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 7135 NOTE PREPARED: Feb 2, 2022
BILL NUMBER: SB 361 BILL AMENDED: Jan 31, 2022
SUBJECT: Economic Development.
FIRST AUTHOR: Sen. Mishler BILL STATUS: As Passed Senate
FIRST SPONSOR: Rep. Brown T
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: Tax Credits: The bill makes certain amendments to the Hoosier Business
Investment (HBI) tax credit, the Economic Development for a Growing Economy (EDGE) tax credit, the
Headquarters Relocation tax credit, and the Redevelopment Tax Credit beginning July 1, 2023. It also
provides that the Indiana Economic Development Corporation (IEDC) may award a tax credit for media
production expenses for certain media productions in Indiana beginning July 1, 2023. The bill limits the total
amount of credits that the IEDC may award for a calendar year for all taxpayers for all applicable tax credits
to $400 M. However, It provides that, subject to review by the budget committee, the IEDC may award an
additional $200 M, in addition to the $400 M limit, but that the additional credits shall not be assigned or
transferred.
Innovation Development District: The bill establishes an Innovation Development District Program
beginning July 1, 2023. It allows the IEDC to designate an area as a district under certain procedures and
enter into an agreement for the terms and conditions of the district. It establishes the Innovation Development
District Fund administered by the IEDC. It provides for the transfer of incremental tax revenue in a district
to the fund. It also provides that the IEDC may make grants, loans, or investments from the fund for specified
purposes. It provides an exemption from wage withholding requirements for an employer within a district
that meets certain requirements and procedures.
Remote Worker Grant Program: The bill requires the Indiana Destination Development Corporation (IDDC)
to design and implement a new remote worker grant program to provide grants to new remote workers for
certain qualifying expenses beginning July 1, 2023. It limits the total amount of grants that may be awarded
under the new remote worker grant program in a fiscal year.
SB 361 1 The bill makes conforming changes.
Effective Date: July 1, 2023.
Explanation of State Expenditures: Innovation Development District: It provides that an application to
establish an IDD must be reviewed by the Budget Committee. The IEDC may designate districts beginning
in FY 2024.
Innovation Development District Fund: The bill establishes the nonreverting Innovation Development
District Fund. The fund will be administered by the IEDC. The fund will consist of: (1) incremental state
income tax, local income tax, and sales tax captured from the IDD; (2) incremental property tax captured
from the IDD; and (3) Loan repayments. The money in the fund may be used to pay for: (1) administrative
expenses related to carry out the responsibilities related to the IDD; and (2) making grants, loans, or
investments for the purposes of economic development and growth in Indiana as listed in the bill.
Indiana Finance Authority (IFA): The bill authorizes the IFA to issue bonds payable solely from the revenue
in the fund and revenue generated from the project in an IDD. If there is insufficient revenue generated to
fulfill the obligations, money from the state General Fund will be appropriated to meet the obligations.
Remote Worker Grant Program: The bill establishes a remote worker grant program. It requires the IDDC
to design and implement the grant program. It provides that a remote worker is eligible for a grant equal to
$5,000 per year, up to a maximum of $15,000 over the life of the program. New remote workers are not
eligible for a grant if their employer receives EDGE tax credits. It caps the total grants at $1 M in FY 2023
and $1.5 M in FY 2024. It requires the IDDC to submit a report to the General Assembly on October 1, 2024,
regarding the implementation of the program. Any fiscal impact would depend on future actions by the
IDDC.
Appropriation for Payment of EDGE Tax Credit: The bill allows an eligible EDGE tax credit recipient to
directly receive a payment equal to the amount of credit without filing a tax return. It appropriates the
required amount of the tax credit from the state General Fund and requires the DOR to make the payments.
Credit recipients may begin requesting payments in FY 2024.
Indiana Economic Development Corporation (IEDC): The bill makes several changes to the tax credits that
require approval from the IEDC. The bill also authorizes the IEDC to establish and administer a Film and
Media Production tax credit. It defines certain applicable tax credits and provides for a limit on the total
applicable tax credits that may be annually approved by the IEDC. The IEDC must establish a policy to
exchange unallocated tax credits for contributions to the Indiana Promotion Fund.
