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TAX UPDATES

Indiana Corporate, Personal Income Taxes: Personal Income Tax Rates Reduced, IRC Conformity Updated

Indiana has enacted a bill that phases in a reduction of the personal income tax, increases the amount of the school scholarship tax credits available, and updates the state's IRC conformity date for corporate and personal income tax purposes and amends the state's adjusted gross income calculation for corporate and personal income tax and financial institutions for tax purposes by removing several addbacks.

Personal Income Tax Rate

The personal income tax rate is reduced for tax years beginning after December 31, 2014, to 3.3% from the current 3.4%, and after December 31, 2016, the rate decreases to 3.23%.

Private School Deduction

Finally, the amount of school scholarship tax credits available is increased to $7.5 million (previously, the amount was $5 million). The changes are effective July 1, 2013.

IRC Conformity

The law updates the IRC conformity date to January 1, 2013 (previously the date was January 1, 2011). However, for taxable years ending before January 1, 2013, Indiana remains decoupled from certain federal tax provisions that were amended by the federal Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act of 2010).

In addition, the bill removes addbacks for the amounts:

  • necessary to make the adjusted gross income of any taxpayer that placed qualified restaurant property in service during the taxable year and that was classified as 15-year property equal to the amount of adjusted gross income that would have been computed had the classification not applied to the property in the year that it was placed in service;
  • necessary to make the adjusted gross income of any taxpayer that placed qualified retail improvement property in service during the taxable year and that was classified as 15-year property equal to the amount of adjusted gross income tax that would have been computed had the classification not applied to the property in the year that it was placed in service;
  • deducted under IRC §198 for the expensing of environmental remediation costs;
  • excluded under IRC §408(d)(8) for a charitable distribution from an individual retirement plan;
  • deducted under IRC §222 for qualified tuition and related expenses;
  • deducted under IRC §62(a)(2)(D) for certain expenses of elementary and secondary school teachers;
  • excluded under IRC §127 for annual employer-provided education expenses;
  • deducted under IRC §179E for any qualified advanced mine safety equipment property;
  • excluded under IRC §132(f)(1)(A) and §132(f)(1)(B) that exceed $100 a month for a qualified transportation fringe;
  • deducted under IRC §221 that exceed the amount the taxpayer could deduct under IRC §221 before it was amended by the Tax Relief Act of 2010;
  • necessary to make the adjusted gross income of any taxpayer that placed any qualified leasehold improvement property in service during the taxable year and that was classified as 15-year property equal to the amount of the adjusted gross income that would have been computed had the classification not applied to the property in the year that it was place into service;
  • necessary to make the adjusted gross income of any taxpayer that placed a motorsports entertainment complex in service during the taxable year and that was classified as 7-year property equal to the amount of adjusted gross income that would have been computed had the classification not applied to the property in the year that it was placed into service;
  • deducted under IRC §195 for start-up expenditures that exceed the amount the taxpayer could deduct under IRC §195 before it was amended by the Small Business Jobs Act of 2010; and
  • necessary to make the adjusted gross income of any taxpayer for which tax was not imposed on the net recognized built-in gain of an S corporation as amended by the Small Business Jobs Act of 2010 equal to the amount of adjusted gross income that would have been computed before was amended by the Small Business Jobs Act of 2010.
 

If you have further questions or would like to speak to one of our professionals regarding any of the tax issues discussed above, please contact your Blue & Co. advisor or e-mail us at blue@blueandco.com or call us at 317-848-8920
 

Please visit our website at http://www.blueandco.com for more information regarding the services we provide.

CIRCULAR 230 DISCLOSURE: To ensure compliance with recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.


 

 

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