Full Opinion

Cite as 2026 Ark. 160 SUPREME COURT OF ARKANSAS No. CV-25-485 Opinion Delivered: October 29, 2026 ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION APPEAL FROM THE BENTON APPELLANT COUNTY CIRCUIT COURT [NO. 04CV-24-1202] V. HONORABLE JOHN R. SCOTT, JUDGE RANDALL RISOR AND TIA RISOR REVERSED AND REMANDED. APPELLEES CODY HILAND, Associate Justice The Arkansas Department of Finance and Administration appeals the Benton County Circuit Court’s order granting summary judgment in favor of Randall and Tia Risor concerning their income-tax liability for tax years 2016, 2017, and 2018. ADFA contends that the circuit court erred in concluding that the Risors could claim a federal bonus-depreciation deduction on their Arkansas tax returns. Alternatively, ADFA argues that the circuit court’s interpretation of Arkansas Code Annotated section 26-51-405 renders the statute unconstitutional under article 2, section 23 of the Arkansas Constitution. We agree that the circuit court erred in permitting a federal deduction on a state tax return absent express adoption by the General Assembly. Accordingly, we reverse and remand. I. Factual and Procedural Background Randall and Tia Risor are Arkansas residents who filed Arkansas individual income-tax returns for the relevant tax years. The Risors own Ozark Rentals and Investments II, LLC (“ORI II”), a Texas limited liability company treated as a partnership for federal income-tax purposes. Although the Risors are Arkansas residents, all of ORI II’s income derived from Texas during the relevant taxable years. Accordingly, ORI II did not file Arkansas income-tax returns for those years. On their individual returns, the Risors reported their share of ORI II’s income or loss as reflected on ORI II’s federal partnership returns (i.e., IRS Form 1065). Those returns included deductions for federal bonus depreciation, which Arkansas law does not allow. ADFA audited the returns and disallowed the bonus-depreciation deductions. It issued proposed additional tax assessments of $39,732 for 2016, $17,899 for 2017, and $48,579 for 2018. The Risors appealed and submitted amended return calculations. ADFA accepted those calculations for purposes of adjustment, resulting in revised assessments of $34,352 for 2016, $17,076 for 2017, and $39,721 for 2018. An administrative law judge and the Commissioner of Revenue sustained the revised assessments, concluding that ADFA properly disallowed bonus-depreciation deductions. The Risors appealed to the circuit court, seeking to set aside the revised assessments and obtain refunds with interest and a declaration that ADFA could not apply the Arkansas Income Tax Act of 19291 to partnership income generated outside Arkansas. Both parties moved for summary judgment. The circuit court granted summary judgment in favor of the Risors, concluding that they had properly calculated their Arkansas tax liability under Arkansas Code Annotated section 26-51-405 using ORI II’s federal partnership return and that ADFA lacked jurisdiction over a foreign partnership. After further proceedings on attorney’s fees, the circuit court granted ADFA’s motion to reconsider that issue but otherwise maintained its ruling on summary judgment. ADFA now appeals. 1 Ark. Code Ann. § 26-51-101 et seq. (Repl. 2020 & Supp. 2025). 2 II. Law and Analysis The state taxes Arkansas residents on their “entire income.” Ark. Code Ann. § 26-51- 201(a) (Repl. 2020). Arkansas Code Annotated section 26-51-428 governs depreciation deductions. Subdivision (a)(1) of that provision adopts 26 U.S.C. §§ 167 and 168(a)–(j) but does not adopt § 168(k), which authorizes bonus-depreciation deductions. That omission is controlling. Thus, the question presented is rather simple: did ADFA properly disallow a federal deduction for bonus depreciation not authorized under Arkansas law? We hold that it did. The circuit court erred in granting summary judgment to the Risors. A. Standard of Review Summary judgment is appropriate only when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Gates v. Hudson, 2025 Ark. 48, at 4–5, 711 S.W.3d 142, 146. We review a grant of summary judgment de novo, viewing the evidence in the light most favorable to the nonmovant. Id. at 5, 711 S.W.3d at 146. When parties file cross-motions for summary judgment, “they agree that there are no disputes as to the facts of the case and that summary judgment is an appropriate means of resolving the dispute.” State v. Good Day Farm Ark., LLC, 2025 Ark. 207, at 6, 725 S.W.3d 1, 5. B. Bonus-Depreciation Deduction The Risors could not include bonus depreciation in calculating Arkansas taxable income because Arkansas law does not authorize it. Ark. Code Ann. § 26-51-428(a)(1) (Supp. 2017). In all versions in effect during the disputed tax years, section 26-51-428(a)(1) expressly adopts 26 U.S.C. §§ 167 and 168(a)–(j), but does not adopt § 168(k). Bonus depreciation arises solely under § 168(k). 3 The Risors are Arkansas residents, and their income is taxable under Arkansas Code Annotated section 26-51-201(a). See Ark. Code Ann. § 26-51-201(a) (“A tax is imposed upon the entire income of every resident, individual, trust, or estate.”). The fact that ORI II is a foreign limited liability company does not remove the Risors’ income derived from ORI II from Arkansas taxation, nor does it expand allowable deductions beyond those authorized by Arkansas law. In Farmers & Merchants Bank v. Skelton, this court addressed a similar argument. 266 Ark. 680, 587 S.W.2d 561 (1979). There, we held that the use of federal tax forms “certainly does not mean that the state also inherently adopts the federal income tax law in its entirety.” Id. at 682, 587 S.W.2d at 562. Such a construction would amount to an improper delegation of legislative authority. Id. at 683, 587 S.W.2d at 562–63. The General Assembly retains the sole authority to determine which deductions are permitted under Arkansas law. The circuit court erred in treating ORI II’s federal return as controlling for Arkansas tax purposes. ORI II’s federal return reflects federal tax treatment, including deductions Arkansas has not adopted, and is not determinative of the Risor’s individual Arkansas tax liability. The circuit court’s error is compounded by its conclusion that ADFA lacked jurisdiction over ORI II, a Texas limited liability company. This conflates jurisdiction over the partnership with Arkansas’s authority to tax its residents. Arkansas does not tax ORI II; it taxes the Risors under section 26-51-201(a). The relevant inquiry is not where a limited liability company operates, but where the taxpayer resides. Thus, it is immaterial that ORI II is a Texas entity or that it conducts no business in Arkansas. Arkansas residents are taxed on income from all sources, including income derived from their foreign limited liability companies. See Ark. Code Ann. § 26-51-201(a). The circuit court’s jurisdictional conclusion was therefore erroneous. 4 Finally, ADFA alternatively argues that the circuit court’s interpretation of section 26- 51-405 would violate article 2, section 23 of the Arkansas Constitution. Because we hold that the statute does not require adoption of federal bonus-depreciation deductions or federal partnership treatment, we need not reach this constitutional issue. III. Conclusion The Risors are Arkansas residents subject to Arkansas income tax on their entire income. Arkansas law has not yet authorized federal bonus-depreciation deductions on one’s state income tax. Therefore, the deduction is unavailable to the Risors. Thus, the circuit court erred in requiring ADFA to accept federal bonus-depreciation deductions reflected on the federal partnership return form and in concluding ADFA lacked authority to adjust the Risors’ income. We reverse and remand for proceedings consistent with this opinion. Reversed and remanded. Special Justice CORY COX joins WOMACK, J., concurs without opinion. WEBB, J., not participating. Brooks C. White, Keith K. Linder, and Bradley B. Young, Office of Revenue Legal Counsel, for appellant. Nixon & Alexander Law Firm, by: David G. Nixon, for appellees. 5