It also allows the IEDC to accept applications from a local unit for the designation of IDDs. It provides
several guidelines and assigns responsibilities for the IEDC as they relate to the districts. It requires the IEDC
to provide information on the IDD in its Economic Incentive and Compliance Report. These requirements are
within the customary duties of the IEDC, but they will increase their workload.
Department of State Revenue (DOR): The DOR will incur additional expenses to revise tax forms,
instructions, computer programs, and withholding tables to reflect the tax rate and tax credit related changes
made by the bill. The DOR's current level of resources should be sufficient to implement these changes.
Other State Agencies: The Department of Local Government Finance (DLGF) and the State Board of
SB 361 2 Accounts will be required to make rules and prescribe forms appropriate for the implementation of IDD
allocation areas. The bill’s requirements are within the agencies’ routine administrative functions and should
be able to be implemented with no additional appropriations, assuming near customary agency staffing and
resource levels.
Penalty Provision: The bill provides that an employer who knowingly fails to annually provide a new employee
a copy of its exemption certificate during the term of the exemption commits a Level 6 felony. A Level 6 felony
is punishable by a prison term ranging from 6 to 30 months, with an advisory sentence of 1 year. The
sentence depends on mitigating and aggravating circumstances. Assuming offenders can be housed in
existing facilities with no additional staff, the marginal cost for medical care, food, and clothing is
approximately $4,333 annually, or $11.87 daily, per prisoner. However, any additional expenditures are
likely to be small.
Explanation of State Revenues: Aggregate Tax Credit Approved by IEDC: The bill defines “applicable
tax credit” to include Hoosier Business Investment (HBI) tax credit, the Economic Development for a
Growing Economy (EDGE) tax credit, the Headquarters Relocation tax credit, the Community Revitalization
Enhancement District (CRED) tax credit, the Redevelopment tax credit, and the Film and Media Production
tax credit. It provides that the IEDC may award up to $400 M annually in credit for applicable tax credits.
Subject to Budget Committee Review, the IEDC may award an additional $200 M annually in credit for
applicable tax credits.
The bill makes changes to the qualifying criteria and annual credit limits of some of the applicable tax
credits. Based on recent data, the average annual contract approval for the applicable tax credits has been
about $300 M, with the annual claims of about $70 M. The changes in the bill will likely result in additional
approvals and claims of these tax credits. The bill provides that if the IEDC does not expect to exhaust the
limit on the award of applicable credits, the IEDC may award some or all of the remaining credits to
taxpayers that make contributions to the Indiana Promotion Fund that was established in 2005.
Changes to Certain State Tax Credits: The bill makes changes to the following state income tax credits:
(A) EDGE tax credit - It allows the IEDC to award EDGE tax credit if an applicant proposes a project to
create new jobs in Indiana but does not propose a physical location in Indiana. It provides the criteria for
allowing a credit to an applicant. Current law requires the qualified project to have a physical location in
Indiana. It provides that the duration of EDGE tax credit may not be more than 20 years. Current law allows
for a duration of 10 years. The bill allows recipients eligible to receive the EDGE tax credit to elect to forgo
claiming the credit against any state tax liability and submit a request to receive a payment equal to the credit.
These changes will potentially increase the amount of EDGE credit approved and claimed starting FY 2024.
(B) HBI tax credit - Current law provides an annual cap of $55 M for the HBI tax credit. The bill removes
the annual cap on the HBI tax credit starting in FY 2024. Under current law, the approval for the HBI tax
credit did not reach the annual cap. The fiscal impact of removing the cap would depend on future actions
by the IEDC.
(C) Headquarter Relocation tax credit - The bill changes the criteria for receiving the Headquarter Relocation
tax credit by removing the requirement for a minimum number of employees in Indiana. Starting in FY 2024,
it removes the $5 M annual limit on the tax credit. Under current law, the approval for the Headquarter
Relocation tax credit did not reach the annual tax cap. Any fiscal impact from removing the tax cap and
removing the minimum employee threshold would depend on future actions by the IEDC.
