indiana legislative update

2014 Edition  |  Table of Contents
 

Income Tax
By Donna L. Niesen, CPA, and Amy Zimmer

Affected Code Section: Ind. Code § 6-3-2-1 (amendment)
Effective Date: July 1, 2014
Enacted By: Senate Bill 1
Explanation: Reduces the corporate income tax rate by continuing the stair-stepped reductions already in place. Upon completion of the reductions, the new rate will be lowered from 6.5% to 4.9%. This is accomplished through 0.25% reductions from 2016 to 2020 with a final reduction of 0.35% in 2021.
Application Note: The rate reductions in place were to reduce the rate to 6.5% after June 30, 2015. Once the rate reaches 4.9% in 2021, this will mark an approximate reduction of 43% from the 8.5% rate which was in effect in 2012.
 

Affected Code Section: Ind. Code § 6-3-2-2.1 (addition)
Effective Date: Jan. 1, 2014 (retroactive)
Enacted By: House Bill 1380
Explanation: Provides that entities contracting with an unrelated third-party logistics provider for the provision of qualified logistics services for legend drugs, devices and medical supplies shall not be deemed to have adjusted gross income from sources within Indiana unless that entity engages in other activities apart from those of its qualified third-party logistics provider. Provides that third-party logistics providers must be certified by the Indiana Economic Development Corporation. Directs that this section expires Jan. 1, 2016.
 

Affected Code Section: Ind. Code § 6-3-2-2.8 (amendment)
Effective Date: Jan. 1, 2013 (retroactive)
Enacted By: House Bill 1206
Explanation: Extends the adjusted gross income tax exemption for insurance companies to include insurers subject to the newly enacted $2,500 tax on captive insurers.
 

Affected Code Section: Ind. Code § 6-3-2-24 (addition)
Effective Date: Jan. 1, 2014 (retroactive)
Enacted By: Senate Bill 161
Explanation: Provides an income tax exemption for the value of an Olympic medal and income received from the U.S. Olympic Committee as prize money for winning an Olympic medal.


Affected Code Section: Ind. Code § 6-3-3-13 (addition)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1222
Explanation: Provides an adoption credit for taxpayers qualifying for the federal adoption credit under IRC § 23 equal to the lesser of 10% of the federal credit claimed in a given year or $1,000 for each eligible child. The credit is nonrefundable and cannot be carried forward or backward.
 

Affected Code Section: Ind. Code § 6-3.1-1-4 (addition)
Effective Date: July 1, 2014
Enacted By: House Bill 1380
Explanation: Permits a taxpayer to carry forward any unused tax credit for a repealed credit program under the limits in place before the credit was repealed unless otherwise expressly provided in the statutory language.


Affected Code Section: Ind. Code § 6-3.1-1-5 (addition)
Effective Date: July 1, 2014
Enacted By: House Bill 1380
Explanation: Permits a taxpayer with proposed costs certified prior to Jan. 1, 2015, to claim an Indiana riverboat building tax credit in the year that the qualified investment is made as if the riverboat building tax credit had not been repealed. Caps the credit amount under this section to $1,000,000 in a fiscal year and provides procedures for administering the credit.
 

Affected Code Section: Ind. Code § 6-3.1-6 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the prison investment tax credit.


Affected Code Section: Ind. Code § 6-3.1-9-1 & 6-3.1-9-2 (amendment)
Effective Date: July 1, 2014
Enacted By: Senate Bill 367
Explanation: Broadens activities qualifying for the neighborhood assistance credit to include certain services provided to ex-offenders.
 

Affected Code Section: Ind. Code § 6-3.1-11-24 (addition)
Effective Date: Jan. 1, 2014 (retroactive)
Enacted By: Senate Bill 367
Explanation: Permits a flow-through entity without enough income tax liability to claim the industrial recovery tax credit to pass the credit to its partners, shareholders or members on a pro rata basis.
 

Affected Code Section: Ind. Code § 6-3.1-16-2, 6-3.1-16-7, 6-3.1-16-10, 6-3.1-16-8, 6-3.1-16-12, & 6-3.1-16-15 (amendment)
Effective Date: Jan. 1, 2015
Enacted By: Senate Bill 367
Explanation: Transfers responsibility for approving qualified expenditures, making other certifications, and performing other administrative tasks under the historic rehabilitation tax credit from the Department of Natural Resources to the Office of Community and Rural Affairs. Directs the Department of Natural Resources to assist the Office of Community and Rural Affairs in making certifications.
 

Affected Code Section: Ind. Code § 6-3.1-16-9 (amendment)
Effective Date: Jan. 1, 2015
Enacted By: Senate Bill 367
Explanation: Modifies the event triggering a taxpayer’s rights to appeal an adverse ruling under the historic rehabilitation tax credit from a decision by the Department of Natural Resources to a final determination made by the Office of Community and Rural Affairs. Directs that the appeal may go the Tax Court.
 

Affected Code Section: Ind. Code § 6-3.1-17 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the Indiana riverboat building credit.
 

Affected Code Section: Ind. Code § 6-3.1-20-1, 6-3.1-20-4, & 6-3.1-20-5 (amendment)
Effective Date: Jan. 1, 2015
Enacted By: Senate Bill 367
Explanation: Broadens the definition of income used in determining a taxpayer’s qualification for the income tax credit for property taxes paid on homesteads to include all adjusted gross income, not just earned income.
Application Note: This change will make several taxpayers with passive income ineligible to claim the credit. Formerly, individuals could be eligible for the credit if they had significant passive income provided they did not have earned income in excess of $18,600 per year.

