(a) A bond required by state tax law shall not be accepted unless it:

1. (1) Is:

   1. (A) A corporate surety bond;
   2. (B) A certificate of deposit with assignment; or
   3. (C) An irrevocable letter of credit; and
2. (2) Meets the following requirements.

(b) Corporate surety bond. A corporate surety bond shall:

1. (1) Be on forms approved by the commissioner;
2. (2) Be issued by an insurer;
3. (3) Be signed by the individual owner, a partner, or a corporate officer showing his or her authority, and payable to the State of Arkansas;
4. (4) Be signed by the insurer or its licensed agent or broker with power of attorney to act on behalf of the insurer and countersigned as otherwise required by law;

5. (5) Be accompanied by:

   1. (A) An application for permit signed by the taxpayer;
   2. (B) The taxpayer's written consent to an audit of his or her records prior to release or cancellation of the bond; and
   3. (C) Power of attorney of the person executing on behalf of the insurer;
6. (6) Contain a provision that requires the insurer to give sixty (60) days’ notice to the commissioner prior to cancellation of the bond; and
7. (7) In all other respects comply with specific statutory requirements applicable under the state tax laws.

(c) Certificate of deposit with assignment.

1. (1) A certificate of deposit and assignment shall:

   1. (A) Be on forms approved by the commissioner;
   2. (B) In the case of the certificate of deposit:

(i) Be signed by the assignor;

1. (ii) Be issued by a bank or savings and loan;

   1. (iii) Be delivered to the commissioner;

      1. (iv) Contain a provision for the automatic renewal of the certificate; and
      2. (v) In all other respects comply with statutory requirements of the laws of the State of Arkansas; and

   2. (C) In the case of the assignment that shall accompany the certificate of deposit:

      1. (i) Be signed by assignor;
      2. (ii) Be acknowledged by the financial institution;
      3. (iii) Contain an irrevocable appointment of the commissioner that allows him or her to endorse the certificate of deposit and apply the proceeds to any and all state and local tax liability of the taxpayer;
      4. (iv) Contain or be accompanied by a written consent to an audit of the taxpayer's records prior to the release or cancellation of the certificate of deposit; and
      5. (v) Provide that the certificate of deposit is to be held by the commissioner for a period of not less than one (1) year from the date of delivery to the commissioner.

2. (2) No certificate of deposit will be accepted or approved by the commissioner for the purpose of security in lieu of a contractor's surety bond.

   1. (d) Irrevocable letter of credit.

3. (1) An irrevocable letter of credit shall:

   1. (A) Be on forms supplied by the issuer and approved by the commissioner;
   2. (B) Be issued by an Arkansas bank;
   3. (C) Be an irrevocable letter of credit;
   4. (D) Be titled or conspicuously state that it is an irrevocable letter of credit;
   5. (E) State that any draft drawn against the letter of credit is payable on presentment of a notice of proposed assessment;
   6. (F) Contain or be accompanied by a written consent to an audit of the taxpayer's records prior to termination; and
   7. (G) State that it may be drawn against for any state excise tax liability of the business for the year during which the letter is effective plus the preceding three (3) years.
4. (2) Notice of termination. A letter of credit given, in lieu of a bond, to secure the payment of any state tax may state that it may be terminated on a certain day, provided that a written notice of termination is received by the commissioner from the taxpayer or the issuer sixty (60) days prior to the date of termination.
5. (3) Length of notice. The notice of termination shall be acknowledged in writing by the manager of the Tax Section of the Department of Finance and Administration for the notice of termination to be effective and for the sixty-day period to begin.
6. (4) Where a letter of credit expires or is terminated the commissioner shall conduct an audit prior to the date of expiration unless, prior to the beginning of the audit, a new letter of credit is provided that can be drawn against for any state excise tax liability of the business for the time immediately after the time the present letter of credit ends plus the preceding three (3) years.