indiana legislative update

2014 Edition  |  Table of Contents
 

Insider Insights

KSM recently partnered with the Indiana Manufacturers Association (IMA) on the 2013 Indiana Manufacturing Surveyan annual taking-of-the-temperature of manufacturers across Indiana. Given the tax-centric findings contained in this year’s survey, we thought it would be enlightening to discuss the results of the survey, and other Indiana tax issues, with an expert in tax policy. With this goal in mind, we were fortunate that Tim Rushenberg, vice president of Governmental Affairs & Tax Policy for the IMA, agreed to share his insights with us.      

As a Hoosier native growing up in Elkhart, Indiana, Tim Rushenberg didn’t map out a career for himself as a state and local tax guru. After all, an undergraduate degree from Indiana University - South Bend and a JD courtesy of Valparaiso University followed by four-plus years as an Air Force Judge Advocate isn’t the customary roadmap to a career in tax. 

Then, Tim got his first taste of state taxes when he became general counsel for the Department of Local Government Finance in the Daniels Administration. This baptism by fire forced Tim to learn property tax on the fly as he and Commissioner Cheryl Musgrave traveled the state, going courthouse to courthouse during reassessment. Soon after, his boss left to run for office, and Tim became the new commissioner, a post he held until 2010. 

Now in his current role as the IMA’s chief tax lobbyist, his vocation since 2012, Tim educates legislators on tax policy decisions. To keep abreast on how businesses are thinking, Tim regularly solicits input from the IMA’s membership to help inform the message he delivers. 

All state and local tax inquiries, big and small, cross Tim’s desk. Often, calls from members deal with tax audits. “A typical call involves a Department of Revenue audit question,” Tim explains. “Our members find an auditor being too formalistic in their interpretation of a manufacturing exemption or other tax matter.” Tim helps them navigate that process, or puts them in touch with someone who can.   

Tim says audit snafus can become an epidemic if unguarded, but he is quick to praise the department’s current administration, led by Commissioner Mike Alley. “They are open to suggestions on how to improve interactions with taxpayers. Any questions our members have, we forward to the department. They seem genuinely interested in what is happening.”

As the discussion shifts to this year’s manufacturing survey, we share with Tim a question posed to survey respondents: “What is the biggest impediment to growing your business?” Upon reminding him that “corporate tax policy” and “property taxes” were rated the two top obstacles, Tim isn’t surprised. “The IMA conducted a survey of its board members last year, and taxes came out #1 there as well. Even over healthcare. As long as that’s the case, I’ll be able to keep my job,” Tim jokes.

Despite concerns over taxes, Tim believes Indiana has taken a number of steps to make the state more competitive, listing change after change made to Indiana’s tax code: elimination of the gross receipts, inventory and inheritance taxes; reduction of the corporate tax and individual tax rates; single sales factor for income tax apportionment … the list goes on. “Tax issues matter a lot to our members. These changes have been very positive.”

When we ask Tim if there is more to be done, he quickly latches onto the 30% floor on personal property tax, the requirement that a company pays personal property tax on a minimum of 30% of its property cost, regardless of age or depreciation. “If this tax could be cut out, it would be great for Indiana businesses, especially those with old equipment.”    

The one time Tim recoils during our chat is when talking about the perception that Indiana businesses have gotten tax relief at the expense of local government funding. Case in point: the property tax caps passed during the Daniels Administration. 

“Yes, tax caps bring predictability, and that is a good thing. But the 3% rate on business property is funding the 1% cap enjoyed by homeowners. With our neighboring states reducing or eliminating their taxes on business property, the 3% cap on business property puts us at a disadvantage.”  

To support his position, Tim cites a litany of manufacturing’s attributes like an 8-year-old boy rattling off the batting averages of his favorite baseball players. “Indiana is the most manufacturing-intensive state in the country as 28% of our state’s economic output comes from manufacturing. This output has grown more than 41% since 2009. More than 25% of our wages come from manufacturing, and 17% of the Indiana workforce is employed by manufacturers. Manufacturing is huge here. If it falls, so falls the Indiana economy.”

A well-manufactured argument.