SB 361 3 (D) Redevelopment Tax Credit - The bill adopts a broader definition for a qualified redevelopment site. It
requires that the IEDC must determine whether a site is a qualified redevelopment site. It also broadens the
definition of rehabilitation for purposes of the credit. The bill increases the maximum applicable credit
percentage to up to 30%. It increases the threshold from $7 M to $20 M in the amount of credit above which
the taxpayer will have to repay to the IEDC with interest. It removes the repayment provision for projects
with at least $100 M in qualified investment. It makes these changes effective FY 2024. It removes the $50
M annual limit on the tax credit. These provisions could increase the amount of the redevelopment tax credit
approved and claimed starting in FY 2024. Any fiscal impact would depend on future actions by the IEDC.
Film and Media Tax Credit: The bill provides for a tax credit to taxpayers who make qualified film and
media production expenditures. The IEDC will determine the amount of credit to award to an applicant. The
proposed credit provided in this bill will likely result in decreased state revenue deposited in the state
General Fund. The fiscal impact of the credit may begin in FY 2024.
Innovation Development District: IDDs would capture the incremental state individual income tax and sales
tax. [The districts would also capture incremental local income tax and property tax.] It sets the base year
definitions for individual income tax, local income tax, state sales tax, and property tax. It provides for the
transfer of the incremental state and local tax revenues generated in a district to the Innovation Development
District Fund.
The Individual Income Tax captured by the districts will reduce revenue to the General Fund. The Sale Tax
revenue is deposited in the General Fund (99.838%), Commuter Rail Fund, (0.131%) and Industrial Rail
Service Fund (0.031%). Captured Sales Tax revenue will reduce deposits to those funds. The revenue loss
to those funds is indeterminable, but potentially significant. The actual reduction will depend on the number
of IDDs approved, the taxpayers in those districts, and the maximum increment provided in the agreement.
Innovation Development District Wage Exemption: It provides an exemption of the withholding requirements
regarding wages earned in a IDD. An employee would not have wages withheld for Individual Income Tax
while working for a qualified employer. The employee would receive a deduction equal to the taxes owned
on the wages paid.
Penalty Provision: If any employers are convicted on Level 6 felony charges, there could be a small increase
in revenue to the General Fund and Common School Fund from court fees and criminal fines. If additional
court cases occur and fines are collected, revenue to both the Common School Fund and the state General
Fund would increase. The maximum fine for a Level 6 felony is $10,000, deposited in the Common School
Fund.
Explanation of Local Expenditures: Penalty Provision: If more defendants are detained in county jails
prior to their court hearings, local expenditures for jail operations may increase. However, any additional
expenditures would likely be small.
Explanation of Local Revenues: Innovation Development District: This provision permits local
redevelopment commissions to singularly or jointly apply to the IEDC to designate areas as an IDD. An IDD
designation may not exceed an initial term of 30 years, but the IEDC may extend the designation for an
additional 20 years if the initial performance metrics have been met.
IDDs will be similar to Tax Increment Financing (TIF) districts. Property taxes paid on assessed value (AV)
SB 361 4 that exceed the base AV of the IDD will be allocated to the Redevelopment Commission. The IEDC may
enter into an agreement with the Redevelopment Commission that allows the Redevelopment Commission
to retain 10% of the captured property taxes. The remainder of the captured property taxes will be paid into
the state Innovation Development District Fund. The IDD may not be established in an existing tax allocation
area.
Property tax revenues for taxing units will remain unchanged. If one assumes that the investment causing the
increase in AV would occur regardless of the IDD, a new IDD could cause a delay in the reduction of tax
rates and the resulting tax shift from existing properties that would normally occur until the new property
is included in the tax base when the IDD expires.
The incremental local income taxes deposited in the state Innovation Development District Fund will likely
not affect certified distributions of local income tax. However, it will likely reduce the frequency and amount
of supplemental distributions.
Penalty Provision: If additional court actions occur and a guilty verdict is entered, local governments would
receive revenue from court fees. However, the amounts would likely be small.
State Agencies Affected: Indiana Economic Development Corporation; Department of State Revenue;
Department of Local Government Finance; State Board of Accounts; Indiana Destination Development
Corporation; Indiana Finance Authority.
Local Agencies Affected: Local redevelopment commissions; Local civil taxing units and school
corporations.
Information Sources: IEDC Transparency Portal; OFMA Income Tax Database.
Fiscal Analyst: Seth Payton, 317- 233-3546; Randhir Jha, 317-232-9556.
SB 361 5