Little Rock, Arkansas – In a major move aimed at easing financial pressures on Arkansas’s agricultural community, Governor Sarah Huckabee Sanders has announced that farmers receiving federal disaster assistance through key USDA programs will not be subject to state income tax on those payments. The exemption is part of Act 696, a measure signed into law earlier this year, along with existing provisions in Arkansas law that protect emergency aid from being taxed.
“There is no denying that Arkansas’ agricultural producers are enduring one of the most difficult seasons in modern memory,” said Governor Sanders. “That’s why my administration is ensuring that recovering farmers don’t have to pay a huge tax bill on top of their other hardships. Not only do these exemptions provide immediate relief to our hardworking farmers and ranchers, but they also help bolster Arkansas’ number one industry.”
The announcement offers clarity for agricultural producers who are preparing for the next filing season. In a letter to Arkansas Department of Agriculture Secretary Wes Ward, Department of Finance and Administration Secretary Jim Hudson confirmed that Emergency Commodity Assistance Program (ECAP) and Emergency Livestock Relief Program (ELRP) payments will be exempt from state income taxes for eligible tax years.
Millions in Relief Protected from Taxation
The ECAP was designed to help agricultural commodity producers struggling with economic losses during the 2024 crop year. As it stands, Arkansas producers are expected to receive approximately $286.2 million through ECAP to offset hardships and continue their production operations.
Additionally, the Supplemental Disaster Relief Program (SDRP) has distributed around $65.71 million to Arkansas farmers for crop damage and losses due to natural disasters during 2023 and 2024. Payments have supported producers of rice, soybeans, cotton, wheat, corn, and specialty crops including sweet potatoes, greens, peaches, watermelons, and pecans.
The Emergency Livestock Relief Program (ELRP) has provided key financial support to cattle producers in 18 Arkansas counties that faced significant flooding in 2024. This initiative covers up to 60 percent of three months of estimated feed costs for eligible ranchers, providing a crucial buffer for cattle operations working to recover.
Importantly, existing Arkansas law under A.C.A. § 26-51-314 already excludes agricultural disaster payments from taxable income, reinforcing the scope of Act 696.
Leaders Praise Relief as a Boost to the State’s Economy
Agriculture officials and lawmakers hailed the decision as a practical measure to strengthen the economy while recognizing the critical role farmers and ranchers play.
“Arkansas farmers and ranchers are the backbone of our state’s economy, and they continue to demonstrate incredible resilience in the face of extreme weather and market challenges,” said Secretary of Agriculture Wes Ward. “These tax exemptions ensure that federal relief dollars go directly to helping producers recover, reinvest, and remain strong heading into the next growing season.”
“Agriculture drives Arkansas’s economy, and these tax exemptions make sure federal relief reaches the producers who keep our state moving,” added Secretary of Finance and Administration Jim Hudson. “This is the kind of practical tax policy that strengthens communities and supports long-term economic resilience.”
Legislators involved in passing Act 696 were also quick to highlight its impact.
“Anything that the state of Arkansas can do to help our farmers when they are struggling helps all of Arkansas because agriculture is our state’s largest industry,” said State Senator Blake Johnson, who sponsored the legislation in the Senate.
Representative Les Eaves, who sponsored the act in the House, added, “I’m committed to ensuring that federal relief dollars reach their full purpose: relief. Arkansas farmers feed the world, and this law makes sure our state has their back. By exempting key USDA disaster and recovery payments from income tax, we’re keeping more resources in the fields and operations that drive our rural economy.”
As Arkansas farmers continue to face unpredictable challenges, this tax relief stands as a vital source of stability and support for the state’s largest industry.