 

Affected Code Section: Ind. Code § 6-3.1-20-7 (amendment)
Effective Date: Jan. 1, 2015
Enacted By: Senate Bill 367
Explanation: Directs that the Northwest Indiana Regional Development Authority, and not the State General Fund, shall receive a distribution if the total amount of income tax credits for property taxes paid on homesteads is less than $8,500,000. Directs that this distribution shall be used to improve mass rail transportation systems in Lake County.
 

Affected Code Section: Ind. Code § 6-3.1-22-2, 6-3.1-22-8, 6-3.1-22-9, 6-3.1-22-10, 6-3.1-22-11, & 6-3.1-22-13 (amendment)
Effective Date: Jan. 1, 2015
Enacted By: Senate Bill 367
Explanation: Transfers responsibility for approving qualified expenditures, making other certifications, and performing other administrative tasks under the residential historic rehabilitation tax credit from the Department of Natural Resources to the Office of Community and Rural Affairs. Directs the Department of Natural Resources to assist the Office of Community and Rural Affairs in making certifications.
 

Affected Code Section: Ind. Code § 6-3.1-23 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the voluntary remediation tax credit.
 

Affected Code Section: Ind. Code § 6-3.1-23 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the blended biodiesel tax credit.
 

Affected Code Section: Ind. Code § 6-3.1-28 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the ethanol production tax credit.
 

Affected Code Section: Ind. Code § 6-3.1-31.5 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the energy savings tax credit.
 

Affected Code Section: Ind. Code § 6-3.1-33 (repeal)
Effective Date: Jan. 1, 2015
Enacted By: House Bill 1380
Explanation: Repeals the new employer tax credit.
 

Affected Code Section: Ind. Code § 6-3.1-34.6-6 (amendment)
Effective Date: Jan. 1, 2014 (retroactive)
Enacted By: House Bill 1180
Explanation: Modifies the definition of a qualified vehicle for purposes of the tax credit for natural gas powered vehicles to require that the vehicle be purchased from a dealer located in Indiana.
 

Affected Code Section: Ind. Code § 6-3.1-34.6-10 (amendment)
Effective Date: Jan. 1, 2014 (retroactive)
Enacted By: House Bill 1180
Explanation: Modifies the annual cap to the tax credit for natural gas powered vehicles to be the lesser of $3,000,000 or the sales and use tax collected on natural gas products. The former cap was the lesser of $3,000,000 or the sales and use tax collected on alternative fuel.
 

Affected Code Section: Ind. Code § 6-3.1-34.6-12 (amendment)
Effective Date: Jan. 1, 2014 (retroactive)
Enacted By: House Bill 1180
Explanation: Adds additional procedural steps for persons placing a qualifying vehicle into service in order to claim the tax credit for natural gas powered vehicles, including receiving pre-approval from the Department of Revenue for the tax credit, notifying the department of the purchase or lease of a qualified vehicle, and submitting proof of the purchase or lease to the department. Allots the credit to taxpayers on a first-come-first-serve basis judged on when the application for pre-approval is submitted.
Application Note: As this change applies retroactively, taxpayers purchasing or leasing qualifying natural gas vehicles should apply as soon as possible in order to have the best chance of receiving a credit.
 

Affected Code Section: Ind. Code § 6-5.5-2-1 (amendment)
Effective Date: July 1, 2014
Enacted By: Senate Bill 1
Explanation: Reduces the financial institutions income tax rate by continuing the stair-stepped reductions already in place. Upon completion of the reductions, the new rate will be lowered from 6.5% to 4.9%. This is accomplished through 0.25% reductions from 2019 to 2022 with a final reduction of 0.35% in 2023.
Application Note: As in prior years, the rate reduction for the financial institutions income tax follow the corporate income tax rate reduction. The financial institutions income tax rate will reach 4.9% two years after the corporate income tax rate.
 

Affected Code Section: Ind. Code § 6-5.5-2-7 (amendment)
Effective Date: Jan. 1, 2013 (retroactive)
Enacted By: House Bill 1206
Explanation: Extends the financial institutions tax exemption for insurance companies to include insurers subject to the newly-enacted $2,500 tax on captive insurers.
 

Affected Code Section: Public Law 1215-2014, Section 1
Effective Date: July 1, 2014
Enacted By: House Bill 1215
Explanation: Requires the Commission on State Tax and Financing Policy to compare the effectiveness of tax credits to the grant programs in encouraging preservation and redevelopment of historic properties and report to the legislative council before Nov. 1, 2014.

 

Connect with Donna 
Donna L. Niesen is a partner in Katz, Sapper & Miller’s State and Local Tax Practice. She has been with the firm since 2005. Donna provides a wide variety of tax consulting services in the areas of multistate sales and income taxes, business incentives, controversy services, and other state taxes. 

Connect with Amy 
Amy Zimmer is a state and local tax consultant in Katz, Sapper & Miller’s State and Local Tax Practice. She provides a variety of tax compliance and consulting services in the areas of property tax, multistate sales and income taxes, and other state taxes.