1. (a)

   1. (1) The members of a business entity must elect annually whether the entity wishes to be subject to the pass-through entity tax.
   2. (2) All members of an affected business entity are bound by the entity’s election for that taxable year.

2. (b)

   1. (1) The annual election must be made prior to the date established by Arkansas law for filing the business entity’s income tax return.
   2. (2) If the business entity receives an extension to file the income tax return, the annual election must be made prior to the extended due date.

3. (c)

   1. (1) The election shall be filed on forms provided by the Secretary of the Department of Finance and Administration.
   2. (2) The election must contain the business entity’s federal employer identification number.
4. (d) A copy of the election shall be provided by the business entity to each member of the business entity making the election to be taxed under the pass-through entity tax.

5. (e)

   1. (1) An affected business entity may revoke its election by submitting to the Department of Finance and Administration a revocation on the forms provided by the secretary prior to the due date or extended due date for the affected business entity’s pass-through entity tax return.
   2. (2) A copy of the revocation shall be provided by the business entity to each member of the business entity submitting the revocation of its election to be taxed under the pass-through entity tax.

6. (f) If an affected business entity revokes its election for a taxable year, then, upon receipt of the revocation, the department will either:

   1. (1)

      1. (A) Issue directly to the affected business entity a refund of installment payments paid to the department for that tax year by the affected business entity.
      2. (B) The refund under this subsection will be paid without interest;
   2. (2) Transfer the installment payments made to the department to a pass-through withholding or composite tax account held by the same entity that made the installment payments; or
   3. (3) Carry forward the installment payments to count towards the pass-through entity tax owed by that entity in a future year.

7. (g)

   1. (1) The affected business entity must indicate on the revocation form submitted to the department its desired treatment of its installment payments under subsection (f) of this section.
   2. (2) If an affected business entity fails to select an option under subsection (f) of this section at the time it revokes its election and in the manner described herein, the department will, if applicable, refund installment payments under subdivision (f)(1) of this section.
8. (h) If an entity makes installment payments to the department for a taxable year and later revokes its election, the department will not issue a refund of those installment payments to a member of the revoking entity or any other individual or transfer any installment payments to any account other than those described in subdivision (f)(2) of this section.

Codification Notes: This section as promulgated prior to codification into the Code of Arkansas Rules provided as follows: "Authority. Ark. Code Ann. § 26-18-301; Ark. Code Ann. § 26-65-102; Ark. Code Ann. § 26-65-105."