COMMON-SENSE TAX REFORM – Straight From The Senate

Indiana’s continued prosperity depends on a healthy business climate, low tax burden and pro-growth policies. During the 2015 legislative session, the General Assembly passed legislation to continue building on our strong foundation in these areas.

Senate Enrolled Act 436 provides tax relief for businesses with less than $20,000 in equipment. Known as the business personal property tax, this payment rarely amounts to a large sum, but can entail enormous compliance costs for businesses.

For example, a business that accumulates machinery, equipment and tools over time must factor in depreciation to determine an accurate value of their assets. Doing so can require countless hours spent in record tracking and administrative bookkeeping.

The exemption is projected to provide up to $8.5 million in tax relief for approximately 144,000 Hoosier small business filers. Eliminating this tax is a common-sense reform, because many businesses affected spend more money complying than their liability is worth.

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House Enrolled Act 1472 serves as a companion to SEA 436 by allowing counties to enact a small, flat fee of up to $50 on exempted businesses under SEA 436. This allows municipalities to recover a portion of the lost revenue from business personal property tax payments without imposing significant compliance costs on business owners. Even if all counties decide to enact these fees, eliminating the business personal property taxes for small businesses is projected to shrink tax bills by $3 million.

Senate Enrolled Act 441 eliminates Indiana’s tax “throwback” rule which required companies to pay Indiana income tax on any out-of-state income that wasn’t taxed in the state where it was earned.

Prior to this legislation, Indiana was one of 25 states to use a throwback rule to collect tax this on out-of-state income. Among Indiana’s neighbors, Ohio, Michigan and Kentucky do not have a throwback rule. This legislation increases our competitive edge and attracts employers who may be based in Indiana but also do business in other states.

These new policies will further our state’s status as a national economic leader. Recently, CNBC ranked Indiana first in their “America’s Top States for Business 2015” scorecard. Indiana’s unemployment rate has been declining and is currently even with or lower than all of our neighboring states and the national average.

However, we can’t afford to stand still when it comes to our economic climate. We must regularly examine and update our policies to make sure they are accomplishing their intended purposes, and keeping Indiana competitive for new investment.

The common-sense tax reforms enacted this year helped accomplish this goal, and lawmakers will continue examining areas for improvement in study committees meeting over the summer and fall months.

As always, I welcome your thoughts and ideas concerning these and other topics. My office can be reached at 800-382-9467 or by email at Senator.Long@iga.in.gov.