a paper copy of the applicable franchise tax report will be mailed to the address on file for your organization. If you did not receive a franchise tax return by March 20th of the reporting year and want to file by paper, please submit a written request for it to be mailed to your organization’s tax contact.  At this time, forms are not available to be downloaded online due to prior registration requirements with Secretary of State.   


When to file and pay franchise tax:

  • May 1st is the due date to file annual franchise tax reports. Your return is considered filed timely when it is postmarked no later than the due date. If May 1st falls on a weekend or holiday, the due date is the next business day. Extensions are not available for Franchise Tax.

How to file and pay franchise tax

  • Online Service:
    • Arkansas Taxpayer Access Point (ATAP) is a web-based service that gives taxpayers or their designated representatives online access to their tax accounts.  ATAP offers many services including filing an electronic return for FREE. Payments may also be submitted through ATAP.  Please visit:

www.atap.arkansas.gov
 

  • Alternative Methods:
     
    • Mail: Reports and payments
      • Mail: PO Box 8053, Little Rock, AR 72203-8053
      • Make check/money order payable in U.S. Dollars to the Department of Finance and Administration and attach it to the front the report along with a completed franchise tax voucher.
      • Stand-alone payments can also be submitted. Be sure to include a completed franchise tax voucher so that the payment posts correctly.
      • Include your account number and the tax year being paid on the memo line. 
      • Do not send cash.
         
    •  FAX: Report only
      • 501-682-4974
         
    • Visit:  File and pay in person at the DFA Franchise Tax Section
      • 1900 W 7th St, Ragland Bldg., Suite 1130, Little Rock, AR  72201

Amended reports:

Amended returns are used to make changes to previously filed original returns. 
File an amended return if, on your original franchise tax return, you omitted assets or authorized stock

- or –

 if the par value was incorrect. 
Do not file an amended return if there are merely calculation errors on the original return. Those errors will be corrected by a representative of the Franchise Tax Section. 

How to file an amended return:

  • ATAP: Tax year 2020 and future year filings can be amended and paid via the ATAP website.
     
  • Alternate methods:
    • Mail or FAX: see FAQ “How to File and pay Franchise tax” for contact information.
       
      • To amend a report, simply use the same form as the original return and indicate in the appropriate box that you are submitting an amendment.  Provide an explanation for the specific changes being made on the report. 
      • To claim a refund, the amended report must be filed within three (3) years from the date your original report was due, or within two (2) years from the date you paid your tax, whichever is later. 
      • Amended reports with a tax due will be retroactively charged interest from the date the original return was due.
      • If you are amending more than one report, please mail each report in a separate envelope.
      • Payment options are consistent with initial filings; however, be sure to check the ‘Amended’ box on the completed Franchise Tax Voucher.

 

How is the amount of Franchise tax calculated?

The tax computation for franchise tax is shown on its respective form.

  • Limited Liability Companies (LLC’s)
    • The tax is a flat rate of $150. 
       
  • Corporations and Banks without authorized stock
    •  The tax is a flat rate of $300. 
       
  • Corporations and Banks with authorized stock
    • Computed by dividing the total property in Arkansas by the total property in the United States as provided on the Company’s Balance Sheet on the last day of the tax period.
    • Next, multiply the result by the value of issued and outstanding capital stock, and then multiply by 0.003. 
    • If the result is less than $150, then round up to pay the minimum amount due of $150.  Otherwise, the result is the amount of franchise tax due.
       
  • Insurance companies with authorized stock
    • Combine the total value of issued and outstanding capital stock. 
      • If the total is less than $500,000, then the total tax due is $300. 
      • If the total is $500,000 or more, then the total tax due is $400.
         
  • Legal Reserve Mutual Insurance entities
    • Calculate tax due based on the end-of-year balance sheet assets total. 
      • If the total amount of assets is less than $100 million, then tax due is $300. 
      • If the total amount of assets is $100 million or more, then tax due is $400.

For further information on tax computation, please see Arkansas Code § 26-54-104 Annual franchise tax.

How are penalties & interest calculated?

Penalty and interest are charged on any unpaid tax from the original due date of the return (May 1) until payment in full is received. Penalty is a one-time charge of $25 and interest is charged on the entire outstanding balance at 10% per year.  

