LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 6034 NOTE PREPARED: Jul 20, 2022
BILL NUMBER: HB 1001 BILL AMENDED:
SUBJECT: Various Family and Children Matters.
FIRST AUTHOR: Rep. Negele BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
XFEDERAL
Summary of Legislation: Automatic Taxpayer Refund: This bill provides for an additional automatic
taxpayer refund (ATR) for the 2021 taxable year in the amount of $225 to taxpayers who are eligible for an
ATR under current law. It also allows an Indiana resident who is not eligible for an additional automatic
taxpayer refund because the individual was not required to file a tax return to file an affidavit with the
Department of State Revenue (DOR) to claim an ATR in the same amount of $225. It requires the DOR to
verify each affidavit submitted as to its accuracy.
Sales Tax Exemption: The bill provides a sales tax exemption for children's diapers.
Exemption for Dependent Children: The bill increases the exemption amount subtracted from an individual's
adjusted gross income for a dependent child. It also allows an individual to claim an increased exemption
amount for a dependent child in the first year in which the exemption amount may be claimed for the child.
Exemption for an Adopted Child: It adds an additional exemption for an adopted child.
Adoption Tax Credit: The bill increases the amount of the tax credit to which an individual who is eligible
to claim the federal adoption credit is entitled.
Required Pregnancy Services: The bill adds: (1) donated breast milk; (2) noninvasive prenatal and routine
carrier screening; and (3) costs of labor and delivery; to the list of supplies and services provided by
Medicaid and the Healthy Indiana Plan.
Safety PIN Grants: The bill allows a local health department that receives a grant from the Safety PIN
HB 1001 1 (Protecting Indiana's Newborns) Grant Fund to use the money to provide financial assistance to individuals
seeking contraceptives.
Appropriations: The bill appropriates money for various purposes related to children and families.
Effective Date: Upon passage; January 1, 2022 (retroactive).
Explanation of State Expenditures: Automatic Taxpayer Refund: The bill provides a $225 ATR in addition
to the ATR provided under current law. The approximately 4.3 million taxpayers that qualify for an ATR
under current law would receive the ATR provided by the bill. In addition, an estimated 300,000 to 800,000
individuals that did not file a tax return could potentially receive the ATR. If all of these individuals meet
the bill’s requirements and file an affidavit with the DOR, General Fund expenditures would increase by
approximately $1,046.0 M to $1,154.4 M in FY 2023.
Appropriations: The bill appropriates $58.5 M to supplement appropriations in FY 2023 for various program
support and expansion, as well as grants, as detailed in the following table.
Agency Appropriation Purpose FY 2023 (in Millions)
Department of Health (DOH) Distribution to Real Alternatives $2.0
DOH Expansion of Nurse Family Partnership
Program
10.0
DOH Safety PIN Grant Fund 5.5
DOH Grants to communities for newborn safety
devices (individual grants not to exceed
$10,000)
1.0
Family and Social Services
Administration (FSSA)
Child Care and Development Fund voucher
program
10.0
FSSA Supplies and services under Medicaid and HIP
mandated services
30.0
Total $58.5
The bill’s requirements may require additional workload to implement these supplemental programs. The
workload is expected to be within these agencies' routine administrative functions and should be able to be
implemented with no additional appropriations, assuming near customary agency staffing and resource levels.
Unencumbered appropriations may revert to the state General Fund at the end of FY 2023 depending on the
fund type to which it is appropriated.
Required Pregnancy Services: The state share of the cost of donated breast milk for Medicaid-covered
newborns who are placed in a neonatal intensive care (NICU) after birth is estimated at $200,600. The cost
of other pregnancy services required under the bill is indeterminate and based on the specific circumstances
of the pregnancies covered. Pregnancy services currently cover prenatal tests and screenings required in the
standards established by the American College of Gynecology and the American Academy of Pediatrics, and
additional testing when medically necessary. Preparing amendments and waivers is within the routine work
HB 1001 2 of the FSSA.
Department of State Revenue (DOR): The DOR would incur additional expenses and workload to issue ATRs
to taxpayers and qualified non-filers, create an affidavit, and verify the accuracy of each affidavit submitted.
The DOR will also incur additional expenses to revise tax forms, instructions, and computer programs to
reflect the tax changes made by the bill. The bill’s requirements represent an additional workload and
expenditure on the agency outside of the agency’s routine administrative functions, and existing staffing and
resource levels, if currently being used to capacity, may be insufficient for full implementation. The
additional funds and resources required could be supplied through existing staff and resources currently
being used in another program or with new appropriations. Ultimately, the source of funds and resources
required to satisfy the requirements of this bill will depend on legislative and administrative actions.
Additional Information -
Automatic Taxpayer Refund: Under current law, taxpayers must have filed a tax return in the calendar year
in which the state had excess reserves to qualify for an ATR. The bill provides that an individual who is not
eligible for an ATR under current law may receive the additional ATR if the individual (1) was a resident
of Indiana for more than 183 days in tax year 2020, (2) was not claimed as a dependent in tax year 2020, and
(3) did not file a tax return for tax year 2020 because the individual was not required to do so under state law.
