Can a property held in an LLC qualify for the Arkansas homestead property tax credit?

Plain-English summary

State Senator Ronald Caldwell asked three related questions about the homestead property tax credit Amendment 79 created (Ark. Const. amend. 79, § 3) and Ark. Code Ann. § 26-26-1118 implemented at the time:

1. Is a limited liability company a "person" under § 26-26-1122(a)(2)(A)'s definition of "homestead"?
2. If a person lives at a home owned by an LLC of which the person is a member, can that person claim the credit?
3. Same question if the person is not a member of the owning LLC.

AG Leslie Rutledge answered all three "no." The opinion's reasoning was textual: § 26-26-1122 defines "homestead" as "the dwelling of a person that is used as his or her principal place of residence." The use of "his or her" and "place of residence" tied the term "person" to a natural person who could occupy a residence. An LLC, as a business entity, is not a natural person and cannot have a principal place of residence in the way an individual does.

Eligibility for the credit also turns on being a "[p]roperty owner" under § 26-26-1122(a)(5), which is defined as an owner of record, mortgagee, recorded contract buyer, recorded life-estate holder, or in narrow circumstances a previous record owner whose tax-delinquent property has vested in the State. A person living in an LLC-owned home does not satisfy that definition just by virtue of LLC membership. The LLC owns the property; the LLC member does not.

The statute does carve out a narrow exception for revocable and irrevocable trusts (§ 26-26-1122(a)(2)(B)), permitting the credit when a dwelling is held by a trust under specified conditions. The opinion noted that the General Assembly drew that exception expressly for trusts and did not extend it to LLCs or other business entities. So a homeowner who has placed a residence in an LLC for liability or estate-planning reasons cannot claim the homestead credit on it.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Why doesn't the LLC member qualify?
The opinion explained that the homestead credit applies to a "property owner." An LLC member is not the property owner; the LLC is. Even if the member is the only member, the property's title is in the LLC, and the credit follows the title.

What if the property is in a trust instead of an LLC? The statute (as it stood in 2020) included revocable and irrevocable trusts among "homesteads" under § 26-26-1122(a)(2)(B). The opinion identified that the legislature's express inclusion of trusts but not LLCs reflected a deliberate choice. Homeowners who want the credit and want title-protection should consult a real-estate attorney before transferring title to an LLC.

What was the credit amount when the opinion was issued? Ark. Code Ann. § 26-26-1118(a)(1)(A) (Supp. 2019) provided a $375 credit. Amendment 79, § 3 set a constitutional floor of $300; the General Assembly's implementing statute increased it to $375. The amount is set by the General Assembly within the constitutional minimum.

Could the legislature change this?
Yes. The opinion's reasoning depends on the specific statutory text in § 26-26-1122. The General Assembly could amend the definition to include LLC-held property if it chose to do so. As of the date of this opinion, it had not.

Background and statutory framework

Amendment 79, § 3 of the Arkansas Constitution requires the General Assembly to provide an annual state credit against ad valorem property tax on a homestead of at least $300. The implementing statute, Ark. Code Ann. § 26-26-1118, provides the credit and ties eligibility to "homestead" and "property owner" definitions in § 26-26-1122. Both definitions key on a natural person occupying a dwelling as a principal place of residence.

The opinion uses standard textualist reasoning: if the General Assembly meant to include business-entity-held property in the credit, it would have said so, especially since it expressly addressed trust-held property in (a)(2)(B). The expression of one (trusts) is the exclusion of others (LLCs, corporations).

Citations

Statutes:

• Ark. Const. amend. 79, § 3 (constitutional homestead-credit floor of $300)
• Ark. Code Ann. § 26-26-1118 (implementing legislation; current credit of $375)
• Ark. Code Ann. § 26-26-1122(a)(2)(A) (definition of "homestead")
• Ark. Code Ann. § 26-26-1122(a)(2)(B) (trust-held dwellings included)
• Ark. Code Ann. § 26-26-1122(a)(5) (definition of "property owner")

