House Tax Bill Package Includes Important Chamber Initiatives
HB 1002 – Various Tax Matters
Authored by Rep. Tim Brown (R-Crawfordsville)
Summary: Repeals a provision that would require the budget agency to transfer the amount of combined excess reserves that exceed $2,500,000,000 in calendar year 2022 to the pre-1996 account of the Indiana state teachers’ retirement fund. Amends provisions that provide for an automatic taxpayer refund if sufficient excess reserves are available to: (1) clarify the tax return filing requirement for a refund; (2) require that refunds be distributed before May 1 of the calendar year immediately following the year in which a determination is made that the state has excess reserves; (3) remove provisions that require a taxpayer to have adjusted gross income tax liability in order to qualify for the refund; and (4) remove provisions that require the refund to be made in the form of a refundable tax credit. Provides that the minimum valuation limitation applicable to the total amount of a taxpayer’s assessable depreciable personal property in a taxing district is 30% of the adjusted cost of the depreciable personal property purchased before January 2, 2022. Provides an exemption from the 30% minimum valuation limitation for new depreciable personal property purchased after January 1, 2022. Requires the department of local government finance to develop or amend forms for property taxation of assessable depreciable personal property. Repeals the utility receipts and utility services use taxes. Provides a state income tax credit for property taxes paid on certain business personal property. Specifies a formula for determining the amount of the credit. Removes the double direct test currently applied in production sales tax exemptions. Phases down the individual adjusted gross income tax rate from 3.23% in 2022 to 3% in 2026 and thereafter. Makes conforming changes.
Chamber position: Support
The latest: Was amended and passed out of Ways and Means Committee 15-7.
Indiana Chamber action/commentary: This is the House Republican comprehensive tax proposal. It includes the Chamber priority of phasing out the 30% minimum valuation depreciation floor on business personal property by providing that the minimum will not apply to any property purchased after January 1, 2022. To compliment this exemption of new property, the bill provides an income tax credit equal to the property tax on existing business personal property, beginning in 2024. The bill also eliminates what is known as the “double-direct test” currently applied in determining qualification for the sales tax exemption on production/manufacturing inputs. This change specifies that several types of inputs that have been the subject of disputes over the past many years are covered by the exemption. It also repeals the utility receipts tax. The Chamber has advocated for a number of years that this method be used to phase out the 30% depreciation floor. Likewise, the Chamber has worked to eliminate the double-direct test and repeal of the utility receipts tax. The House bill very thoughtfully addresses each of these items previously identified by the Chamber in a neat, comprehensive package – one sure to promote investment and economic growth across all sectors of the business community. Our efforts over the years appear to be paying off. And on top of these important items, the bill additionally provides relief to businesses that operate as pass-through entities (partnerships/LLCs and sub-chapter S corps) in the form of a reduction of the individual income tax that their owners pay. The Chamber gave its enthusiastic support for this bill, citing the many important gains to be realized by removing what are among the few remaining blackmarks on our tax code.
Resource: Bill Waltz at (317) 264-6887 or email: bwaltz@indianachamber.com