The estimated number of individuals eligible to receive ATRs under this bill is based on 2021 Census Bureau
estimates of Indiana’s population and the estimated number of taxpayers that will receive an ATR in CY
2022. For purposes of this analysis, it is assumed that all Indiana residents that did not file a tax return and
are either 19 years and over or 24 years and over would receive an ATR. However, the actual number of
eligible individuals could be smaller to the extent that these individuals did not reside in Indiana for more
than 183 days. The actual number of eligible taxpayers may also be smaller than the estimate if the DOR is
unable to verify information submitted by all individuals and provide the ATR to all individuals who did not
file a tax return but who otherwise qualify under the bill.
Current law requires the Office of Management and Budget to calculate the amount of state reserves at the
end of each odd-numbered fiscal year. State reserves that exceed 12.5% of the General Fund appropriation
for the fiscal year are considered excess reserve. If the excess reserve is more than $50 M, then it is equally
distributed to the Pension Stabilization Fund and for the purpose of ATRs. The DOR issues ATRs to Indiana
residents that filed a tax return for the previous taxable year. P.L. 2-2022, which applies to ATRs issued in
CY 2022 and going forward, expanded eligibility to include taxpayers that did not have tax liability. The
excess reserve calculation at the end of FY 2021 resulted in ATRs of $125 per taxpayer, $545.4 M in total,
beginning in May 2022.
Required Pregnancy Services: Estimates for donated breast milk expenditures are based on 3,430
Medicaid-covered newborns placed in a NICU in CY 2020 and the cost of donated breast milk estimated at
$1,000 per infant for the NICU stay. The total state cost is just under $1.2 M, with the fee-for-service share
of $200,600 and a HIP share of $979,300.
Medicaid is jointly funded between the state and federal governments. The standard state share of costs for
most Medicaid medical services for FFY 2023 is 34.3%, or 10% for the age 19 to 64 expansion population
within the Healthy Indiana Plan. The state share of administrative costs is 50%. Fee-for-service enrollees are
about 17% of the Medicaid pregnancy population and are funded by the state General Fund, while the state
share for HIP enrollees, 83% of Medicaid enrolled pregnancies, is covered within the incremental hospital
HB 1001 3 assessment fee that funds HIP.
Explanation of State Revenues: Summary - The bill’s tax provisions will reduce state General Fund revenue
by an estimated $21.1 M to $22.2 M in FY 2023 and between $22.9 M to $24.0 M in FY 2024. The tax
provisions apply in tax year 2022 and will impact revenues beginning in FY 2023. The summary estimate
of the bill’s tax provisions include the changes to income tax exemptions for dependent children, the new
exemption for adopted children, the adoption tax credit, and the new sales tax exemption for children’s
diapers.
Estimated Revenue Impact (in Millions)
Tax Provision FY 2023 FY 2024
Exemption for Dependent Children ($9.7) ($9.5)
Exemption for an Adopted Child (4.4 - 5.3) (4.3 - 5.2)
Adoption Tax Credit (0.8 - 1.0) (0.8 - 1.0)
Sales Tax Exemption for Children’s Diapers (6.2) (8.3)
Total ($21.1 - $22.2)($22.9 - $24.0)
Exemption for Dependent Children: Increases to the exemption amount for a dependent child and doubling
that exemption amount in the first tax year in which the taxpayer is able to claim that child will reduce
General Fund revenue by approximately $9.7 M in FY 2023 and $9.5 M in FY 2024. The increase in the
exemption amount for a dependent child from $1,500 to $1,600 will reduce state General Fund revenues by
approximately $5.4 M in FY 2023 and $5.3 M in FY 2024. The estimate assumes that taxpayers receive an
additional $100 exemption for 1,750,000 dependent children (the average number of child exemptions that
were claimed annually in tax years 2017-2019).
The bill also allows a taxpayer to receive a $3,200 dependent child exemption in the first year in which the
taxpayer is able to claim an exemption for that child rather than a $1,600 exemption. Increasing the
exemption for newly claimed children could reduce General Fund revenues by $4.3 M in FY 2023 and $4.2
M in FY 2024. The estimate assumes that approximately 84,000 child exemptions are claimed for the first
time annually at a cost of $1,600 per exemption. The estimated 84,000 child exemptions is based on the
number of births in Indiana in 2019 (80,851) and the average annual number of adoptions from state court
data from 2017-2021 (3,044).
Exemption for an Adopted Child: The bill provides a new $3,000 exemption for adopted children under the
age of 19 or under the age of 24 if they are a full-time student. The adoption exemption could reduce General
Fund revenue by between $4.4 M and $5.3 M in FY 2023 and between $4.3 M and $5.2 M in FY 2024. The
estimate assumes that the population of adopted children eligible for the exemption ranges between 45,000
and 55,000. The lower estimate was calculated by taking the average total number of child exemptions
claimed in state income tax returns from 2017-2019 multiplied by 2.6% (the estimated percentage of children
who are adopted in Indiana from a U.S. Census Bureau report based on 2010 Census data). The higher
estimate uses the annual average number of adoptions cases recorded in Indiana courts from 2017-2021
multiplied by 18 to estimate the entire population of eligible adopted children within the age range indicated
by the bill.
