(a) This part shall apply only to taxpayers subject to the tax imposed by the Income Tax Act of 1929, Arkansas Code § 26-51-101 et seq., that have the following characteristics:

1. (1) The taxpayer is a passive intangible holding company;
2. (2) The taxpayer receives business income from intragroup intangible licensing transactions with one (1) or more other members of the same group doing business within the jurisdiction of this state; and
3. (3) At least one (1) of the other members of the same group from which business income is received by the taxpayer is subject to the tax imposed by the Income Tax Act of 1929, Arkansas Code § 26-51-101 et seq.

(b)

1. (1) A passive intangible holding company shall not be subject to the provisions of this part for income derived from any intragroup intangible licensing transaction if the licensee does not claim a deduction on its Arkansas income tax return for expenses associated with the intragroup intangible licensing transaction.
2. (2) If the licensee elects to forego this deduction, the passive intangible holding company shall not be required to report the income from the intragroup intangible licensing transaction for Arkansas income tax purposes.