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 Supreme Court of Arkansas. On October 27, 2005, the Supreme Court affirmed the Circuit Court's decision. 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.
References
- "Clinton Library Gets Break," American Libraries 36.11 (December 2005): 25.
- "Clinton Library Sues Arkansas," American Libraries 33.8 (September 2002): 24.
- 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).
- 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.