HB 1001 4 For each adopted child under the age requirements, a taxpayer would be able to claim an exemption for an
adopted child as well as an exemption for a dependent child. In the tax year in which the child was adopted,
the taxpayer would receive exemptions totaling $6,200 for that child ($3,200 for an exemption for a newly
claimed dependent child plus $3,000 for an exemption for an adopted child). In tax years after the adoption,
the taxpayer would be eligible for exemptions of $4,600 for that child ($1,600 for the dependent child
exemption plus $3,000 for the exemption for an adopted child).
Adoption Tax Credit: The increase to the adoption tax credit could reduce General Fund revenue by $0.8 M
to $1.0 M in FY 2023 and FY 2024. The bill increases the state adoption tax credit to an amount equal to
20% of the federal adoption tax credit claimed in a taxable year up to a maximum state credit of $2,500 per
eligible child. This estimate is based on tax returns for tax years 2017-2019.
During tax years 2017-2019, an average of 1,535 tax filers claimed approximately $725,000 in the state
adoption tax credit annually. Under current law, Indiana’s adoption tax credit is capped at 10% of the federal
adoption tax credit up to a maximum amount of $1,000. The state tax credit is nonrefundable and cannot be
carried forward or carried back. However, unused federal adoption tax credits can be carried forward for five
years. The federal credit equals the amount of the qualified adoption expenses limited by a credit maximum
($14,400 for tax year 2021) and by the taxpayer’s income.
Sales Tax Exemption: The exemption for children’s diapers could reduce sales tax revenue by an estimated
$6.2 M in FY 2023, depending on the effective date of the legislation. The annual revenue loss could be
approximately $8.3 M beginning in FY 2024. Sales tax revenue is distributed to the General Fund (99.838%),
Commuter Rail Service Fund (0.131%), and Industrial Rail Service Fund (0.031%). The estimated reduction
in sales tax revenue is based on average expenditure data from the Consumer Expenditure Survey and
Census Bureau estimates of the number of households in Indiana. It is assumed that the exemption will be
effective beginning in September 2022.
Explanation of Local Expenditures:
Explanation of Local Revenues: Exemptions for Dependent and Adopted Children: Increased exemptions
for dependent children and adopted children will reduce local income tax revenue by an estimated $7.0 to
$7.5 M in FY 2023 and FY 2024.
State Agencies Affected: Department of State Revenue; Department of Health; Family and Social Services
Administration.
Local Agencies Affected:
Information Sources: OFMA Income Tax Database; Legislative Services Agency. 2018 Indiana Tax
Incentive Evaluation, p. 48-52.
https://iga.in.gov/legislative/2022ss1/publications/tax_incentive_review/#document-19f338a0;
IRS. Understanding the adoption tax credit.
https://www.irs.gov/newsroom/understanding-the-adoption-tax-credit; Indiana Department of Revenue.
Information Bulletin #117, Personal Exemptions and Special Rules, August 2020.
https://www.in.gov/dor/files/reference/ib117.pdf; Indiana Trial Court Statistics, Adoption court data
from 2017-2021, https://publicaccess.courts.in.gov/ICOR/; STATS Indiana, Vital Statistics, Total Births,
Indiana, 2019. https://www.stats.indiana.edu/vitals/;
Kreider, Rose, and Daphne Lofquist. Adopted Children and Stepchildren: 2010 Population
HB 1001 5 Characteristics, U.S. Census Bureau, April 2014;
U.S. Health and Human Services Department; National Alliance of State Pharmacy Associations,
Pharmacist Prescribing: Hormonal Contraceptives, https://naspa.us/resource/contraceptives;
The Joint Committee on Taxation. Estimated Budget Effects of the Revenue Provisions Contained in
Rules Committee Print 116-68, The “Consolidated Appropriations Act, 2021."
U.S. Bureau of Labor Statistics, Consumer Expenditure Survey, 2020, Detailed means, variances, and
percent reporting.
U.S. Bureau of Economic Analysis, Regional Price Parities by State, 2020.
U.S. Census Bureau, American Community Survey, 2020 ACS 5-Year Data, Indiana.
https://wonder.cdc.gov/controller/datarequest/D149;jsessionid=EEC053C8DF8D4A80CD3F7E1B34C8;
https://www.cdc.gov/nchs/pressroom/states/indiana/in.htm
U.S. Census Bureau, Annual Estimates of the Resident Population by Single Year of Age and Sex for
Indiana, April 1, 2020 to July 1, 2021.
Fiscal Analyst: Lauren Tanselle, 317-232-9586; Jason Barrett, 317-232-9809; Camille Tesch, 317-232-
5293; Karen Rossen, 317-234-2106.
HB 1001 6