Senate Bill 242 contains the variety of provisions identified by the Department of Revenue (DOR) over the course of the year that are needed to clean up administrative quirks in the law. And it is also typically the bill that includes an updated reference to the latest versions of the IRS code, in which taxpayers carry over their federal taxable income to serve as a base for determining their state tax liability.
Indiana, and all states, choose the degree to which to elect to conform to the federal tax law. This will be especially tricky this year given the multitude of changes in the federal tax reform package. And many of the details are yet unknown as everyone awaits rules and guidance from the IRS. Nevertheless, the states will have to decide before next year. And in Indiana’s case, that effectively means they will have to make some choices about exactly which changes they will conform with and which they may choose to de-couple from, meaning they may choose to require taxpayers to add back deductions, exemptions and special treatments they receive under federal law when they complete their state return. This is often greatly influenced by how much the changes would impact or disrupt the existing revenue streams.
There are a good number of professionals around the country running sophisticated programs to analyze, or model, how these changes will alter their state revenues. Indiana too is in the midst of this process. And when the projections are determined, policy and budget makers will have to consider the basic question of what changes they will elect to go along with, and which ones they may elect not to conform with. Unfortunately, this analysis will probably not be completed by the end of the session. Regardless, it is probable that the state will have to make its initial judgments and make some choices. These will most likely be made part of SB 242 sometime in the waning days of the session.
The Chamber will stay in close contact with those participating in these discussions in order to avoid any big surprises. These choices about federal/IRS code conformity could have great bearing on business taxes this year. Stay tuned.
On a related note, the Chamber will hold the Tax Summit: Tax Cuts and Jobs Act on April 24 at the Hyatt Regency in downtown Indianapolis. The event will unpack the business implications of the new tax reform law.
Among the topics addressed: elimination of the corporate Alternative Minimum Tax, the tax rate reduction for pass-through entities and overall impact on small businesses. As always, Chamber members receive discounted registration. Hope to see you there!
Resource: Bill Waltz at (317) 264-6887 or e-mail: email@example.com