What You’ll Learn
If you’re a nonprofit in Arkansas, or you’re a nonprofit considering fundraising or other activities in Arkansas, you must understand the requirements that Arkansas has established for nonprofits operating in the state.
How can you become familiar with these laws? Where should you start?
Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Arkansas.
Getting to Know the State Nonprofit Corporation Law
*Important primarily for nonprofits incorporated in Arkansas
[Miss Bates] was a happy woman, a woman whom no one named without goodwill. It was her own universal goodwill and contented temper which worked such wonders. She loved everybody, was interested in everybody’s happiness, quick-sighted to everybody’s merits; thought herself a most fortunate creature, and surrounded with blessings in such an excellent mother and so many good neighbors and friends and a home that wanted for nothing. The simplicity and cheerfulness of her nature, her contented and grateful spirit, were a recommendation to everybody and a mine of felicity to herself.
- Emma, Jane Austen
When reading a novel, we get to know a fictional character by the author’s description of him or her. The author tells us what the character will look like, what his or her purpose will be, how he or she will act, and how he or she will make decisions.
Nonprofit corporations are something like fictional characters.
We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law (called the nonprofit corporation act) and the rules the nonprofit makes for itself (called the bylaws and articles of incorporation). The law and the organization’s own rules tell us what the organization will be called, what its purpose will be, how the nonprofit will act, and how it will make decisions.
To get to know your own nonprofit, you must be familiar with the sections below.
State Nonprofit Corporation Law
Conflict Transactions: Ark. Code Ann. § 4-28-623(c)- Applies to Unincorporated Nonprofits. Need to review the basic best practices for conflicted transactions? See Bylaws Module 14: Conflicts of Interest.
Director (called “Manager”) Standards of Conduct: Ark. Code Ann. § 4-28-623 - Applies to Unincorporated Nonprofits; For Nonprofit Corporation: Ark. Code Ann. 4-27-831; Need a refresher on the role of directors? See Bylaws Module 6: Directors.
Indemnification: Ark. Code Ann. § 4-28-627-Applies to Unincorporated Nonprofits. For Nonprofit Corporation: Ark. Code Ann. § 4-28-215; Ark. Code Ann. § 4-26-814; Not sure what “indemnification” is? Need to review the basics? See Bylaws Module 8: Indemnification.
For Religious Nonprofits
Nonprofit Religious Corporation Act: Arkansas’ nonprofit corporation law includes a designated law governing the formation and operations of nonprofit religious corporations and specific provisions to protect their right to self-government in internal affairs. See Ark. Stat. § 4-33-180; Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Arkansas law permits a director to rely on guidance from religious figures within his or her faith tradition in the fulfillment of the director’s fiduciary duties. Ark. Stat. § 4-33-830(b)(4)
Understanding Religious Liberty in this State
*Important for all nonprofits doing business in Arkansas, whether incorporated in Arkansas or elsewhere
In sum, the religious characteristics of the Schools consist of minimal, largely comparative religious studies, scheduled prayers and services, quotation of Bible verses in a school publication, and the employment of nominally Protestant teachers for secular subjects. References to Bible verses, comparative religious education, and even prayers and services are common at private schools and cannot suffice to exempt such schools from § 2000e-1; the addition of nominally Protestant teachers does not alter this conclusion. We conclude the Schools are an essentially secular institution operating within an historical tradition that includes Protestantism, and that the Schools’ purpose and character is primarily secular, not primarily religious.
- Equal Employment Opportunity Comm’n v. Kamehameha Schools/Bishop’s Estate, 990 F.2d 458 (9th Cir. 1993).
Sometimes, the state or local government (like the city or county) makes laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.
For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.
So what do you need to do? Be aware of the laws listed below. If any of the laws impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Talk to an attorney if you have specific concerns.
Religious Liberty Protections
State Religious Freedom Restoration Act: Arkansas has enacted a RFRA that protects the religious free exercise of all individuals and entities by requiring government burdens on religious exercise to satisfy strict scrutiny. These protections originate in a statute rather than the state constitution. Ark. Code Ann. § 16-123-401; Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
Constitutional Protections for Free Exercise: The Arkansas Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment. Ark. Const., Art. 2, Sec. 24, 25, 26
State Blaine Amendment: The Arkansas Constitution does not contain a Blaine Amendment but also does not expressly protect faith-based organizations’ freedom to participate in public benefit programs on the same terms as similarly situated secular institutions. Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Be sure you understand whether any local regulations, such county or municipal ordinances, apply to your organization. Arkansas does not currently have a statewide sexual orientation and gender identity law, but local governments may have ordinances that impact faith-based organizations.
Religious Freedom and Public Accommodation Laws: Arkansas’ nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities and provide no meaningful religious accommodations or exemptions. Ark. Stat. Ann. § 16-123-107; Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.
Protections for Religious Exercise in State of Emergency: Arkansas law provides that religious worship can only be prohibited or restricted by an emergency order that: (a) applies equally to all “essential” secular entities in the jurisdiction, (b) serves a compelling governmental interest, and (c) is narrowly tailored. Ark. Stat. Ann. § 12-75-134
Key Employment Laws and Regulations
If your nonprofit is operating in Arkansas, you will be subject to the Arkansas Civil Rights Act, as well as potentially subject to the federal anti-discrimination employment law, Title VII of the Civil Rights Act of 1964.
