Excess inclusion income (EII) must be included in Arkansas corporate income tax returns. Arkansas has adopted Subchapter M of the Internal Revenue Code, which includes provisions on excess inclusion income in IRC §860.
If a taxpayer files a consolidated Arkansas return, excess inclusion income should be recognized on a separate entity basis, at the member company level, rather than on a consolidated basis. Arkansas law requires each member of an Arkansas consolidated return to calculate its taxable income separately. No exception has been made for excess inclusion income.
Revenue Legal Counsel Opinion No. 20171012, Arkansas Department of Finance and Administration, Office of Revenue Legal Counsel, December 1, 2017, ¶400-858
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