A “Loan Out” Company will also need to register for Corporate Income Tax with the State of Arkansas. https://atap.arkansas.gov.
For the full amount of the line item from Production Company to the Loan Out Company to be considered for the Incentive, the full amount needs to be subject to the appropriate Arkansas tax. Because the amount paid to the Loan Out company will have certain costs deducted prior to the final payment to the employee, the Loan Out Company will need to register for Corporate Income tax and apportion annual income based on the production occurring here.
Form AR-1R is required for a C Corp loan out to register with Arkansas.
As long as the requirements are otherwise met that a payment is reported to the Department and properly subject to tax, the rebate program should be able to be applied.
Specifically:
Whether withholding tax requirements must be met on payments by a production company or payroll company to a loan out corporation to qualify for the DPMPIDA Rebate? No, as long as the payments are reported to the Department and subject to Arkansas Tax, the DPMPIDA Rebate applies to the payments.
Whether a loan out company must register with the Department for payments to qualify for the DPMPIDA? Yes. Because the statute requires that the payments both be reported to the Department and subject to Arkansas tax, the loan out companies that serve as the legal payees of the personal services for individuals working on the qualified project must register to pay Arkansas tax.
What reporting requirements are there for payments made by the production company or the payroll company to loan out companies organized as C Corporations? While normally distributions to C Corporations do not require any documentation, to qualify for the DPMPIDA rebate, the Department must be able to trace the payments when reviewing the required paperwork. No specific forms or reports are necessarily contemplated, but the records submitted by the production company must allow the Department’s auditors to trace the payment from the production and the amount through to the appropriate loan out company that will be subject to tax on the income from the activities in Arkansas.