Arkansas Civil Rights Act: Ark. Code Ann. §16-123-101
Religious Freedom for Employees: No express statutory protection present, but see Ark. Stat. Ann. § 16-123-107
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Arkansas but incorporated elsewhere
You must consider registering as an out-of-state business (sometimes called a “foreign business”) if your organization has activities in Arkansas. You should consider completing the foreign business registration even if you have already completed a charitable registration. Not every out-of-state organization needs to register. An attorney can assist the organization in determining whether its connections with the state are significant enough to trigger the foreign business registration requirement. Examples of activities that might trigger this requirement include having employees physically located in the state, conducting programs in the state, maintaining a bank account in the state, creating or acquiring debts, owning real or personal property in the state, and having an office in the state.
Business Registration Statute
Ark. Code Ann. § 4-33-1501 (2016)
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Arkansas and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
You might not recognize some of the terms the Arkansas law uses. For example, the law uses “solicit” or “solicitation” to mean asking for donations on behalf of a charity. If you are making almost any type of request for donations, your organization is probably “soliciting” in Arkansas. If you receive only an occasional donation from Arkansas, you might not be subject to the law. Unfortunately, the law does not clearly answer the question of whether your organization needs to register if you receive just one donation from Arkansas.
In this state, you must register before you ask people in the state to make donations (sometimes called “charitable contributions”) If your organization is a religious nonprofit, you might not have to register, however, because you may be eligible for a religious exemption. To receive this exemption, your organization must apply using a form from the Arkansas Secretary of State. Arkansas’s religious exemption does not only appeal to churches and other organizations that the IRS exempts from filing the IRS Form 990 Non-Filers, such as churches. Your organization might also be exempt if you do not receive more than $25,000 in contributions annually. (Unfortunately, the law leaves some unanswered questions here—the law does not specify whether the $25,000 maximum applies to total contributions or only to Arkansas-sourced contributions.)
If You're Fundraising In Multiple States, Make Sure You Understand the URS
Your organization can complete the Arkansas charitable registration requirement using the Unified Registration Statement, which is a standardized charitable registration accepted in many states.
You should consider the following pros and cons when deciding whether to use the URS. If you use the URS, you must complete the form and attachments manually and mail the completed form and related checks to Arkansas. If you make any mistakes in the form or in the payment, you may delay the process and have to engage in additional communication with the Department to complete the registration.
Arkansas unfortunately does not yet allow charities to file initial registration and subsequent renewals online.
Evaluate Whether You'll Need a Registered Agent
You must designate the Arkansas Secretary of State to act as your registered agent for service of process if your organization is an out-of-state nonprofit registered to solicit charitable contributions in Arkansas. See Ark. Code Ann. § 4-28-413.
Follow the Rules About Communicating with the Public
You need to include specific statements whenever you are requesting donations in Arkansas or from Arkansas residents. Below is sample language to use with charitable solicitations in this state:
The solicitation is conducted by *NAME* on behalf of *ORG*. *NAME* does not receive compensation for this solicitation and is not a professional solicitor. Upon request, *ORG* can provide the percentage of funds raised which is being paid to the solicitor, either directly or as reimbursement of costs, and what percentage will be ultimately retained by the charity.
Charitable Registration Statute
Charitable Registration Exemption Statute
Annual Report Requirement
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
*Important for all nonprofits doing business in Arkansas, whether incorporated in Arkansas or elsewhere
If your organization has received federal income tax exemption, you may be able to apply for an exemption from the Arkansas state income tax. You can find out whether your organization is eligible for the exemption by reviewing the list at Ark. Code Ann. § 26-51-303. Note that, although an organization may be exempt, if it has unrelated business taxable income (UBTI) that is subject to federal taxation, that UBTI may be subject to state income tax. See Ark. Code § 26-51-304. Arkansas also has a state franchise tax, but organizations such as 501(c)(3) organizations, that are exempt from federal income tax under IRC Sec. 501(a) are also exempt from the state franchise tax. See Ark. Code § 26-54-102(b)(1).
You also need to consider applying for sales and use tax and property tax exemptions. This is especially true if you will be selling merchandise or event tickets in Arkansas. You can learn about how to apply for property tax exemption by consulting the county in which the property is located. For example, Washington County has published a Property Tax Exemption Application and posted it on the county website. An accountant or attorney can provide specific answers to these questions.
Arkansas Property Tax Exemption: Ark. Const. Art. 16, § 5
Corporate Income Tax Statute
Corporate Franchise Tax Statute
What You Need to Know About Sales Tax
Sales and Use Tax: Arkansas imposes a sales and use tax on religious organizations’ sales and provides no meaningful exemption. Arkansas imposes a sales and use tax on religious organizations’ purchases and only provides limited exemptions for certain items. Ark. Code Ann. § 26-50 et seq.; Ark. Code Ann. § 26-20-101 et seq.; Ark. Code Ann. § 26-75; Ark. Code Ann. § 26-74
State-Specific Special Requirements
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.
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**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington