What is Withholding Pass-Through Tax?
Ark. Code Ann. § 26-51-919 requires withholding tax for pass-through entities on nonresident members. A nonresident member is an individual or business entity that does not have its residential domicile or commercial domicile in Arkansas during any part of the tax year, or is a trust not organized in the State. Pass-through entities shall withhold top individual income tax rate (3.9% for 2024) on the share of income of the entity that is derived from or attributable to sources within the state and distributed to each nonresident member. Any pass-through entity that makes a distribution to a nonresident member is required to deduct and withhold Arkansas income tax from distributions of taxable income being made with respect to Arkansas source income.