Am I required to have a valid FEIN? How does my business obtain a FEIN?

Yes, a valid FEIN/Tax ID is required to file the yearly tax report. Registrations and reports cannot be completed successfully without this information.

The Federal Employee Identification Number (FEIN) is obtained from the Internal Revenue Service and can be requested online at www.irs.gov.

Should I incorporate my business?

The DFA Franchise Tax section cannot provide advice to individuals on how to best structure their business. Individuals should consult a lawyer and/or tax professional in making the decision.

 If the decision is made to form a corporation, please contact the Business Services Division of the office of the Secretary of State for assistance with the incorporation process.

Secretary of State
Business and Commercial Services Division
Phone: 501-682-3409 or toll-free outside the Little Rock area: (888) 233-0325.
Email: corporations@sos.arkansas.gov


How to update Articles of Incorporation:

A Corporation’s Articles of Incorporation can be updated by completing the appropriate form and submitting it to the Arkansas Secretary of State.  The forms are available online at www.sos.arkansas.gov and are specific to the type of entity.

Why must a corporation pay Franchise Tax even if it is no longer in business?

All corporations that exist owe franchise tax. Regardless if your organization is no longer in business and/or revoked, they continue their existence until all past due taxes are paid with the DFA and it is properly dissolved with the Secretary of State.

What does it mean when a corporation is revoked?

Corporations that are in a revoked status endanger their corporate protections and are barred from many corporate activities. Revocation occurs for failure to comply with all franchise tax obligations. The most common reason is failure to pay its annual franchise tax.

How do I obtain proof of clearance?

The Arkansas Secretary of State office can provide documentation stating the basic corporate status. Please contact a representative at the Arkansas Secretary of State by phone at 501-682-3409 or toll free at 888-233-0325.

If the current clearance status is unknown by the Secretary of State, you may obtain your status with the DFA by emailing franchisetax@dfa.arkansas.gov or by calling 501-682-7920.

What is the “registered agent’ of a corporation?

The registered agent is the person or entity designated by the corporation to receive any service of legal action or other official communication on its behalf.  The registered agent may or may not be an owner, shareholder, or officer of the corporation.  Many corporations use their attorney or a professional corporate service company to handle their correspondence.  The registered agent’s address must be a valid street address in Arkansas and the agent must be located at that address.

How can I change the registered agent of my corporation?

The name of the registered agent and/or the registered office of a corporation is changed by filing a “Notice of Change of Registered Agent” and submitting it to the office of the Secretary of State.

How do I change the officer(s) of a corporation?

Officer changes can be made when filing an annual franchise tax report with the Arkansas Department of Finance and Administration Franchise Tax Section. If a change needs to be made after the annual tax report has been submitted, an amendment can be filed. You also have the option of changing or adding an officer by filing the appropriate form with the Secretary of State.

What are the different types of clearance?

  • General Filing – Corporations who wish to file any forms or documentation related to that corporation must not owe any past-due franchise taxes with the DFA. For general filing, past-due franchise taxes mean the past three (3) years of franchise tax returns must be filed and paid in order to be cleared for general filing. The general filing clearance also extends to any person substantially connected to any corporation that owes past-due franchise taxes.
  • Reinstatement - When a corporation is forfeited, reinstatement to all rights, powers, and property may occur if all franchise tax requirements are met within seven (7) years of the date of forfeiture.  Included in the franchise tax requirements is the filing of all delinquent franchise tax returns and payment of all taxes and penalties due to the satisfaction of the Arkansas Department of Finance and Administration.
  • Dissolution - A corporation may file for dissolution clearance with the Franchise Tax Section when the corporation itself is being ended and all assets are redistributed. Upon dissolution, the corporation will no longer exist. To be cleared to dissolve, a corporation must file and pay all past-due franchise taxes in addition to filing the final return and paying the minimum tax in the current calendar year in which the dissolution is requested.


How to Obtain Copies of Past Returns

You may request copies of previously filed Arkansas franchise tax returns by completing form AR-4506 and returning it to the Franchise Tax Section with a check or money order for $2.00 per report.