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 7170 NOTE PREPARED: Feb 1, 2022
BILL NUMBER: SB 382 BILL AMENDED: Jan 25, 2022
SUBJECT: Various Tax Matters.
FIRST AUTHOR: Sen. Holdman BILL STATUS: As Passed Senate
FIRST SPONSOR: Rep. Brown T
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: The bill does the following:
(1) It allows certain corporations to make an election to determine the corporation's state Adjusted Gross
Income Tax under specified provisions.
(2) It requires all wagering taxes to be reported and remitted electronically through the Department of State
Revenue (DOR) online tax filing program.
(3) It amends the distribution date for certain alcoholic beverage tax revenue and wagering tax and fee
revenue.
(4) It clarifies provisions regarding application of the Sales Tax to transactions in which a person acquires
an aircraft for rental or leasing in the ordinary course of the person's business. It reorganizes and revises
provisions that apply to the Sales Tax exemption for nonprofit organizations. It reorganizes and revises
provisions regarding Sale Tax exemptions for utilities. It amends Sales Tax provisions that apply to
wholesale sales. It clarifies that a marketplace facilitator is considered the retail merchant for transactions
it facilitates on its marketplace regardless as to whether the marketplace facilitator has a contractual
relationship with the seller.
(5) It allows nonresident shareholders and partners of a partnership to make an election to opt out of
withholding tax requirements in certain specified circumstances.
(6) It clarifies the reporting process used for distribution of Local Income Tax (LIT) revenue to conform to
SB 382 1 current practice.
(7) It amends due date provisions for returns, refunds, assessments, or other submissions under the State
Income Tax and Financial Institutions Tax.
(8) It provides that an election by a corporation to make a consolidated return continues to apply following
a corporate reorganization or sale.
(9) It makes technical and clarifying changes to the procedures for reporting federal partnership audit
adjustments.
(10) It increases the number of years a Local Income Tax expenditure tax rate for correctional facilities and
rehabilitation facilities may be imposed from 22 to 25 years in the case of a tax rate adopted after June 30,
2022.
(11) It adds procedures to allow the DOR to offset LIT distributions to local units when an over distribution
has been made either in error or because a taxpayer refund is approved after the distribution.
(12) It makes a technical correction to tax penalty provisions that apply to pass through entities.
(13) It reduces the tax rate imposed on the distribution of closed system cartridges beginning July 1, 2022,
from 25% to 15% of the wholesale price. It requires remote sellers to collect the tobacco product tax on
taxable products. It provides a more specific definition of "tobacco products" for purposes of the Tobacco
Products Tax. It imposes a tax on the distribution of alternative nicotine products in Indiana based on a rate
of $0.40 per ounce of the product weight as listed by the manufacturer. It defines "alternative nicotine
products" for purposes of the tax. Beginning January 1, 2023, it provides for a $0.72 per cigar tobacco
products tax cap for cigars with a wholesale price exceeding $3 per cigar. It clarifies that, in the case of
distributor to distributor transactions, the Tobacco Products Tax is imposed at the time a distributor first
receives the tobacco products in Indiana. It amends provisions that apply to a refund of a tobacco products
license fee when a license is surrendered to the DOR before its expiration. It imposes a penalty on retailers
who purchase tobacco products or cigarettes from a distributor who has not obtained a registration certificate
from the DOR (or whose registration certification is revoked or suspended). It authorizes the DOR to revoke
or suspend a registration certificate for failure to comply with certain reporting requirements. It provides the
basis upon which the DOR may refuse to issue or renew a registration certificate.
(14) It provides that the DOR may require reporting of any information reasonably necessary to determine
Alcoholic Beverage Excise Tax liability.
(15) It clarifies provisions that specify the effective date of an innkeeper's tax ordinance and the subsequent
tax collection duties of the DOR. It also adds similar provisions under the food and beverage tax.
(16) It requires the State Budget Agency (SBA) to transfer $7.1 M from the state General Fund to the Indiana
Geographic Information Office (GIO) to be used for the purposes of funding the Geographic Information
Office and the implementation of the geographic information system (GIS) for the DOR local income tax
purposes. The bill requires the SBA to create a report on the current GIS related contract costs for all state
agencies that could be eliminated in order to offset the required future state appropriations needed to fund
the Geographic Information Office and submit the report to the Interim Study Committee on Fiscal Policy
before November 1, 2022.
SB 382 2 (17) It makes conforming changes.
