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Tax Update: Indiana Governor Signs Legislation Decreasing Income Tax Rates for Corporate Taxpayers, Providing Business Personal Property Tax Reform, and Enacting Other Tax Changes

March 27, 2014


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On March 25, 2014, Indiana Governor Mike Pence signed legislation which phases in reduced corporate income tax and financial institutions tax rates, enacts a credit for sales tax paid on bulk propane during the first three months of 2014, and provides for business personal property tax reform.


Corporate income tax:


The bill phases in a decrease in the corporate income tax rate from 6.5% after June 30, 2015 to 4.9% after June 30, 2021. Effective July 1, 2014, a tax at the following rates is imposed on that part of the adjusted gross income derived from sources within Indiana of every corporation: 6.5%, after June 30, 2015; 6.25%, after June 30, 2016; 6.0%, after June 30, 2017; 5.75%, after June 30, 2018; 5.5%, after June 30, 2019; 5.25%, after June 30, 2020; and 4.9% after June 30, 2021.


Financial institutions tax:


The bill also phases in a decrease in the financial institutions tax rate from 6.5% for taxable years beginning after December 31, 2016 to 4.9% for taxable years beginning after December 31, 2022. Effective July 1, 2014, a tax at the following rates is imposed on a taxpayer's apportioned income for the corporate privilege of transacting the business of a financial institution in Indiana: 6.5%, after December 31, 2016; 6.25%, after December 31, 2018; 6.0%, after December 31, 2019; 5.5%, after December 31, 2020; 5.0%, after December 31, 2021; and 4.9% after December 31, 2022.



Personal property tax reform:


Effective July 1, 2015 and applicable to assessment dates after December 31, 2015, the county income tax (COIT) council of a county may adopt an ordinance providing that, if for a particular assessment date the acquisition cost of a taxpayer's business personal property in a county is less than $20,000, the taxpayer is not required to file a personal property return for the taxpayer's business personal property in the county for that assessment date, and the taxpayer's business personal property in the county for that assessment date is exempt from taxation.


The business personal property tax exemption does not apply to mobile homes assessed as personal property, personal property held as an investment, or personal property that is owned by certain utilities subject to regulation by the Indiana Utility Regulatory Commission (IURC) and is assessed as utility property. A taxpayer is required to file a certification with the county assessor before May 15 of the year in which the assessment date occurs; a penalty is imposed if the annual certification is not timely filed. In addition, the tax rate for certain tax increment financing areas must be calculated as if the business personal property exemption were not in effect.


Personal property tax exemption for new property:


A COIT council may adopt an ordinance to exempt from property taxation any new business personal property that is located in the county. This exemption does not apply to mobile homes assessed as personal property, personal property held as an investment, or personal property that is owned by certain utilities subject to regulation by the IURC and is assessed as utility property.



Personal property enhanced abatement:


Effective July 1, 2015, a designating body may establish an enhanced abatement schedule for personal property that may not exceed 20 years.



Distribution of abatement reimbursements, repayments or penalties:


Effective July 1, 2014, a county or municipality that receives a reimbursement, repayment, or penalty from a taxpayer as a result of the taxpayer's failure to comply with the statement of benefits provided by the taxpayer as part of a property tax abatement, or as a result of the taxpayer's failure to comply with any other requirement to receive a property tax abatement, the county or municipal fiscal officer must distribute the amount of the reimbursement, repayment, or penalty on a pro rata basis to each taxing unit that contains the property that was subject to the abatement deduction.


Sales tax on bulk propane sales:


Effective March 25, 2014, a retail merchant engaged in selling bulk propane at retail in Indiana must claim a credit before June 30, 2014, equal to the sales tax paid by the retail merchant's customers after December 31, 2013, and before April 1, 2014, on that part of the price of bulk propane that exceeded $2.50 per gallon. The retail merchant must provide a credit to its customers on their next purchase of bulk propane occurring after the retail merchant claims the credit. Retail merchants are entitled to a collection allowance for administering the credits provided to customers.





Source: RIA Checkpoint/Thomson Reuters article by Rachel M. Stephens (RIA) .