The following words and terms, when used in this part, shall have the following meanings:

1. (1) "Department" means the Department of Finance and Administration;

2. (2)

   1. (A) "Distributed" or "distribution" means a nonresident member's distributive share of a pass-through entity's income and shall include a cash payment, a distribution of other property, a credit to the member in lieu of such payment, or the member's distributive share of the entity's income or other gain that is:

      1. (i) Passed through to the member; and
      2. (ii) Subject to Arkansas income tax.

   2. (B) Distributions paid or credited are not subject to withholding under Arkansas Code § 26-51-919 if the distributions paid or credited to the nonresident members:

      1. (i) Are subject to withholding under other provisions of Arkansas law; or

      2. (ii) Represent:

         1. (a) (a) A return of such member's investment;
         2. (b) (b) A return of capital; or
      3. (c) (c) Previously taxed income.

   3. (C) If distributions are subject to withholding under other provisions of Arkansas law, distributions paid or credited are first considered to be distributed out of a member's current year distributive share of an entity's income or other gain that is:

      1. (i) Passed through to the member; and
      2. (ii) Subject to Arkansas income tax.
   4. (D) Any distributions paid or credited for the year that exceed the member's distributive share of the entity's income or other gain that is passed through to the member are not subject to Arkansas withholding;

3. (3) "Member" means a:

   1. (A) Shareholder of an S corporation;
   2. (B) Partner in a general partnership;
   3. (C) Partner in a limited partnership;
   4. (D) Partner in a limited liability partnership;
   5. (E) Member of a limited liability company; or
   6. (F) Beneficiary of a trust;

4. (4) "Nonresident" means:

   1. (A) An individual who is not a resident of, or domiciled in, Arkansas during any part of the tax year;
   2. (B) A business entity that does not have a commercial domicile in Arkansas during any part of the tax year; or
   3. (C) A trust that is not organized in Arkansas; and

5. (5)

   1. (A) "Pass-through entity" means a:

      1. (i) Corporation that is treated as an S corporation under the Internal Revenue Code;
      2. (ii) General partnership;
      3. (iii) Limited partnership;
      4. (iv) Limited liability partnership;
      5. (v) Trust; or
      6. (vi) Limited liability company.
   2. (B) A pass-through entity does not include any entity listed in subdivisions (5)(A)(i) – (vi) of this section that is taxed as a corporation or is a disregarded entity for federal income tax purposes.