Arkansas says USDA relief funds won’t be taxed as farmers recover

Arkansas farmers recovering from back-to-back years of weather-driven losses will not owe state income tax on major federal disaster and relief payments, Gov. Sarah Huckabee Sanders said Thursday.

Sanders said the exemptions, authorized under Act 696 of 2025 and existing state law, are meant to keep farmers from facing new financial burdens as they rebuild from severe weather and market disruptions. “My administration is ensuring that recovering farmers don’t have to pay a huge tax bill on top of their other hardships,” she said.

In a letter to Agriculture Secretary Wes Ward, state Finance and Administration Secretary Jim Hudson confirmed that payments from the USDA’s Emergency Commodity Assistance Program and Emergency Livestock Relief Program qualify for income-tax exemption for applicable tax years. The clarification comes as producers prepare for the upcoming filing season.

Ward said the exemptions will help direct critical relief funds to farm operations facing ongoing volatility. “These tax exemptions ensure that federal relief dollars go directly to helping producers recover, reinvest, and remain strong heading into the next growing season,” he said.

Hudson said the policy reflects the importance of agriculture to the state’s economy. “This is the kind of practical tax policy that strengthens communities and supports long-term economic resilience,” he said.

Act 696, sponsored by Sen. Blake Johnson and Rep. Les Eaves, exempts USDA payments made under the American Relief Act of 2025. Those include ECAP assistance for 2024 crop-year commodity losses. Current estimates project Arkansas producers will receive about $286.2 million through that program.

Producers also have collected roughly $65.71 million through the USDA’s Separate Disaster Relief Program for crop, tree, and vine losses from qualifying disasters in 2023 and 2024. Payments covered rice, soybeans, corn, cotton, wheat, and specialty crops such as tomatoes, greens, watermelons, pecans, sweet potatoes, and peaches.

Longstanding Arkansas Code § 26-51-314 separately exempts disaster-program payments to cattle farmers. That includes support from the Emergency Livestock Relief Program, which provides up to 60% of three months of feed costs to ranchers in 18 counties hit by major flooding in 2024.

Johnson said easing the tax burden helps sustain the state’s largest industry. Eaves said the law ensures federal relief “reaches its full purpose: relief,” keeping more resources in the farms that fuel rural economies.