The Honorable Pat Pappas State Representative 2901 Willow Pine Bluff, Arkansas 71603
Dear Representative Pappas:
This is in response to your request for an opinion on three questions regarding "leases and/or hunting leases." Your three questions are as follows:
1. Is there a law on the books for leases and/or hunting leases by private individuals or corporations limiting the amount that can be collected by them for these leases?
2. Are there any guidelines at all regarding these types of leases?
3. Is this income taxable?
In response to your first question, my research has disclosed no state statutes limiting the amount that can be collected for such leases. It is fair to state, in my opinion, that the amount of consideration given for such leases is purely a matter of contract between the parties.
In response to your second question, there are no statutory guidelines governing the leases you describe. The body of common law, however, developed by the decisions of courts of this state, may provide some guidance on the contractual aspects of such leases, should a dispute arise over their interpretation or enforceability. It appears, however, that the interpretation of such leases, once entered into, does not comprise the focus of your question.
In response to your third question (whether the income from such leases is taxable), I must note that this is a more appropriate question for taxation authorities, including the Revenue Division of the Department of Finance and Administration as regards state income tax, and the Internal Revenue Service as regards federal income tax. Although the state income taxation laws do include ". . . interest, rent, [and] royalties" within the definition of "gross income" (see A.C.A. § 26-51-404), the question of whether rental income from a particular lease would be includable by a particular taxpayer as "gross income" is a question which must be determined by reference to all the relevant facts and circumstances. I cannot come to a general conclusion which would apply in each instance. In addition, this office has no particular expertise in matters of federal taxation, and as such, questions regarding the taxability of property for federal tax purposes should be addressed to federal taxation authorities.
The foregoing opinion, which I hereby approve, was prepared by Deputy Attorney General Elana C. Wills.
Sincerely,
WINSTON BRYANT Attorney General
WB:ECW/cyh