- (a) The following examples illustrate the application of Acts 1985, No. 759.
- (b) Each example assumes that the taxpayer, the donation, sale, or expenditure, and the institution receiving the donation, sale, or payment are qualified under Acts 1985, No. 759. Example 1: A wholesaler purchases machinery for one hundred thousand dollars ($100,000) from his or her supplier. The taxpayer sells this machinery and equipment to a qualified vocational technical school for eighty-five thousand dollars ($85,000). The wholesaler is entitled to claim credit under Acts 1985, No. 759, for a sale below cost. The basis of claiming the credit is the amount by which the wholesaler reduced the price from his or her own cost ($100,000 - $85,000 = $15,000). The wholesaler may claim a credit of four thousand nine hundred fifty dollars ($4,950) or fifty percent (50%) of his or her net tax liability, whichever is less. Example 2: Arkansas Instruments, a computer manufacturer, sells a computer system to a qualified vocational technical school for eighty-five thousand dollars ($85,000). Arkansas Instruments paid forty-five thousand dollars ($45,000) for the parts that went into the computer system. The lowest price at which Arkansas Instruments sells the computer system to its customers is one hundred thousand dollars ($100,000). Arkansas Instruments is entitled to claim a credit under Acts 1985, No. 759, for a sale below cost. Arkansas Instruments’ cost is deemed to be the lowest price at which it sells the computer system ($100,000). The credit is based upon the amount by which Arkansas Instruments reduced its cost ($100,000 - $85,000 = $15,000). The credit is thirty-three percent (33%) of the amount by which the price is reduced ($15,000 x .33 = $4,950). Arkansas Instruments may claim a credit of four thousand nine hundred fifty dollars ($4,950) or fifty percent (50%) of its tax liability, whichever is less. Example 3: A retailer purchases machinery for one hundred thousand dollars ($100,000) from his or her supplier. The taxpayer sells this machinery and equipment to a qualified vocational technical school for eighty-five thousand dollars ($85,000). The retailer is entitled to claim credit under Acts 1985, No. 759, for a sale below cost. The basis of claiming this credit is the amount by which the retailer reduced the price from his or her own cost ($100,000 - $85,000 = $15,000). The retailer may claim a credit of four thousand nine hundred fifty dollars ($4,950) or fifty percent (50%) of his or her net tax liability, whichever is less. Example 4: Arkansas Retailer donates machinery and equipment to a qualified vocational technical school. Arkansas Retailer paid eighty-five thousand dollars ($85,000) for the equipment from its supplier. Arkansas Retailer may claim a credit of ($85,000 x .33 = $28,050) twenty-eight thousand fifty dollars ($28,050) or fifty percent (50%) of its tax liability, whichever is less. Example 5: An Arkansas resident pays thirty thousand dollars ($30,000) in cash to an Arkansas university to fund a qualified research program. The Arkansas taxpayer is entitled to claim a credit against his or her Arkansas income tax in the amount of nine thousand nine hundred dollars ($9,900) or fifty percent (50%) of his or her tax liability, whichever is less. Example 6: Arkansas Instruments, a manufacturer, donates a computer system to a qualified vocational technical school. Arkansas Instruments paid forty-five thousand dollars ($45,000) for the parts that went into the computer system. The lowest price this system is sold to Arkansas Instruments' customers is one hundred thousand dollars ($100,000). Arkansas Instruments is entitled to a credit of ($100,000 x .33 = $33,000) thirty-three thousand dollars ($33,000) or fifty percent (50%) of its tax liability, whichever is less.