1. (a) General requirements for the credit — Arkansas Code § 26-51-502(a) and (b)(1).

   1. (1)

      1. (A) A credit against individual income tax owed to the State of Arkansas is allowed for expenses associated with household and dependent care services that are necessary for the taxpayer to obtain or hold gainful employment.
      2. (B) Section 21 of the Internal Revenue Code of 1986, as amended and in effect on January 1, 1997, has been adopted for purposes of calculating this credit.
      3. (C) The corresponding Treasury Regulation, as of January 1, 1993, remains I.R.C. Reg. 1.44A-1 [removed].

   2. (2) As set forth in I.R.C. Reg. 1.44A-1 (1993) [removed], five (5) general requirements must be satisfied before the credit can be taken:

      1. (A)

2. (i) The taxpayer must maintain a household.

   1. (ii) I.R.C. Reg. 1.44A-1(a)(2) and (d) [removed];

      1. (B)

         1. (i) One (1) or more "qualifying individuals" must be a member of the taxpayer's household.
         2. (ii) I.R.C. Reg. 1.44A-1(a)(2) and (b) [removed];

      2. (C)

         1. (i) The household and dependent care expenses must be necessary for the taxpayer to obtain or hold gainful employment.
         2. (ii) I.R.C. Reg. 1.44A-1(a)(2) and (c) [removed];

      3. (D)

         1. (i) The services provided, whether they are provided inside the household or outside the household (including services provided by dependent care centers), must meet the specific requirements of I.R.C. § 21.
         2. (ii) I.R.C. Reg. 1.44A-1(c)(2), (c)(3), (c)(4), and (c)(5) [removed]; and

      4. (E)

         1. (i) The household and dependent care expenses must actually be paid during the tax year for which the credit is being claimed.
         2. (ii) I.R.C. Reg. 1.44A-1(a)(3) [removed].

3. (b) Ten percent standard credit — Arkansas Code § 26-51-502(b)(2). The amount of the credit shall be ten percent (10%) of the total federal credit allowable under I.R.C. § 21 as in effect on January 1, 1997.

   1. (c) Twenty percent approved childcare facility credit — Arkansas Code § 26-51-502(c)(1).
   2. (1) A credit against individual income tax owed to the State of Arkansas is allowed for expenses incurred by a qualified individual for childcare services provided by an approved childcare facility.
   3. (2) The amount of this credit shall be twenty percent (20%) of the total federal household and dependent care credit allowed under Section 21 of the Internal Revenue Code as in effect on January 1, 1993.

   4. (3) Three (3) general requirements must be satisfied before the credit can be taken:

      1. (A) A federal household and dependent care credit must be allowable under I.R.C. § 21 as in effect on January 1, 1993;

      2. (B) A "qualified individual" is a taxpayer who:

         1. (i) Has a dependent child with respect to whom the taxpayer is entitled to a credit under Arkansas Code § 26-51-501(a)(3); and
         2. (ii) Incurs childcare expenses necessary to obtain or hold gainful employment at an approved childcare facility; and

      3. (C) An “approved childcare facility” is a childcare facility that:

         1. (i)
4. (a) (a) Provides an appropriate early childhood program.

5. (b) (b) Such programs are:

   1. (1) (1) Developmentally appropriate for young children ages three (3) through five (5); and

   2. (2) (2) Approved by the Division of Elementary and Secondary Education; and

      1. (ii)
6. (a) (a) Has been certified by the Division of Child Care and Early Childhood Education.

7. (b) (b) Arkansas Code § 6-45-109.

   1. (d) Refundability — Arkansas Code § 26-51-502(c)(1).
   2. (1) The twenty percent (20%) Arkansas approved childcare facility credit is refundable.
   3. (2) The excess of this credit over the taxpayer's Arkansas tax liability will be returned to the taxpayer as an overpayment of tax.

8. (e) Election of credits — Arkansas Code § 26-51-502(c)(2).

   1. (1) A taxpayer cannot claim both the ten percent (10%) and the twenty percent (20%) childcare credit on the same expenses.
   2. (2) If an individual has a federal childcare credit that includes expenses from a facility that qualifies for the twenty percent (20%) credit and expenses from a facility that only qualifies for the ten percent (10%) credit, the credit must be prorated based on the number of days the child attended each facility.

9. (f) Tax credit — Child with developmental disability — Arkansas Code § 26-51-503.

   1. (1)

      1. (A) A taxpayer who is maintaining, supporting, and caring for a child with a developmental disability shall be entitled to a five-hundred-dollar credit per tax year for the child.
      2. (B) If the taxpayer is caring for more than one (1) child with a developmental disability, the taxpayer shall be entitled to one (1) five-hundred-dollar credit per child.

   2. (2) Requirements. The following criteria must be satisfied in order to properly claim the exemption:

      1. (A)

         1. (i) A physician (medical doctor) must certify in writing that the child has a developmental disability.
         2. (ii) Such certification shall be valid for state income tax purposes for five (5) years;

      2. (B) The individual must meet the eligibility requirements for admission to a human development center (Arkansas Code § 20-48-404), which are:

         1. (i) The taxpayer has resided in the State of Arkansas for at least three (3) years prior to the claim for credit;
         2. (ii) Due to developmental disability, the child is incapable of managing himself or herself or his or her affairs, and his or her welfare requires the special care, training, and education provided at a center; and
         3. (iii) The child’s physician has used standard tests and examinations in determining that the child has a developmental disability and is in need of the special training provided at a human development center;

      3. (C) The child with a developmental disability must be:

         1. (i) The taxpayer's biological child;
         2. (ii) The taxpayer's adopted child; or
         3. (iii) Clearly related by blood to the taxpayer; and
      4. (D) The taxpayer must be caring for the child with a developmental disability in the taxpayer's home.

Codification Notes: I.R.C. Reg. 1.44A-1 was removed by 72 FR 45338, 45346. I.R.C. § 21 is codified at 26 U.S.C. § 21.