Effective Date: Upon passage; January 1, 2020 (retroactive); July 1, 2021 (retroactive); July. 1, 2022;
January 1, 2023; July 1, 2023.
Explanation of State Expenditures: Appropriation to GIS Office: The bill requires that before July 1, 2023,
the SBA must transfer $7.1 M from the State General Fund to the Indiana Geographic Information Office
to be used for the purposes of funding the office and the implementation of the geographic information
system (GIS) for the DOR’s local income tax purposes.
State Budget Agency: The bill requires the SBA to prepare a report before November 1, 2022, showing the
cost savings related to GIS from all state agencies that could offset the future appropriations to the
Geographic Information Office. The SBA's current level of resources should be sufficient to implement these
changes.
Department of State Revenue (DOR): The bill will impact the DOR’s administrative duties and rules related
to the imposition of various taxes and fees. The DOR will incur additional expenses to create forms,
instructions, and computer programs based on the guidelines provided in the bill. The DOR's current level
of resources should be sufficient to implement these changes.
Over Distributions of Local Revenue: If the DOR determines that an amount of a listed local tax has been
distributed to a local unit in error or determines that all or part of the distribution was refunded subsequent
to the distribution, the DOR will notify the county treasurer and the county auditor of the excess distribution
and request that the excess distribution be repaid to the DOR or that the DOR be permitted to offset the
excess distribution against listed taxes. If the DOR determines that an offset is not practicable, the DOR will
offset the distribution against the local income tax distributions. To the extent that in certain instances the
state would not be able to recover the over distributions to the local unit in absence of these provisions, these
changes would result in fiscal impact on the state.
Explanation of State Revenues: Wagering Taxes Filing: The bill makes changes to riverboat taxes, racino
taxes, sports wagering taxes, pari-mutuel wagering, and breakage to add electronic filing requirements similar
to Sales Tax and withholding taxes. These changes are effective in tax year 2023.
Sales Tax Related to Nonprofit: The bill amends the Sales Tax provisions for the nonprofit organizations.
It makes technical changes to the test to determine if an item sold by the nonprofit is tax exempt. It changes
the threshold under which sales by a nonprofit remains tax exempt from having sales for less than 30 days
in a calendar year to less than $20,000 in sales in a calendar year. This could change the tax status of some
nonprofit entities resulting in an indeterminable impact on Sales Tax revenue. It also reduces the filing and
registration requirements for a nonprofit entity. The changes are applicable starting FY 2023.
Other Sales Tax Provisions: Sales Tax provisions related to aircraft for rental or leasing, wholesale sales,
exemptions for utilities, and marketplace facilitators, restate or clarify the provisions without changing the
taxation of any goods or services. The Sales Tax on aircraft for rental or leasing clarifies when a taxpayer
has to make a Sales Tax payment in case the aircraft is sold within 13 year period of its purchase. It removes
references to a person making wholesale sales and clarifies the retail merchant definition. It removes
redundancy from exemptions of certain utility services and moves predominant utility services to the double
direct exemption. It provides that a marketplace facilitator will be considered a retail merchant regardless
of whether the marketplace facilitator has a contractual relationship with a seller. These provisions applicable
SB 382 3 starting FY 2023 are clarification of current law.
Partnership Withholding: The provision allowing nonresident shareholders and partners of a partnership to
make an election to opt out of withholding tax requirements will not have any impact on the total tax paid
by the taxpayer. The provision sets requirements along with interest and penalties if the beneficiary of this
election does not remit any tax otherwise due. These provisions are effective starting in FY 2023.
Consolidated Return Continuation: The bill clarifies the conditions under which after a sale, merger or
acquisition the election to file a consolidated return or a combined return continues to the new entity absent
an election by those consolidated members to file separately. This would remove ambiguity in the filing
status of an entity after change in its ownership status. These provisions are effective starting in FY 2023.
Partnership Audit Adjustment Reporting: To the extent that these provisions increase the audit efficiency
and tax liability of a partnership in Indiana, it could increase Individual Income Tax, Corporate Income Tax,
or Financial Institution Tax revenues. These taxes are deposited in the state General Fund. These provisions
are effective starting in FY 2022.
Tobacco Products Tax: The bill reduces the tax rate on closed system cartridges from 25% to 15% of the
wholesale price. This could reduce annual revenue collections by an estimated $1.6 M to $2.8 M beginning
in FY 2023. Sales Tax revenue deposited in the General Fund could also decrease by approximately $0.1 M
to $0.2 M. The bill’s $0.72 per cigar Tobacco Products Tax cap could reduce revenue by an indeterminable,
but potentially significant amount beginning in FY 2023.
