(a) Railroads — Arkansas Code § 26-51-204.

1. (1) Every organization operating a railroad, partly within and partly without the state, shall apportion the net operating income attributable to this state by multiplying the net income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor doubled and the denominator of which is four (4).
2. (2) Property factor. The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period, provided that the average value of the operating equipment (locomotives, freight and passenger cars, work and miscellaneous equipment) shall be apportioned to the state in the ratio of total miles such property is operated within the state to total miles operated throughout the system.

3. (3)

   1. (A) Average value of the property owned by the taxpayer means the average of the original cost of the property at the beginning and ending of the tax period.
   2. (B) Property rented is valued at eight (8) times the net annual rental.
4. (4) Payroll factor. The payroll factor is a fraction, the numerator of which is compensation paid for services performed entirely within the state plus a proportionate part of the compensation paid for services performed both within and without the state based on the ratio of total miles traveled within the state to total miles traveled and the denominator of which is total compensation paid during the tax period.
5. (5) Sales factor. The sales factor is a fraction, the numerator of which is the gross revenue from within the state plus a proportionate part of interstate revenues earned in the state determined on the basis of miles operated in the state to total miles operated in the system and the denominator of which is total operating revenues.
6. (6) To the net income thus determined shall be added nonoperating revenues from sources within Arkansas less any related expenses.

7. (7)

   1. (A) Operating income is the same as business income.
   2. (B) Nonoperating income is the same as nonbusiness income. Example: ABC Railroad A. Average Property in Arkansas $1,000,000 B. Average Property in Texas $1,000,000 C. Average Locomotives & Equipment $1,000,000 D. Operating Miles in Arkansas 400,000 E. Operating Miles in Texas 600,000 F. Payroll in Arkansas $200,000 G. Payroll in Texas $200,000 H. Interstate Payroll $100,000 I. Arkansas Revenues $1,000,000 J. Texas Revenues $1,000,000 K. Interstate Revenues $500,000 L. Arkansas Non-business Revenues $150,000 M. Related Expenses $20,000 N. Total Non-business Revenues $500,000 O. Related Expenses $50,000 Federal Return: P. Total Income $3,000,000 Q. Total Deductions $2,000,000 R. Line 28 Income $1,000,000 The Arkansas property factor is the average value of real and tangible property in Arkansas, plus the average value of interstate property, multiplied by Arkansas’s total miles, divided by total miles, divided by average value of all property or: A + (D ÷ [D + E] x C) ÷ (A + B + C) = Property Factor $1,000,000 + (400,000 mi ÷ [400,000 mi + 600,000 mi] x $1,000,000) ÷ ($1,000,000 + $1,000,000 + $1,000,000) = 46.666667% The Arkansas payroll factor is Arkansas payroll, plus interstate payroll, multiplied by Arkansas total miles, divided by total miles, divided by total payroll or: F + (D ÷ [D + E] x H) ÷ (F + G + H) = Payroll Factor $200,000 + (400,000 mi ÷ [400,000 mi + 600,000 mi] x $100,000) ÷ ($200,000 + $200,000 + $100,000) = 48.000000% The sales factor is Arkansas revenues, plus interstate revenues, multiplied by Arkansas total miles, divided by total miles, divided by total revenues or: I + (D ÷ [D + E] x K) ÷ (I + J + K) = Sales Factor $1,000,000 + (400,000 mi ÷ [400,000 mi + 600,000 mi] x $500,000) ÷ ($1,000,000 + $1,000,000 + $500,000) = 48.000000% x 2 = 96.0000% (due to double weighted sales factor) Arkansas apportionable income is Line 28 federal taxable income less net nonbusiness income or: R - (N - O) = Arkansas apportionable income $1,000,000 - ($500,000 - $50,000) = $550,000 This is assuming no other adjustments are necessary.
8. (8) The Arkansas apportionment factor is the property factor, plus the payroll factor, plus the sales factor, divided by four (4). (46.666667% + 48.000000% + 96.000000%) ÷ 4 = 47.666667% Income apportioned to Arkansas is $550,000 x 47.666667%, or $262,167. Direct income allocated to Arkansas is $150,000 minus $20,000, or $130,000. Arkansas taxable income is $392,167.

(c) Public utilities — Arkansas Code § 26-51-204.

1. (1) Telephone, electric power, and gas distribution companies operating both inside and outside of Arkansas shall allocate and apportion to Arkansas their net income by use of the allocation and apportionment procedures provided under the Uniform Division of Income for Tax Purposes Act, Arkansas Code § 26-51-701 et seq.
2. (2) The Uniform Division of Income for Tax Purposes Act applies to all taxpayers doing business both inside and outside of Arkansas.