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: Mar 11, 2022
BILL NUMBER: SB 361 BILL AMENDED: Mar 8, 2022
SUBJECT: Economic Development.
FIRST AUTHOR: Sen. Mishler BILL STATUS: Enrolled
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. The bill adds veteran owned
businesses to the list of businesses that would qualify for an enhanced Venture Capital Tax Credit. 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 $300 M.
Augmentation: It provides for the augmentation of the amount appropriated to the IEDC in an amount not
to exceed $300 M for the purposes of business promotion and innovation. The bill specifies that funds
appropriated to the IEDC for the purposes of business promotion and innovation do not revert to the state
General Fund.
Report: It requires the IEDC to identify state laws and regulations that burden existing businesses or inhibit
creation of new businesses and provide a report with recommendations to the General Assembly and Budget
Committee.
Innovation Development District: The bill specifies the procedure by which the IEDC may designate an area
as an Innovation Development District. It requires the IEDC to enter into an agreement with the executive
of a city, town, or county, or, if applicable, executives with territory located in the district establishing the
terms and conditions governing certain districts.
Innovation Development District Fund: It requires the IEDC to establish a local Innovation Development
District Fund for each district. The bill provides that money in a local Innovation Development District Fund
SB 361 1 is continuously appropriated for the uses of the fund.
Workforce Retention and Recruitment Program and Fund: The bill authorizes a county, city, or town to
establish a Workforce Retention and Recruitment Program and Fund for the purposes of recruiting and
retaining individuals who will satisfy the current and future workforce needs of the unit's employers or
provide substantial economic impact to the unit, including providing incentives in the form of grants or loans
to qualified workers. It authorizes the unit to transfer money into the fund from other sources. The bill
provides that the executive of the unit shall administer the fund in coordination with a Workforce Fund Board
of Managers appointed by the executive of the unit.
Film and Media Tax Credit: The bill provides that the IEDC may award a tax credit for media production
expenses for certain media productions in Indiana.
The bill makes conforming changes.
Effective Date: Upon passage; July 1, 2022; January 1, 2023.
Explanation of State Expenditures: Augmentation: The bill provides for the augmentation of the amount
appropriated to the IEDC not to exceed $300 M for the purposes of business promotion and innovation. The
IEDC may transfer the funds to the statewide Innovation Development District Fund. The funds appropriated
to the IEDC for the purposes of business promotion and innovation do not revert to the state General Fund.
Innovation Development District: This bill allows the IEDC to designate territory as Innovation Development
Districts (IDD). In cases where the costs and benefits of the district investment are expected to be less than
$2 B, the IEDC may not make the IDD designation without an agreement with the appropriate city, town,
or county executives. The bill requires the IEDC to notify the Budget Committee within 15 days after an
agreement establishing an IDD has been reached. The designation as an IDD may not exceed 30 years unless
extended by the Budget Committee. Designations may not be made after June 30, 2025.
Statewide Innovation Development District Fund: The bill establishes the nonreverting statewide IDD Fund.
The fund will be administered by the IEDC. The fund will consist of: (1) transfers from a local Innovation
Development Fund; (2) appropriations from the General Assembly; (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 program; and (2) making grants, loans, or investments for the purposes listed in the bill. The bill also
requires the IEDC to establish and administer the local IDD Funds for the districts.
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. The money needed to
make the payments will be paid from funds appropriated to the IEDC for business promotion and innovation
or from the statewide IDD Fund. The payments are subject to available funding. Credit recipients may begin
requesting payments in FY 2023.
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.
It provides several guidelines and assigns responsibilities for the IEDC as they relate to the IDDs. It requires
SB 361 2 the IEDC to provide information on the IDDs in its Economic Incentive and Compliance Report. The IEDC
must also provide a report identifying state laws and regulations that burden existing businesses or inhibit
creation of new businesses to the General Assembly and Budget Committee. The IEDC also must publish
the established uniform policies and procedures on the IEDC Internet web site. These requirements are within
the customary duties of the IEDC and can be accomplished with existing resources.
Department of State Revenue (DOR): The DOR will incur additional expenses to revise tax forms,
instructions, and computer programs. 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
Accounts will be required to make rules and prescribe forms appropriate for the implementation of IDDs.
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.
Indiana Trust Fund Investment Board: The bill designates two members of the General Assembly to serve
on the Next Level Indiana Trust Fund Investment Board. The current law does not specify board member per
diem or travel reimbursement.
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 aggregate amount of applicable tax credits that the IEDC may award for a state
fiscal year for all taxpayers is $300 M.
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.
