Republican Governor Mike Huckabee signed the legislation, Act 218 , on February 28 effective for tax years beginning January 1, 2002 and later. Arkansas lagged the rest of the nation in coming into compliance with the 2001 pension legislation last year largely because the Arkansas state legislature did not meet. However, the Arkansas Department of Finance and Administration (DFA) anticipated – and alerted tax payers last year that the General Assembly would likely do so, and do so retroactively, as it did (see State EGTRRA Compliance A Patchwork Quilt for Plan Sponsors ). Information in the 2002 Arkansas income tax booklets asked taxpayers who made contributions in excess of the old limits to refrain from filing their 2002 Arkansas return until the federal changes were adopted as Arkansas state law, according to the DFA.
Last November, North Carolina managed to bring its laws into conformity with the Economic Growth Tax Relief and Recovery Act (EGTRRA), but it proved to be a complicated process given the state’s budgetary straits (see Tar Heels Embrace EGTRRA ). Similar problems held up passage in a variety of states, including California and Wisconsin. Massachusetts had to pass it over the governor’s veto (see And Then There Were FiveMake That Two ).
With the passage of Act 218 Governor Huckabee noted that Arkansas taxpayers now can take advantage of increased annual contribution limits for IRAs, 401(k), 403(b), 457 and SIMPLE plans, as well as educational IRAs for state income tax purposes. Arkansas Revenue Commissioner Tim Leathers said, “This will simplify tax return preparation and recordkeeping for all Arkansas taxpayers who participate in these plans, and for the tax professionals and companies that administer these plans.”