LITTLE ROCK, Ark. — Governor Sarah Huckabee Sanders today announced important income tax exemptions for farmers receiving federal assistance through United States Department of Agriculture (USDA) disaster and relief programs. These exemptions were authorized through Act 696, signed by Governor Sanders in 2025, as well as longstanding provisions of Arkansas law, ensuring farmers and ranchers are not taxed on critical relief funds.
“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,” said Governor Sanders. “Not only do these exemptions provide immediate relief to our hardworking farmers and ranchers, but they also help bolster Arkansas’ number one industry.
In a letter to Arkansas Department of Agriculture Secretary Wes Ward, Arkansas Department of Finance and Administration Secretary Jim Hudson confirmed that both Emergency Commodity Assistance Program (ECAP) and Emergency Livestock Relief Program (ELRP) payments qualify for state income tax exemption for applicable tax years, ensuring clarity for Arkansas producers as they prepare for the upcoming filing season.
“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.”
“Agriculture drives Arkansas’s economy, and these tax exemptions make sure federal relief reaches the producers who keep our state moving,” said Arkansas Secretary of Finance and Administration Jim Hudson. “This is the kind of practical tax policy that strengthens communities and supports long-term economic resilience.”
In accordance with Act 696 of 2025, sponsored by Senator Blake Johnson and Representative Les Eaves, payments made to farmers by the USDA under the American Relief Act of 2025 are exempt from Arkansas income tax.
This exemption includes assistance provided through the ECAP, which delivers 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 support continued production.
The SDRP provides disaster relief payments to producers who suffered revenue, quality, or production losses to crops, trees, bushes, or vines due to qualifying disaster events in calendar years 2023 and 2024. Arkansas producers have received approximately $65.71 million in SDRP, which included payments for rice, soybeans, corn, cotton, wheat, as well as other specialty and high-value crops such as tomatoes, greens, watermelons, pecans, sweet potatoes, and peaches.
Additionally, under A.C.A. § 26-51-314, Arkansas law exempts from income tax any payments made to a cattle farmer or cattle rancher from an agricultural disaster program. These programs provide compensation for losses resulting from emergencies, natural disasters, or significant market declines.
This exemption applies to payments from the 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 vital support to maintain operations and recover more quickly.
“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 Arkansas State Senator Blake Johnson.
“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,” said Arkansas State Representative Les Eaves. “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.”
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