§ 20-3-111 — Funds exempt from tax

(a) Except as otherwise indicated in this chapter, interest, dividends, and capital gains from funds invested in the Achieving a Better Life Experience Program are exempt from Arkansas income taxes. (b) (1) A qualified distribution from a disability savings account established under the Achieving a Better Life Experience Program is exempt from Arkansas income tax with respect to the designated beneficiary's income. (2) (A) The earnings portion of nonqualified distributions from a disability savings account established under the Achieving a Better Life Experience Program are subject to Arkansas income tax. (B) The earnings portion of a nonqualified distribution is taxable to the designated beneficiary. (c) Earnings on a contribution that are included in a refund are subject to Arkansas income tax. (d) (1) Contributions to a disability savings account established under this chapter may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b) . (2) (A) Deductible contributions under this subsection shall not exceed five thousand dollars ($5,000) per taxpayer in a tax year. (B) If the aggregate amount of contributions by a taxpayer during a tax year exceeds the limitation stated in subdivision (d)(2)(A) of this section, the amount of contributions in excess of the limitation stated in subdivision (d)(2)(A) of this section may be carried forward for purposes of deduction for four (4) consecutive tax years following the tax year in which the contribution was made. (3) A contribution that has been deducted from a taxpayer's income for a prior tax year under this subsection is subject to recapture if the taxpayer: (A) Takes a subsequent nonqualified distribution from the account; or (B) Rolls the account over to a tax-deferred savings program established by another state or institution under 26 U.S.C. § 529A . (4) A contribution that is subject to recapture under this subsection shall be recaptured by adding the amount previously deducted, not to exceed the amount of the nonqualified distribution, to the taxpayer's adjusted gross income for the tax year in which the nonqualified distribution occurred.

Legislative History

Amended by Act 2021, No. 882,§ 1, eff. for tax years beginning on or after January 1, 2021. Amended by Act 2019, No. 825,§ 1, eff. for tax years beginning on or after 1/1/2019. Added by Act 2015, No. 1238,§ 1, eff. 7/22/2015.