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 the 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 the 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 credits approved and claimed
starting FY 2023.
(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 2023. 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
SB 361 3 Relocation tax credit by removing the requirement for a minimum number of employees in Indiana. Starting
in FY 2023, 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.
(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 2023. 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 2023. Any fiscal impact would depend on future actions by the IEDC.
(E) Venture Capital Investment Tax Credit -The bill also increases the maximum amount of Venture Capital
Investment tax credits available to veteran- owned businesses from 25% of the qualified investment to 30%
of the qualified investment, and it raises the cap on the credit amount from $1 M to $1.5 M beginning in CY
2023. This could increase credit amounts awarded to certain taxpayers, but all credits awarded will still be
subject to the annual award amount cap of the program.
Film and Media Tax Credit: The bill provides for a tax credit to taxpayers who make qualified media
production expenditures. The IEDC will determine the amount of credit to award to an applicant, but the
credit may not exceed 30% of the taxpayer’s qualified production expenses. The credit is nonrefundable, and
unused credits may be carried forward for up to nine years. 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 2023.
Innovation Development District: The IDDs would capture the incremental state Individual Income Tax and
Sales Tax. It sets the base year definitions for state Individual Income Tax and Sales Tax. It provides for the
transfer of the incremental state revenues generated in a district to the applicable local IDD 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 districts approved, the taxpayers in those districts, and the economic activity occurring in the districts.
Explanation of Local Expenditures: Workforce Retention and Recruitment Program and Fund: The bill
would increase workload and expenditures for counties, cities, and towns that decide to establish a workforce
retention and recruitment program. Under the program, grants and loans may be awarded to individuals that
meet the criteria set in the bill. The bill provides the local units with flexibility to determine how to structure
the program as well as to determine the form and size of the grant and loan incentives offered. The bill is
silent on how the administrative costs of a program would be paid.
Innovation Development District: In cases where the costs and benefits of the district investment are
expected to be less than $2 B, the IEDC is required to reach an agreement with the appropriate city, town,
or county executives before the IDD is created. If an agreement is not reached, the IDD may not be
established. These provision can be accomplished within existing resources.
SB 361 4 Additional Information - Workforce Fund Board of Managers: Local units participating in the program
would be required to form a five member workforce fund board of managers. The board of managers is
required to adopt rules and bylaws, identify the most appropriate and fiscally responsible incentives to retain
individuals and families in their communities, develop the program, administer the fund, market the program,
identify and recruit applicants, establish an application process, evaluate applicants, offer incentives to
qualified applicants, and report on the program. The board of managers may establish a nonprofit
organization to administer the program. A local unit may join with other units, private sector businesses, or
community or philanthropic organizations to establish a program.
Workforce Retention and Recruitment Fund: The fund may consist of private grants or contributions,
appropriations to the fund from the unit’s budget, transfers from other unencumbered local funds, and
repayments to the fund. The unit executive and the board of managers shall administer the fund. Any money
in the fund at the end of the calendar year does not revert to the unit’s general fund.
Explanation of Local Revenues: Innovation Development District: The local executive or the IEDC will
designate each IDD as an allocation area, similar to a Tax Increment Financing (TIF) district. Property taxes
paid on assessed value (AV) that exceed the base AV of the IDD will be allocated to the local IDD Fund
administered by the IEDC. At least 12% of the captured property taxes deposited into the local IDD Fund
will be transferred to the general fund of each city, town, county, or school corporation with territory within
the district. The local IDD Funds also receive the captured state income tax and sales tax revenue applicable
to the activity within the district. The IEDC may transfer captured state income and gross retail taxes to the
statewide IDD Fund provided all obligations for the state fiscal year are met.
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 IDD may not be established in an existing tax
allocation area.]
The bill also permits a local executive or the IEDC to exempt new commercial or industrial real property
improvements and new personal property from property taxation. If exempt, the property’s AV will not be
added to the tax base of the taxing units nor will it be allocated to the IDD. The exemption may be terminated
by the party providing the exemption. The fiscal impact depends on the actions of the local executive and
the IEDC.
Workforce Retention and Recruitment Fund: Local units may also receive revenues from penalties imposed
on individuals who move out of the unit before they meet the time commitment required in incentive
agreements. Local units have flexibility to set both the duration of the time commitment and the penalty.
Workforce fund managers may choose to waive a penalty for a qualified worker.
State Agencies Affected: Indiana Economic Development Corporation; Department of State Revenue;
Department of Local Government Finance; State Board of Accounts; Indiana Finance Authority.
Local Agencies Affected: 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; Bob Sigalow 317-232-9859.
SB 361 5