SMALL BUSINESS TAX ACCOUNTING
USE OF ACCRUAL BASIS and CASH BASIS ACCOUNTING METHODS
CORPORATION INCOME TAX REGULATION 3.26-51-401(a)
Pursuant to the authority vested in the Director of the Arkansas Department of Finance &
Administration and in compliance therewith, the Director and Commissioner hereby promulgate
the following regulation for the proper administration of the Arkansas Income Tax Act of 1929.
This regulation shall be effective ten (10) days after it has been filed by the Department of
Finance and Administration with the Arkansas Secretary of State.
This regulation has been promulgated to implement and facilitate Revenue Procedure
#2001-76, 2001-52 I.R.B. 613 issued by the Internal Revenue Service on December 11,
2001. Under Ark. Code Ann. §26-51-401, Arkansas income tax returns must be prepared
using the same accounting method as that used for federal income tax purposes. In order to
remain consistent with federal rules on the use of accounting methods, the Director has
determined that promulgation of this regulation is necessary.
a) "Qualifying Small Business Taxpayer" shall mean any taxpayer with "average
annual gross receipts" of greater than $1,000,000 but less than or equal to
$10,000,000 that is not prohibited from using the cash method of accounting
under IRC §448. A taxpayer's average annual gross receipts of $10,000,000 or
less is determined by averaging the annual gross receipts for a three tax year
period ending immediately prior to the tax year electing the cash method of
accounting. Taxpayers are required to recalculate their average annual gross
receipts each tax year. The election to change to the cash method of accounting
may be made for tax years ending on or after December 31, 2001.
The averaging is based upon the three years prior to the tax year
electing the change. If electing for tax year 12/31/01, the averaging
is based upon tax years 12/31/98, 12/31/99 and 12