1. (a) The affected business entity shall calculate its tax rate as follows:

   1. (1) The affected business entity shall pay a tax equal to the top marginal income tax rate for the taxable year under Arkansas Code § 26-51-201(a) on its net taxable income computed as described in this part; and
   2. (2) Any net capital gain earned by the affected business entity, regardless of whether that gain is a short-term or long-term capital gain or the amount of the gain, shall be taxed at fifty percent (50%) of the top marginal income tax rate for the taxable year under Arkansas Code § 26-51-201(a).

2. (b)

   1. (1) On its tax return, an affected business entity shall compute its net taxable income as determined by the Income Tax Act of 1929, Arkansas Code § 26-51-101 et seq.
   2. (2) The affected business entity shall make any applicable basis adjustments in computing the net taxable income of the entity.

3. (c)

   1. (1) An affected business entity that receives or earns income tax credits under Arkansas law may elect to apply those tax credits to reduce the pass-through entity tax owed by the entity.
   2. (2) The tax credits shall be subject to the same limitations that would have been applicable had the credit been used to reduce an income tax liability.
   3. (3) Entitlement to an income tax credit, deduction, or exemption by a member or members is not relevant to and must not be considered in the computation of the pass-through entity tax.
4. (d) If the affected business entity has income from both within and without Arkansas for the taxable year, the business entity shall apportion or allocate its income to Arkansas as required by Arkansas Code § 26-51-701 et seq.
5. (e) An affected business entity that incurs a net operating loss may carry forward the loss for the period of years as allowed by Arkansas Code § 26-51-427.
6. (f) An affected business entity may deduct guaranteed payments to its members as ordinary and necessary business expenses to the extent they are not required to be capitalized by Arkansas law and otherwise meet the definition of an ordinary and necessary business expense.
7. (g) If an affected business entity is a member of one (1) or more other affected business entities, that entity shall subtract its distributive share of the income or add its distributive share of the losses from the other affected business entity or entities, to the extent the income or loss from the other affected business entity or entities was apportioned or allocated to Arkansas or otherwise attributable to Arkansas.
8. (h) Penalty and interest will be calculated and imposed pursuant to the Arkansas Tax Procedure Act, Arkansas Code § 26-18-101 et seq.

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; Ark. Code Ann. § 26-65-106."