Indiana General Assembly Makes Forward Moves in Economic Development During 2023 Session
Economic development is a constant priority for the Indiana General Assembly, and 2023 was no exception. During this year’s legislative session, lawmakers added funding to a variety of incentive programs that promote investment in Indiana – and created other economic development programs anew. Highlights include a second round of funding for the popular READI program, creation of a new fund that will help the state close mega deals, and continued funding for initiatives originally created for pandemic relief. Read on to learn more! (And for more information on this year’s tax-related legislation, check out KSM’s 2023 Indiana Legislative Update.)
The Regional Economic Acceleration & Development Initiative, also known as the READI program, was created during the 2021 legislative session. Over the last two years, the Indiana Economic Development Corp. (IEDC) disbursed $474.9 million in awards across 17 different regions within Indiana. The awards ranged from $5 million to $50 million and were allocated to regions based on various factors, such as:
- Which projects had the greatest economic development potential.
- Which applications focused on Indiana’s rural communities.
- The degree of regional collaboration.
- Which projects met the economic needs of their region.
The program was so popular that lawmakers wanted to improve upon and expand it. During the 2023 legislative session, they approved an additional $500 million in funding for the program. These funds will be disbursed for mega projects of at least $5 million over the next two years.
READI 2.0 is slightly different from the original program; the allocations for READI 2.0 must prioritize projects that accelerate capital and infrastructure construction, and funding will only be provided to projects that improve (1) quality of place, (2) quality of life, or (3) quality of opportunity for Indiana residents. Although these additional restrictions appear more limiting, in many ways, regions will be better able to argue that their projects meet program requirements. For example, any of the following projects could potentially improve quality of place, life, or opportunity:
- Infrastructure projects that improve walkability or bike access in the region
- Programs that support mental and public health
- Permanent housing for individuals experiencing homelessness
- Workforce housing developments
- Revitalization of vacant properties
- Purchasing land or buildings for new development
- Cultural amenities
- Talent attraction initiatives
- Improve access to broadband internet
- Support for small businesses, like creating new investment funds or voucher programs that encourage innovation
READI grants are not awarded directly to any one entity. The program requires individuals across a region to work together on joint infrastructure projects. Companies can petition for their economic development officials to be included in the region’s multi-year development plan, but ultimately, it is the region’s responsibility to apply for the grant and allocate funds if and when they are awarded.
Other Revitalized Programs
Existing programs with new rounds of committed funds include:
- Certified Technology Parks: Legislators increased funding from $100,000 to $250,000 per year. The funds will be generated by an annual additional incremental income tax deposit that a Certified Technology Park captures once it has reached its limit on deposits.
- Manufacturing Readiness Grants: This grant program will be funded to the tune of $20 million each year over the next two years.
- Next Level Jobs: This initiative continues to live on with funding for fiscal year 2023-24 at $17,064,066 and 2024-25 at $17,064,066.
- Workforce Ready Grants: An additional $6,000,000 of annual funding was injected into this program for fiscal years 2023-24 and 2024-25.
New Historic Rehabilitation Tax Credit
In addition to READI 2.0, legislators funded a new tax credit called the Historic Rehabilitation Tax Credit. Beginning in 2024, the IEDC can begin awarding credits to those who restore or preserve a qualified historic structure. These credits are 25% of rehabilitation expenditures, or 30% of expenditures for nonprofit properties that don’t produce income.
This credit would mirror Indiana’s current Historic Rehabilitation Credit with one major difference: The current credit requires the taxpayer to use the property as their primary residence, while the credit approved this year would extend to nonresidential properties.
More Flexibility Via Deal Closing Fund
To give the IEDC better flexibility when incentivizing new investment, the legislature allocated $500 million to Indiana’s Deal Closing Fund and $150 million to its Site Acquisition Fund.
The $500 million Deal Closing Fund is a discretionary fund that the IEDC can use to help win projects for the state. Because this fund is discretionary, the IEDC can use it as a last-ditch effort to seal the deal on a highly coveted mega project. Similarly, the IEDC can use the $150 million Site Acquisition Fund to purchase properties that could be desirable to investors. Both incentives provide the IEDC the flexibility it needs to leverage incentives that will attract new investment into the state.
Outlook for Real Estate Investment
This year’s legislature approved a $350 million increase over their previous budget to attract investment into the state. At session’s close, Governor Eric Holcomb said, “Indiana’s economy is thriving, and these renewed commitments and expanded investments in economic development will ensure that momentum continues for years to come.”
For more information about this new legislation and how it might impact your business, contact us.
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