(a) Subchapter S of the Internal Revenue Code, 26 U.S.C. § 1361 et seq., as in effect on January 1, 2017, regarding small business corporations, is adopted for the purpose of computing Arkansas income tax liability.

(b) (1) (A) A corporation shall be treated as a Subchapter S corporation for Arkansas income tax purposes if the corporation has elected Subchapter S treatment for federal income tax purposes for the same tax year.

(B) An election made under Subchapter S of the Internal Revenue Code, 26 U.S.C. § 1361 et seq., for federal income tax purposes is deemed to have been made for Arkansas income tax purposes.

(2) A corporation that has elected to be treated as a Subchapter S corporation for federal income tax purposes shall not elect to be treated as a Subchapter C corporation for Arkansas income tax purposes.

(3) When filing an Arkansas Subchapter S income tax return, a corporation shall attach to its Arkansas Subchapter S income tax return a complete copy of the corporation's federal Subchapter S income tax return filed with the Internal Revenue Service for that taxable year.

(c)

(1) However, all nonresident shareholders of S corporations receiving a prorated share of income, loss, deduction, or credit pursuant to the provisions of this section must file a properly executed state income tax return with the director and remit the applicable state income tax due.

(2) Failure to so report and remit on the part of any nonresident shareholder shall be grounds upon which the director may revoke the corporation's Subchapter S election and collect the tax from the corporation by any manner authorized by the Income Tax Act of 1929, § 26-51-101 et seq.