(a) Subchapter S of the Internal Revenue Code, 26 U.S.C. § 1361 et seq., as in effect on January 1, 2017, regarding small business corporations, is adopted for the purpose of computing Arkansas income tax liability.
(b)
(1) The corporate election and shareholder consents required to be filed under Subchapter S of the Internal Revenue Code, 26 U.S.C. § 1361 et seq., for Arkansas income tax purposes shall be filed with the Director of the Department of Finance and Administration in the same manner and at the same time as required under Subchapter S of the Internal Revenue Code, 26 U.S.C. § 1361 et seq., on forms to be prescribed by the director.
(2) A corporation may elect Subchapter S treatment for Arkansas income tax purposes only if it has elected Subchapter S treatment for federal income tax purposes for the same tax year.
(3) When filing an Arkansas Subchapter S income tax return, a corporation shall attach to its Arkansas Subchapter S income tax return a complete copy of the corporation's federal Subchapter S income tax return filed with the Internal Revenue Service for that taxable year.
(c)
(1) However, all nonresident shareholders of S corporations receiving a prorated share of income, loss, deduction, or credit pursuant to the provisions of this section must file a properly executed state income tax return with the director and remit the applicable state income tax due.
(2) Failure to so report and remit on the part of any nonresident shareholder shall be grounds upon which the director may revoke the corporation's Subchapter S election and collect the tax from the corporation by any manner authorized by the Income Tax Act of 1929, § 26-51-101 et seq.
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