The bill requires remote sellers that meet the threshold in current law to collect Sales Tax to also collect
Tobacco Products Tax beginning in FY 2024. In addition, the bill imposes a tax on alternative nicotine
products at a rate of $0.40 per ounce. These provisions would increase revenue by an indeterminable, but
potentially significant amount. The bill also imposes a penalty on a retailer who purchases cigarettes or
tobacco products from a distributor that has not obtained a registration certificate or license. The maximum
penalty would not exceed the greater of 100% of the retail value of the products purchased or $5,000.
[Under current law, the tax on closed system cartridges will be imposed beginning in FY 2023 at a rate of
25% of the wholesale price. The tax rate on other tobacco products is 24% of the wholesale price. Revenue
is deposited in the General Fund and various dedicated funds.]
Wagering Tax Distributions: The bill requires that Riverboat Wagering Tax deposited in the State General
Fund be based on revenue received by the state in the immediately preceding month instead of the current
month as under the existing law. This would result in reducing one month of revenue received by the State
General Fund by between $30 M and $40 M in FY 2022. The total amount of tax received by the state and
distributed to state funds and local units in the long term will not be effected by the bill.
Alcoholic Beverage Tax: The bill provides that DOR may require the reporting of any information reasonably
necessary to determine the amount of Alcoholic Beverage Tax due. This could further assist the audit process
and decision making potentially impacting the revenue received from this excise tax. This is effective in FY
2023.
Corporate Adjusted Gross Income Tax-Apportionment Method: It establishes a specific apportionment
method to compute the Indiana taxable income of certain qualified taxpayers that elect to apply for an
alternate method. Upon electing for the alternate method of apportionment, the eligible corporation will be
SB 382 4 subject to the election for 10 taxable years. It permits the taxpayer to continue to elect to use the method
beyond the initial 10 year period. An eligible corporation must have greater than $1 B of tangible personal
property sales that is sourced to Indiana, and would have an apportionment of greater than 10%. It changes
the apportionment method to exclude certain qualifying distribution sales from the numerator in the
computation of Indiana apportionment. It provides for steps to calculate the tax payable amount under the
new method and sets a minimum threshold for the tax payable amount. This provision will likely result in
reducing the Corporate Income Tax liability of taxpayers that elect to choose the alternate method. It would
reduce Corporate Income Tax by an indeterminable amount starting in FY 2023. Corporate Income Tax is
deposited in the State General Fund.
Other Provisions: It updates the penalty provisions for certain returns. It provides information on tax return
due dates in special circumstances related to weekends and federal extensions. It codifies current practice
for determining local income tax distributions.
Explanation of Local Expenditures:
Explanation of Local Revenues: Food and Beverage Tax and Innkeeper’s Tax: The provisions related to
food and beverage tax and innkeeper’s tax state that if the DOR is collecting these taxes, the DOR would
start collecting taxes on the later of the first day of the month that is not less than 30 days after the ordinance
is sent to the DOR, or the effective date specified in the ordinance. If an ordinance does not specify an
effective date, the ordinance will be considered effective on the earliest date allowable. These provisions will
create consistency with other requirements set in current law. It makes further clarifications in a similar
provision regarding Innkeeper’s Tax collections by the DOR. These changes may result in prompt transfer
of ordinances to the DOR. They will not have a fiscal impact if the ordinances adopting a tax or tax rate
modifications are sent to DOR timely.
Over Distributions of Local Revenue: These changes would result in fiscal impact on the local units only
to the extent that in certain instances the state would be able to recover certain over distributions from the
local units.
Local Income Tax Expenditure Rate: The provisions in the bill increases the number of years a local income
tax expenditure tax rate for correctional facilities and rehabilitation facilities may be imposed from 22 to 25
years. The change will apply to tax rates adopted after June 30, 2022.
Tobacco Products Tax: The bill would have an indeterminable but likely small impact on local distributions
from the Cigarette Tax Fund to the extent that Tobacco Products Tax revenue is affected. [Two-thirds of the
Tobacco Products Tax revenue deposited in the Cigarette Tax Fund is distributed to cities and towns based
on population.]
State Agencies Affected: Department of State Revenues, Geographic Information Office, State Budget
Agency.
Local Agencies Affected: All Local Units.
Information Sources:
Fiscal Analyst: Randhir Jha, 317-232-9556; Lauren Tanselle, 317-232-9586.
SB 382 5