Arkansas Enterprise Zone Act
Arkansas Enterprise Zone Act (Advantage Arkansas or AEZA) is a 1993 law that establishes tax incentives for Arkansas communities that are experiencing elevated levels of poverty or unemployment. The implementation and operation of the law falls under the control of the Arkansas Department of Economic Development (ADED). The law is codified under § 15-4-1701 and § 15-4-1703 of the Arkansas Code. According to the law "any legitimate business enterprise" can apply for sale-and-use tax refunds if they meet one of nine requirements in § 15-4-1704(b) of the Arkansas Code.
The Clinton Foundation applied for tax breaks under the Arkansas Enterprise Zone Act in 2002, but found its application for $2 to 3.5 million in incentives denied in May 2002 by ADED officials because the Clinton Library was a nonprofit entity. Said ADED director Jim Pickens at the time, "Unfortunately, our incentive programs are not designed for nonprofits." Nonprofits are generally exempt from taxes owed by for-profit enterprises. The money requested by the Clinton Foundation involved tax reimbursements for Library construction equipment and building material.
The Foundation sued the state on July 18, 2002, to recover the tax credits. In December 2003 the Foundation argued in court papers that "a job created by a nonprofit business is no different than a job created by any other type of business." Foundation attorney Jane Dickey explained that the Foundation had a corporate headquarters, created twenty-five or more jobs, and had no retail sales -- all legal stipulations under the AEZA.
On January 6, 2004, the Arkansas Attorney General's Office submitted its own argument in briefs submitted to the Pulaski County Circuit Court. The Attorney General argued that the AEZA was intended solely for for-profit businesses, and did not include "libraries, schools, educational facilities, or governmental institutions." Pulaski County Circuit Judge Willard Proctor Jr. reversed the decision of the ADED in 2004.
Larry Walther of the ADED appealed Proctor's decision to the Arkansas Supreme Court. On October 27, 2005, the Supreme Court unanimously affirmed the Circuit Court's decision in Arkansas Department of Economic Development and Larry Walther, Director v. The William J. Clinton Presidential Foundation. Despite its status as a nonprofit entity, wrote associate justice Jim Gunter in the court's opinion, the Clinton Foundation qualified as a legitimate business enterprise under Advantage Arkansas. The Foundation ultimately received a total of $3.5 million in rebates.
In 2003 Arkansas state legislators passed an amendment to the Arkansas Enterprise Zone Act that specified the tax breaks were allowed only to "for profit" enterprises. The change in the law did not apply to the Clinton Foundation as it had already filed suit the year prior to the amendment.
References
- "Clinton Library Gets Break," American Libraries 36.11 (December 2005): 25.
- "Clinton Library Sues Arkansas," American Libraries 33.8 (September 2002): 24.
- Andrew DeMillo, "Clinton Library Ruled Eligible for Tax Breaks: State's High Court Says Nonprofit Foundation Qualifies for Program," Arkansas Democrat-Gazette, October 28, 2005.
- Brenda Goodman, "Ruling Favors Clinton Library," New York Times, October 28, 2005.
- David M. Halbfinger, "Clinton Library Won't Get Tax Break," New York Times, May 30, 2002.
- James Jefferson, "Arkansas Supreme Court Gives Tax Break to Clinton Library, October 27, 2005 (AP).
- James Jefferson, "High Court Hears Arguments in Clinton Library Tax Break Dispute," Associated Press State & Local Wire, October 7, 2005.
- Martha Leonard, "Nonprofits Await Outcome of Clinton Library Lawsuit," Arkansas Business, September 30, 2002.
- Rob Moritz, "Clinton Library's Economic Benefits Exceed Tax Break, Rutherford Says," Arkansas News Bureau, Oct 7, 2005.
- "No Tax Rebate for Clinton Library?" American Libraries, 35.3 (March 2004): 18.
