Jim Hudson, in His Official Capacity as Secretary, Arkansas Department of Finance and Administration v. United States Beef Corporation

── Jim Hudson, in His Official Capacity as Secretary, Arkansas Department of Finance and Administration v. United States Beef Corporation ── Court: Supreme Court of Arkansas Date: April 16, 2026 Category: General Cite as 2026 Ark. 63 SUPREME COURT OF ARKANSAS No. CV-25-395 Opinion Delivered: April 16, 2026 JIM HUDSON, IN HIS OFFICIAL CAPACITY AS SECRETARY, APPEAL FROM THE PULASKI ARKANSAS DEPARTMENT OF COUNTY CIRCUIT COURT, FINANCE AND ADMINISTRATION FOURTEENTH DIVISION APPELLANT [NO. 60CV-22-2158] V. HONORABLE SHAWN J. JOHNSON, JUDGE UNITED STATES BEEF AFFIRMED. CORPORATION APPELLEE SHAWN A. WOMACK, Associate Justice This tax appeal turns on a narrow question under Arkansas’s pre-2026 version of the Uniform Division of Income for Tax Purposes Act (UDITPA): whether the gain US Beef realized from selling its entire business—particularly its intangible assets—was “business income,” taxable in Arkansas, or “nonbusiness income,” taxable to its commercial domicile, Oklahoma. The circuit court granted summary judgment to US Beef, holding the gain was nonbusiness income and properly taxed in Oklahoma. We affirm. I. Facts and Procedural Background US Beef was incorporated in Oklahoma in 1973 and remained headquartered and commercially domiciled there through 2018. It owned and operated Taco Bueno and Arby’s franchises in nine states, including Arkansas. Its regular operations included running those restaurant franchises and ensuring compliance with brand standards. Its support functions—operations, marketing, recruiting, and information technology—were conducted in Oklahoma. In September 2017, US Beef received an unsolicited offer to purchase its business. It culminated in two asset sales in December 2018. On or about December 5, US Beef sold the Arby’s brand and restaurants to RB American Group, LLC. On or about December 14, it sold the Taco Bueno brand and restaurants to Quality Brand Management III, LLC. These transactions disposed of substantially all of US Beef’s real estate and restaurant operations and ended its business. According to the affidavit of its president, Brett Pratt, US Beef had never before contemplated or engaged in such a transaction. On its 2018 Arkansas corporate income tax return, US Beef treated the gains from the sales as nonbusiness income. It allocated gain from Arkansas real property to Arkansas, allocated gain from tangible personal property under Arkansas law, and allocated gain from intangible personal property—approximately $176.7 million—to Oklahoma, its commercial domicile. US Beef paid tax to Oklahoma on that intangible gain and filed an Arkansas return reflecting a refund due from previous estimated tax payments. DFA denied the refund claim. In its January 15, 2020, notice of claim denial, DFA determined the transaction generated apportionable business income, not allocable nonbusiness income. US Beef appealed. The Office of Hearings & Appeals sustained the denial on April 12, 2021. US Beef then sought judicial relief in Pulaski County Circuit Court under Arkansas Code Annotated section 26-18-406(b) (Repl. 2020), requesting declarations that the gain could not be apportioned as business income under section 26- 2 51-701, that the gain did not constitute business income under the governing corporate- income-tax rule and that, alternatively, the rule itself was invalid. US Beef moved for summary judgment. The parties agreed the transactional test was not at issue. The case thus turned on whether the gain qualified as business income under the functional test. After a hearing, the circuit court granted summary judgment to US Beef on March 10, 2025. The cour