26 CAR § 64-103. Examples of application

(a) The following examples illustrate the application of Acts 1985, No. 759. (b) Each example assumes that the taxpayer, the donation, sale, or expenditure, and the institution receiving the donation, sale, or payment are qualified under Acts 1985, No. 759. Example 1: A wholesaler purchases machinery for one hundred thousand dollars ($100,000) from his or her supplier. The taxpayer sells this machinery and equipment to a qualified vocational technical school for eighty-five thousand dollars ($85,000). The wholesaler is entitled to claim credit under Acts 1985, No. 759, for a sale below cost. The basis of claiming the credit is the amount by which the wholesaler reduced the price from his or her own cost ($100,000 - $85,000 = $15,000). The wholesaler may claim a credit of four thousand nine hundred fifty dollars ($4,950) or fifty percent (50%) of his or her net tax liability, whichever is less. Example 2: Arkansas Instruments, a computer manufacturer, sells a computer system to a qualified vocational technical school for eighty-five thousand dollars ($85,000). Arkansas Instruments paid forty-five thousand dollars ($45,000) for the parts that went into the computer system. The lowest price at which Arkansas Instruments sells the computer system to its customers is one hundred thousand dollars ($100,000). Arkansas Instruments is entitled to claim a credit under Acts 1985, No. 759, for a sale below cost. Arkansas Instruments’ cost is deemed to be the lowest price at which it sells the computer system ($100,000). The credit is based upon the amount by which Arkansas Instruments reduced its cost ($100,000 - $85,000 = $15,000). The credit is thirty-three percent (33%) of the amount by which the price is reduced ($15,000 x .33 = $4,950). Arkansas Instruments may claim a credit of four thousand nine hundred fifty dollars ($4,950) or fifty percent (50%) of its tax liability, whichever is less. Example 3: A retailer purchases machinery for one hundred thousand dollars ($100,000) from his or her supplier. The taxpayer sells this machinery and equipment to a qualified vocational technical school for eighty-five thousand dollars ($85,000). The retailer is entitled to claim credit under Acts 1985, No. 759, for a sale below cost. The basis of claiming this credit is the amount by which the retailer reduced the price from his or her own cost ($100,000 - $85,000 = $15,000). The retailer may claim a credit of four thousand nine hundred fifty dollars ($4,950) or fifty percent (50%) of his or her net tax liability, whichever is less. Example 4: Arkansas Retailer donates machinery and equipment to a qualified vocational technical school. Arkansas Retailer paid eighty-five thousand dollars ($85,000) for the equipment from its supplier. Arkansas Retailer may claim a credit of ($85,000 x .33 = $28,050) twenty-eight thousand fifty dollars ($28,050) or fifty percent (50%) of its tax liability, whichever is less. Example 5: An Arkansas resident pays thirty thousand dollars ($30,000) in cash to an Arkansas university to fund a qualified research program. The Arkansas taxpayer is entitled to claim a credit against his or her Arkansas income tax in the amount of nine thousand nine hundred dollars ($9,900) or fifty percent (50%) of his or her tax liability, whichever is less. Example 6: Arkansas Instruments, a manufacturer, donates a computer system to a qualified vocational technical school. Arkansas Instruments paid forty-five thousand dollars ($45,000) for the parts that went into the computer system. The lowest price this system is sold to Arkansas Instruments' customers is one hundred thousand dollars ($100,000). Arkansas Instruments is entitled to a credit of ($100,000 x .33 = $33,000) thirty-three thousand dollars ($33,000) or fifty percent (50%) of its tax liability, whichever is less.