Arkansas IMPACT in Action: New Incentive Initiatives

During the 2025 legislative session, Arkansas enacted IMPACT (Improving Markets, Promoting Arkansas Commerce & Trade), a legislative package that modified and expanded the state’s economic development framework. This package includes a new Modernization and Automation Credit, a new Lithium-Focused Sales and Use Tax Exemption, and a revamped Data Center Incentive.

Modernization and Automation Credit

Effective October 2025, Arkansas launched a new incentive under Act 882 focused on encouraging reinvestment in existing facilities. The program provides eligible companies with a tax credit that can be applied against either income tax or sales and use tax. The credit equals 5 percent of qualified project expenditures, with as much as $2 million annually to reduce state taxes owed. Credits may also be rolled over up to a maximum of five years, providing added flexibility as businesses implement large-scale upgrades.

To qualify, companies must have two years of operating history in Arkansas and maintain their headcount and aggregate pay levels throughout the project and for two years following completion. Eligible companies must also commit $25 million in automation or modernization efforts over a six-year period and obtain a satisfactory fiscal impact assessment. Overall, the credit is designed to strengthen Arkansas companies by supporting facility upgrades and positioning them for long-term growth.

Lithium Resource Sales and Use Tax Exemption

Arkansas introduced Act 1012, effective October 2025, to provide a sales and use tax exemption for companies participating in the state’s lithium supply chain. The exemption encompasses a wide range of facility-related costs. Eligible expenses include, but are not limited to, construction and development costs, equipment purchases, and ongoing operational costs.

To qualify, eligible companies must generate $3 million in payroll per year for two years and commit $100 million within 10 years of commencing construction. This program is designed to incentivize companies to keep more of the lithium lifecycle in-state, helping Arkansas retain greater value from the resource.

Data Center Incentive

Originally introduced during the 2023 legislative session, Arkansas Act 548 updates the state’s sales and use tax exemption for data centers, making the incentive easier to navigate while aligning it with modern project requirements. Costs eligible for the exemption include, but are not limited to, facility development and renovation, data center equipment, the labor required to install it, and electricity.

Eligibility is contingent upon creating $1 million in annual payroll over a two-year period, spending $100 million over a five-year period, and a satisfactory fiscal impact evaluation. The legislation also establishes eligibility criteria for large data center projects, requiring $3 million in annual payroll over a three-year period and a $2 billion spend over a 10-year period. These incentive enhancements improve Arkansas’ overall competitiveness in attracting data center investment of all sizes. 

Other key updates from Arkansas’ 2025 legislative session

Beyond the initiatives outlined above, the IMPACT package includes several other noteworthy provisions. These include the designation of the Arkansas Development Finance Authority (ADFA) as a corporate instrumentality of the state (Act 944), the launch of the Generating Arkansas Jobs Act of 2025 (Act 373), and reforms to Arkansas’ Small Business Innovation Research (SBIR) Matching Grant Program (Act 440). Notably, IMPACT did not replace Arkansas’ existing incentive programs; those that existed prior to the package remain in place.

Conclusion

The establishment of the Modernization and Automation Credit and the Lithium Tax Exemption, together with the updates to the Data Center Incentive, illustrate the scope of Arkansas’ 2025 IMPACT legislation. As a whole, the IMPACT package reflects a coordinated approach to economic development and strengthens the state’s overall investment climate. If your business is interested in pursuing any of these programs or learning more about other incentives available in Arkansas, please reach out to one of Site Selection Group’s economic development experts. 

Sources: Arkansas Economic Development Commission and the Arkansas Department of Commerce