(Adds move by Arkansas Senate in paragraph 2)
By Steve Barnes
LITTLE ROCK, Ark., April 1 (Reuters) - Arkansas Governor Asa Hutchinson told lawmakers on Wednesday to revise a bill that rights activists and U.S. businesses said allowed discrimination against gays, and home-state corporate giant Wal-Mart Stores Inc praised his action.
The state's Senate took up the challenge late on Wednesday, sending to the House of Representatives legislation that would bring the Religious Freedom Restoration Act (RFRA) into line with federal statutes. A House panel is due to take up that law on Thursday.
Indiana's governor a day earlier said lawmakers should fix a similar RFRA. After it was enacted last week, the state was hit with protests, threatened boycotts and warnings from powerful U.S. firms of pending economic damage for being seen as standing against U.S. ideals of inclusion.
In a news conference at the Capitol in Little Rock, Hutchinson, who previously said he would sign the bill, said he was sending the act back to the Republican-controlled legislature to be rewritten so it can better balance tolerance for diversity and protections of religious freedom.
"We want to be known as a state that does not discriminate, but understands tolerance," Hutchinson said. "We just didn't get it perfect through that legislative process."
The governor said his own son had asked him to veto it, adding a personal element to the pressure to reject the bill. While Hutchinson spoke, scores of protesters outside waved the rainbow flag of the gay rights movement.
Hutchinson, who is 64, recognized a generational divide over same-sex marriage.
"The issue has become divisive, because our nation remains split on how to balance the diversity of our culture with the traditions and firmly held religious convictions. It has divided families and there is clearly a generational gap on this issue."
A day earlier, Wal-Mart, the world's biggest retailer, called on Hutchinson to veto the bill. On Wednesday, it commended his decision and, in a Twitter post, urged lawmakers to "make certain any legislation does not encourage discrimination."
About 40 technology industry leaders, including the CEOs of Yelp, Twitter, AirBnB, Cisco Systems and PayPal, joined the debate with a statement calling on state lawmakers to approve civil rights protections for members of the lesbian, gay, bisexual and transgender (LGBT) community.
In Indiana, Republican lawmakers met LGBT leaders to see how they could modify the new law to protect their community from potential discrimination. The rewritten law could be ready as early as Thursday, said Tory Flynn, spokeswoman for Indiana House Speaker Brian Bosma.