SB 385 – Assessment of Business Personal Property Taxes
Authored by Sen. Aaron Freeman (R-Indianapolis)

Provides that the business personal property exemption from taxation is based on the current cash value instead of the acquisition cost.

Chamber position: Support

The latest: Passed by the Senate Tax and Fiscal Policy Committee 10-2.

Much of the testimony focused on the use of cash value as the basis for applying the $40,000 threshold. There was concern regarding how cash value would be ascertained and suggestions that disagreements would prompt more appeals. Local units of government were also opposed due to the reduction of tax revenues.

Indiana Chamber action/commentary: The Chamber supported the bill and emphasized how the benefit of this change, relieving some 66,500 small businesses from paying personal property tax, outweighs the relatively minor reduction in tax collections. The exemption threshold is currently based on what the business purchased its property for, and it does not account for the natural depreciation in value that occurs as the asset ages. It is more equitable to have the threshold based on a present year depreciated value. However, the committee discussion raised questions as to exactly how current cash value would be ascertained. It is believed that the bill is likely to be amended on the Senate floor to address the question and establish the Department of Local Government rules for assessment and depreciation as the means for applying the valuation threshold. These rules are familiar to the assessors, known to taxpayers and eliminate most of the issues raised by the more subjective cash value test.


Partnership Audit Adjustment Language in DOR Bill Trimmed Back

SB 408 – Various Tax Matters
Authored by Sen. Travis Holdman (R-Markle)

Removes references to an out-of-state merchant’s collection of the state use tax. (Under current law, an out-of-state merchant is required to collect the state gross retail tax (not the use tax) on retail transactions made in Indiana if certain threshold conditions are met.) Makes clarifying and technical changes to the definitions of “bundled transaction,” “unitary transaction,” and “gross retail income” in the state sales tax statute and “adjusted gross receipts” in the sports wagering statute. Removes outdated references to the gross income tax and adjusted gross income tax. Makes a technical correction in the gasoline use tax statute. Clarifies the allowable state income tax deductions and credits for a married individual filing a separate return. Provides certain procedures for reporting federal partnership audit adjustments for purposes of the state adjusted gross income tax and financial institutions tax in order to conform with changes in federal law. Requires an entity that makes first payment of prize money related to a racing event at the Indianapolis Motor Speedway to withhold and remit a tax to the state Department of Revenue (DOR) equal to the individual adjusted gross income tax rate plus the local income tax rate multiplied by the amount of prize money awarded, and in turn: (1) relieves the recipient of the prize money from withholding requirements that would otherwise apply to any of the prize money that it pays or distributes to its employees, partners, shareholders, or beneficiaries; and (2) allows the recipient of the prize money to exclude the amount received in determining the recipient’s state and local income tax liability. Provides that if a taxpayer was granted a historic rehabilitation tax credit before the termination of the authority to grant the credit after December 31, 2015, and for a year other than the year in which the preservation or rehabilitation of the historic property was performed and certification provided, the taxpayer is entitled to claim that tax credit beginning in the subsequent year for which the credit was granted, notwithstanding the zero dollar cap on the amount of credits allowed in a state fiscal year beginning after June 30, 2016, and the expiration of the historic rehabilitation tax credit chapter on January 1, 2019. Full details.

Chamber position: Support in part

The latest: Amended and passed by the Senate Tax and Fiscal Policy Committee 11-0.

This is DOR’s agency bill, meaning it is comprised for the most part of administrative tweaks the department finds desirable. It is typically a hodge-podge. In addition to the department’s mix of items, the bill included model language designed to provide guidance and uniformity for partnerships (and their partners) to adjust their state tax liability in response to federal IRS audits. Audits are presently being conducted under a new set of federal regulations. A group of stakeholders met to determine the desirability of adopting all of the model provisions and concluded the timing was not right to do so. The decision was to wait until some of the unanswered questions can be better flushed out. But it was acknowledged that a few stop-gap measures to fill voids in the statutory law were needed to serve as an interim fix. These scaled-back provisions were by an amendment inserted in place of the full set of model provisions.

Indiana Chamber action/commentary: The Chamber advocated for the inclusion of the model provisions referenced above. We participated in the discussions along with other interested parties. It was concluded by the group that this wait-and-see approach was prudent at this time. We will be advocating for adoption of follow-up measures next session. Guidance and uniformity among states will be needed to govern how partnerships and their partners must adjust their state tax liability in response to federal IRS audits. Ultimately, clear and uniform statutory direction will be helpful to both the DOR and taxpayers.

Chamber-Opposed Overly Broad Deduction Scrapped in Favor of a More Structured Credit

SB 292 – County Option Circuit Breaker Tax Credit
Authored by Sen. Jack Sandlin (R-Indianapolis)

Authorizes a county fiscal body to adopt an ordinance to provide a credit against property tax liability for qualified individuals. Defines a “qualified individual” for purposes of the credit. Provides that the ordinance may designate: (1) all of the territory of the county; or (2) one or more specific geographic territories within the county; as an area in which qualified individuals may apply for the credit. Provides that the credit amount is equal to the amount by which property taxes on the property increased by more than 2% from the prior year. Requires a qualified individual who desires to claim the credit to file a certified statement with the county auditor. Provides that the county auditor shall apply the credit in succeeding years after the certified statement is filed unless the auditor determines that the individual is no longer eligible for the credit or the county fiscal body rescinds the ordinance. Retains the penalty provisions in the current bill for wrongly receiving the credit. Makes conforming changes.

Chamber position: Opposed in part the introduced bill; neutral to the amended bill

The latest: Amended and passed by the Senate Tax and Fiscal Policy Committee 12-0.

This bill was substantially amended. The senior homestead assessed value deduction was deleted and replaced with a county option circuit-breaker tax credit.

Indiana Chamber action/commentary: The Chamber opposed the overly broad deduction in the introduced bill and testified in favor of amendments that would more appropriately address neighborhood gentrification, the stated objective of this bill. The reworked bill, contrary to the original version, no longer presents the potential for property tax shifts. It now contains provisions for tailoring a credit based in specified neighborhoods and designated income levels. These changes address the primary concerns that the Chamber raised as to the introduced bill. Consequently, since it won’t  directly impact business taxpayers, we now take a neutral position.

Resource: Bill Waltz at (317) 264-6887 or email: bwaltz@indianachamber.com