Senate Bill 233 – Business Personal Property Tax Exemption
Authored by Sen. Aaron Freeman (R-Indianapolis)

This bill increases the acquisition cost threshold for the business personal property tax exemption from $20,000 to $40,000.

Chamber Position: Support

The Latest: Heard by the House Ways and Means Committee on Wednesday; held pending consideration of a potential amendment.

Indiana Chamber Action/Commentary: This bill received complete support in the Senate, passing 48-0. It is a follow-up to legislation the Chamber successfully promoted in 2015 to establish a “de minimis” exemption for personal property tax filing. In testifying before the House Ways and Means Committee this week, the Chamber explained its support for both the original legislation and this adjustment to upgrade that legislation.

The primary objective for the original exemption was to alleviate a taxpayer from having to pay more to prepare a return than what they ultimately owe in tax. The initial $20,000 threshold relieved about half of all business personal property owners from having to file a return. As the threshold has been re-examined, it turns out that the $20,000 threshold isn’t sufficient to fulfill the original objective. By raising the threshold to $40,000, the exemption will now cover an additional 28,300 returns. The new threshold expands the exemption to cover filers who, on average, pay only about $145 in tax per return. Most taxpayers will still pay more than $145 to their accountant, so the change will better fulfill the objective of exempting those whose ultimate tax liability is dwarfed by the cost of compliance.

Because the expanded exemption reduces tax collections by only a nominal amount (about $4 million as a cumulative statewide total), the revenue loss to individual units of government will be negligible. In the House, the author has now proposed an amendment that would further enhance the exemption by changing how the new $40,000 threshold would be calculated. The new proposal is to determine the value of the property based on its depreciated value rather than the acquisition cost, as it is currently calculated. The effect of this would be to encompass taxpayers whose property was acquired at a price above $40,000, but due to its age and the application of the applicable depreciation schedules is presently valued under the $40,000 threshold. The committee expressed concern with the potential fiscal impact and the greater reduction of tax collections that would result as a consequence of such an amendment and elected to withhold consideration of the amendment pending further analysis. 

Resource: Bill Waltz at (317) 264-6887 or email: [email protected]