1. (a) Credit for water resource projects, water impoundments, and water control structures — Arkansas Code § 26-51-1006 [repealed].

   1. (1)

      1. (A) The income tax credit for water resource projects, water impoundments, and water control structures is issued and verified through the Arkansas Natural Resources Commission.
      2. (B) The commission, upon acceptance and approval of the project, will issue a certificate and tax credit approval document to the taxpayer.
      3. (C) In the year the project is completed, the commission will issue the taxpayer a certificate of completion for tax credit document.

   2. (2)

      1. (A) In order to claim the income tax credit prior to the completion of the project, the taxpayer must attach the certificate of tax credit approval to its income tax return.
      2. (B) If the project has been completed, the certificate of completion for tax credit must be attached to the taxpayer's income tax return.
      3. (C) The income tax credit is limited to nine thousand dollars ($9,000) or the amount of the taxpayer's computed tax liability for the tax year, whichever is the smaller amount.
      4. (D) Any unused income tax credit may be carried forward for up to nine (9) consecutive tax years following the tax year in which the credit originated.
   3. (3) If a certificate of completion is not issued by the commission within three (3) years of the certificate of tax credit approval date, the taxpayer will be subject to an assessment by the Corporation Income Tax Section of the Department of Finance and Administration for the repayment of those credits previously taken, including interest.

   4. (4)

      1. (A) Any water resource or surface water conservation project approved prior to December 31, 1995, must comply with the provisions established under the Water Resource Conservation and Development Incentives Act of 1985 [repealed].
      2. (B) The 1985 act limited the credit to three thousand dollars ($3,000) per year with a ten-year carryforward allowed.

2. (b) Credit for abandoning or reducing the extraction of groundwater — Arkansas Code § 26-51-1007.

   1. (1)

      1. (A) The income tax credit for abandoning or reducing the extraction of groundwater and utilizing surface water in lieu of groundwater is issued and verified through the commission.
      2. (B) The commission will issue a certificate of tax credit approval and certificate of completion for tax credit in the same manner as outlined in subsection (a) of this section.

   2. (2)

      1. (A) In order for the taxpayer to claim this credit, the appropriate certificate must be attached to its income tax return.
      2. (B) The income tax credit is limited to nine thousand dollars ($9,000) or the amount of the taxpayer's computed tax liability for the tax year, whichever is the smaller amount.
      3. (C) Any unused income tax credit may be carried forward for up to two (2) consecutive tax years following the tax year in which the credit originated.

   3. (3)

      1. (A) If the corporation is claiming more than one (1) income tax credit, the corporation should specify in which order the credits should be claimed.
      2. (B) If not specifically stated, the department will utilize the credits in the order which it perceives to be to the best advantage of the corporation.

3. (c) Credit for surface water conversion within critical areas — Arkansas Code § 26-51-1008.

   1. (1)

      1. (A) With respect to agricultural or recreational water projects, the income tax credit is limited to nine thousand dollars ($9,000) or the amount of the taxpayer's computed tax liability for the tax year, whichever is the smaller amount.
      2. (B) Any unused credit may be carried forward for up to two (2) consecutive tax years following the tax year in which the credit originated.

   2. (2)

      1. (A) For industrial or commercial water projects, the income tax credit is limited to thirty thousand dollars ($30,000) or the amount of the taxpayer's computed tax liability for the tax year, whichever is the smaller amount.
      2. (B) Any unused credit may be carried forward for up to four (4) consecutive tax years following the tax year in which the credit originated.
   3. (3) The income tax credit set forth in Arkansas Code § 26-51-1008 shall be available for tax years beginning on or after August 1, 1997.

4. (d) Application and approval procedure — Arkansas Code § 26-51-1010(c).

   1. (1)

      1. (A) The commission will issue a certificate of tax credit approval to applicants that propose water conservation projects that meet the requirements of the Water Resource Conservation and Development Incentives Act, Arkansas Code § 26-51-1001 et seq.
      2. (B) Upon completion of the project, the commission will issue a certificate of completion for tax credit to the taxpayer.

   2. (2)

      1. (A) The taxpayer must attach the certificate of tax credit approval to the income tax return on which it first claims the income tax credit.
      2. (B) The certificate of completion for tax credit must be attached to the first tax return filed by the taxpayer after the certificate has been issued.

5. (e) Multiple credits — Arkansas Code § 26-51-1010(d).

   1. (1) If a taxpayer is claiming more than one (1) water conservation income tax credit, the taxpayer should specify on its return the order in which the credits should be applied.
   2. (2) If no such specification is made, the department will apply the credits in the order which would be of best advantage to the taxpayer.

6. (f) Project completion and maintenance — Arkansas Code § 26-51-1011.

   1. (1)

      1. (A) All water conservation projects must be completed within three (3) years of the date that the certificate of tax credit approval was issued.
      2. (B) If the project is not completed within this three-year period:

7. (i) All credits claimed must be repaid to the department; and

   1. (ii) The project will be disallowed for any further water conservation income tax credits.

   2. (2)

      1. (A) All water conservation projects must be maintained for a minimum life of ten (10) years after the certificate of completion for tax credit has been issued.
      2. (B) If the taxpayer terminates the project at any time during the first ten (10) years, the taxpayer must notify the commission and the department in writing of the termination.
      3. (C) In addition, the taxpayer must promptly file an amended income tax return after the termination and repay any tax credits claimed but not earned.

Codification Notes: Arkansas Code § 26-51-1006 was repealed by Acts 2011, No. 631, § 4. The Water Resource Conservation and Development Incentives Act of 1985 was repealed by Acts 1995, No. 341.