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December 16, 2025 •Jared Garner
In November 2025, Arkansas Governor Sarah Huckabee Sanders announced new income tax exemptions for farmers who received federal aid through the disaster and relief programs of the United States Department of Agriculture (USDA) in 2025 through Arkansas Act 696. Provisions in Arkansas law had already established certain income tax exemptions on prior USDA payments, including the Market Facilitation Program and the Coronavirus Aid, Relief, and Economic Security Act. However, with the recent announcement on Act 696, payments from programs listed in the American Relief Act of 2025, Division B, Title I, are now Arkansas income tax-exempt as of January 1, 2025.
So, what is the American Relief Act of 2025? This bill was passed by Congress and signed by President Biden in December 2024 to avoid a government shutdown and extend the 2018 Farm Bill through 2025. The Act allocated over $30 billion to USDA for farm relief. Within this amount, $20 billion has been designated to assist farmers who suffered natural disasters in 2023 and 2024 through the Supplemental Disaster Relief (SDRP) and Emergency Livestock Relief (ELRP) programs. The remaining $10 billion has been directed to provide economic assistance to farmers from the economic losses expected from 2024 commodities through the Emergency Commodity Assistance Program (ECAP).
Below are common USDA programs and payments with their descriptions. Each of these programs have been determined to be exempt by Governor Sanders’ announcement.
Disaster relief payments for calendar years 2023 and 2024 for farmers who lost revenue or quality of crops, trees, bushes, and vines due to a qualifying natural disaster event. Qualifying natural disasters include droughts, excessive heat, wildfires, derechos, tornadoes, hurricanes, floods, freezes, and winter storms.
Disaster relief payments for calendar years 2023 and 2024 to a cattle farmer or cattle rancher based on the qualifying natural disasters listed above.
Economic support for eligible farmers for the 2024 crop year. It is a direct payment based on a “per acre” formula pertaining to each specific commodity. The main commodities associated with ECAP are corn, soybeans, and wheat with many other crops receiving small shares of ECAP payments.
A Farm Bill program payment provided when actual revenue is less than a guarantee based on historical data and market conditions. ARC reimburses up to the difference.
A Farm Bill program payment for a covered commodity when the effective price dips below the effective reference price. PLC reimburses up to the shortfall.
With all these programs now income tax-exempt in the State of Arkansas, this allows the federal aid to be used to reinvest or recuperate Arkansas farms without any implications for state income tax. Why is this important for you to know? As an Arkansas farmer, whether your tax return is prepared by you or a tax firm, be aware and review that your USDA relief payments are being taxed properly for the state.
Preparing a return is just one part of a broader strategy. Our team at HoganTaylor can help you evaluate whether this strategy makes sense for your situation and identify opportunities to position your farm for future growth. Contact a HoganTaylor Tax advisor to learn more.
If you have any questions about the content of this publication, or if you would like more information about HoganTaylor's Tax practice, please email Tony Otto, Tax Practice Lead, at jotto@hogantaylor.com.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.