Arkansas Code Title 26. Taxation § 26-51-504. Out-of-state income

(a)(1)(A) For the purpose of ascertaining the income tax due by an individual resident of Arkansas whose gross income includes income derived from property located outside the State of Arkansas, or from business transacted outside the State of Arkansas, the tax shall first be computed as if all of the income of the resident were derived from sources within the State of Arkansas, but a credit shall then be given on the tax as so computed, for the amount of income tax actually owed by the resident for the year to any other state or territory on account of income from property owned or business transacted in the other state or territory. However, credit shall not exceed what the tax would be on the outside income, if added to the Arkansas income, and calculated at Arkansas income tax rates.

(B) Income from property located or business transacted in another state or territory does not include work performed in this state as provided in § 26-51-202(c).

(2)(A) For purposes of subdivision (a)(1) of this section, the amount of income tax owed to any other state or territory by a resident shareholder of an S corporation shall be considered to include an amount equal to the shareholder's pro rata share of any net income tax owed by the S corporation to a state which does not recognize S corporations.

(B) As used in subdivision (a)(2)(A) of this section, “net income tax” means any tax imposed on or measured by a corporation's net income.