Senate Bill 563 – Economic Development
Authored by Sen. Travis Holdman (R-Markle)

Makes a variety of changes to tax policy and tax incentive programs intended to promote and enhance economic development. The major components are: (1) moving to a market-based sourcing method for income apportionment for service companies; (2) a small business innovation voucher program to assist in research; (3) making the venture capital investment credit transferrable/saleable; (4) making the headquarters relocation credit available to small businesses; (5) including additional items to what qualifies for the Hoosier business investment tax credit; and (6) expanding the application of the redevelopment tax credit.

The Latest: Heard by the House Ways and Means Committee on Wednesday; no vote taken yet.

Chamber Position: Support

Chamber Action/Commentary: This bill embodies the Governor’s economic development package. The Chamber testified in support of it this week, referring to it as “a good collection of good changes.” In our testimony, we noted that one element of the bill is a fairly significant policy change that is likely overdue and simply makes sense to do. That is to transform Indiana to a market-based sourcing methodology for computing the taxable income for businesses that provide a service, as opposed to a tangible, manufactured product.

The change will exclude, from taxation, income from the sale of a service to customers who are located (in a market) outside of Indiana. Basing the income only on services provided in Indiana will operate to benefit Indiana companies which, in many cases, are currently being double taxed by having to pay tax on the same income to both Indiana (because they are located here) and the state where their customer resides.

Another significant aspect of the bill is to make the venture capital investment credit transferable. We have been talking to policymakers about the need to make this change for many years and have slowly convinced more and more of them and moved them closer to this point over time. It appears we are now poised for this to finally pass. Our testimony in support of this element centered on how this needed adjustment will put us on a better competitive ground for attracting investment capital from a large pool of investors from the east and west coasts. The only drawback is that the provision has a 2024 sunset date, which we spoke against in referencing the otherwise very positive impacts of the provision.

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