Little Rock, Arkansas – Governor Sarah Huckabee Sanders announced a significant step to support Arkansas’ agricultural community, unveiling income tax exemptions for farmers receiving federal disaster and relief assistance. This announcement, made today, ensures that relief payments provided through United States Department of Agriculture (USDA) programs will not be subject to state income tax, allowing producers to use critical funds for recovery and reinvestment rather than covering additional tax burdens. The exemptions were authorized under Act 696, signed by Governor Sanders in 2025, as well as longstanding provisions of Arkansas law.
“There is no denying that Arkansas’ agricultural producers are enduring one of the most difficult seasons in modern memory. 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,” Governor Sanders said. “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 clarifies that federal assistance payments made under programs such as the Emergency Commodity Assistance Program (ECAP) and the Emergency Livestock Relief Program (ELRP) qualify for state income tax exemption. Arkansas Department of Finance and Administration Secretary Jim Hudson confirmed these exemptions in a letter to the Arkansas Department of Agriculture, providing certainty to producers as they prepare for the upcoming tax filing season.
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“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 Arkansas 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.”
Hudson also emphasized the importance of the exemptions for long-term economic resilience. “Agriculture drives Arkansas’s economy, and these tax exemptions make sure federal relief reaches the producers who keep our state moving,” he said. “This is the kind of practical tax policy that strengthens communities and supports long-term economic resilience.”
Act 696 of 2025, sponsored by Senator Blake Johnson and Representative Les Eaves, formalizes the exemption of USDA disaster payments from Arkansas income tax. The law covers relief provided under the American Relief Act of 2025, ensuring that farmers and ranchers receiving assistance for losses are not penalized by state taxation.
The ECAP, one of the primary programs covered under the exemptions, provides economic support to eligible agricultural commodity producers for the 2024 crop year. Current estimates indicate that Arkansas farmers will receive approximately $286.2 million through ECAP to offset losses and sustain continued production. These funds play a vital role in helping producers recover from revenue shortfalls, weather-related impacts, and other challenges.
The SDRP (Special Disaster Relief Program) also falls under these exemptions, offering disaster relief payments to producers who suffered losses due to events affecting crops, trees, bushes, or vines during calendar years 2023 and 2024. Arkansas farmers have received roughly $65.71 million through SDRP, covering a wide range of commodities, including rice, soybeans, corn, cotton, wheat, as well as specialty and high-value crops like tomatoes, greens, watermelons, pecans, sweet potatoes, and peaches.
Beyond crop producers, cattle ranchers also benefit from exemptions under A.C.A. § 26-51-314, which shields from state income tax any payments received from agricultural disaster programs. This includes funds distributed through the Emergency Livestock Relief Program (ELRP), which supports cattle producers in 18 Arkansas counties affected by significant flooding in 2024. Through ELRP, eligible ranchers may receive up to 60% of three months of calculated feed costs, providing critical support to maintain operations and recover more quickly from natural disasters.
“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 Senator Blake Johnson.
Representative Les Eaves, House sponsor of Act 696, emphasized the broader impact of the law. “I am proud to be the House sponsor of Act 696, and 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,” he said. “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. When our farmers succeed, Arkansas succeeds — and this legislation helps secure that future.”
The combined efforts of Governor Sanders and state legislators reflect a strategic approach to supporting Arkansas’ agricultural sector through both immediate financial relief and long-term economic resilience. By ensuring that federal assistance reaches farmers and ranchers without being eroded by state taxes, the administration hopes to provide stability, encourage reinvestment, and safeguard the state’s top industry against the unpredictable challenges of climate, markets, and natural disasters.
This announcement underscores the state’s commitment to practical, targeted policies that directly benefit the people who sustain Arkansas’ economy and food supply. For many farmers and ranchers, the exemptions represent a lifeline, allowing them to focus on rebuilding operations, protecting livelihoods, and preparing for future growing seasons without the added burden of income taxation on disaster and relief payments.