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS
THE ATTORNEY GENERAL
LESLIE R UTLEDGE
Opinion No. 2020-027
October 30, 2020
The Honorable Ronald Caldwell
State Senator
120 CR 393
Wynne, AR 72396
Dear Senator Caldwell:
This is in response to your request for an opm1on on the following questions concerning eligibility for the homestead property tax credit under Amendment 79 to the Arkansas Constitution 1 and its implementing legislation: 1) Is a limited liability company considered a "person" under the definition of "homestead" found in Ark. Code Ann. § 26-26- l l 22( a)(2)(A) as it applies to the homestead property tax credit under Ark. Code Ann. § 26-26-1118? 2) Is a person eligible to receive the homestead property tax credit under Ark. Code Ann § 26-26-1118 for the person's principal place of residence if the property is owned by a limited liability company of which the person is a member? 3) Is a person eligible to receive the homestead property tax credit under Ark. Code Ann. § 26-26-1118 for the person's principal place of residence if the property is owned by a limited liability company of which the person is not a member? 1 Amendment 79 requires the General Assembly to "provide by law for an annual state credit against ad valorem property tax on a homestead in an amount of not less than three hundred dollars ($300)." Ark. Const. amend. 79, § 3. 323 C ENTER STREET. SUITE 200 • LITTLE ROCK, ARKA NSAS 7220 I TJ:LEPllONE (501) 682-2007 • FAX (501) 682-8084 INTERNET W1'BSl1T • http://www.ag.state.ar.us/ The Honorable Ronald Caldwell State Senator Opinion No. 2020-027 Page 2 RESPONSE The answer to each of these questions is "no." DISCUSSION Question 1: Is a limited liability company considered a "person" under the definition of "homestead" found in Ark. Code Ann. § 26-26-1122(a)(2)(A) as it applies to the homestead property tax credit under Ark. Code Ann.§ 26-26-1118? Section 26-26-1118 implements Amendment 79. It currently provides for an annual homestead property tax credit of $3 7 5: There is established a homestead property tax credit for each assessment year that reduces the amount of real property taxes assessed on the homestead of each property owner by three hundred seventy-five dollars ($375).2 Section 26-26-1122 then defines "Homestead" as follows: "Homestead" means the dwelling of a person that is used as his or her principal place of residence with the contiguous land, excluding all land valued as agricultural land, pasture land, or timberland. "Homestead" includes: (i) A dwelling owned by a revocable or irrevocable trust and used as the principal place of residence of the person who formed the trust; and (ii) A dwelling owned by an irrevocable trust and used as the principal place of residence of a beneficiary of the trust, as evidenced by submitting a signed, notarized, and file-marked copy of the irrevocable trust to the county assessor. 3 2 Ark. Code Ann. § 26-26-1 11S(a)(1 )(A) (Supp. 2019). 3 Id. at § 26-26-l l 22(a)(2)(A) and (a)(2)(B) (Supp. 2019). The Honorable Ronald Caldwell State Senator Opinion No. 2020-027 Page 3 As you note, that statute does not define "person." But as used in context, "person" means a natural person. That is because in the statute the word "person" is accompanied by the words "his or her" and "place of residence," and those terms typically denote a natural person. Accordingly, a limited liability company is not a "person" under Section 26-26-1122. Question 2: Is a person eligible to receive the homestead property tax credit under Ark. Code Ann § 26-26-1118 for the person's principal place of residence if the property is owned by a limited liability company of which the person is a member? Question 3: Is a person eligible to receive the homestead property tax credit under Ark. Code Ann. § 26-26-1118 for the person's principal place of residence if the property is owned by a limited liability company of which the person is not a member? Questions 2 and 3 ultimately concern the same issue, and can be addressed together. The homestead property tax credit extends to eligible property owners.4 A "[p]roperty owner" is an owner of record, a mortgagee, a buyer under a recorded contract, a person holding a recorded life estate, or, in certain circumstances, a previous record owner whose tax-delinquent property has vested in the State.5 If a person does not meet that definition, then he or she is not eligible to claim the homestead property tax credit. This is true regardless of whether that person is a member of the limited liability company that owns the property. Nor for the reasons explained above is a limited liability company eligible for the homestead tax credit. The credit reduces the amount ofreal property taxes otherwise owed on the "homestead of each property owner."6 As explained above, a "homestead" is generally the "dwelling of a person that is used as his or her principal 4 See id. at § 26-26- l l l 8(b )(2)(A) ("Each property owner shall register with the county assessor proof of eligibility for the property tax credit if the property owner intends to claim a property tax credit."). 5 Id. at§ 26-26-l 122(a)(5). 6 Id. at§ 26-26-l I IS(a)(l)(A). The Honorable Ronald Caldwell State Senator Opinion No. 2020-027 Page 4 place of residence .... " And by definition, a limited liability company is not a person capable of occupying a dwelling as a principal place of residence. 7 Sincerely,
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LESLIE RUTLEDGE
Attorney General
7 The "homestead" definition expressly includes trusts under certain conditions. Ark. Code Ann. § 26-26-l l 22(a)(2)(B). But that definition makes no allowance for applying the homestead credit to propetiy owned by a business entity such as a limited liability company.