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: Mar 11, 2022
BILL NUMBER: SB 382 BILL AMENDED: Mar 8, 2022
SUBJECT: Various Tax Matters.
FIRST AUTHOR: Sen. Holdman BILL STATUS: Enrolled
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 provides that a taxpayer is not required to file subsequent personal property tax returns for the business
personal property exemption.
(5) 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. It provides required report filing deadlines for exempt transactions for certain
retail merchants.
SB 382 1 (6) It provides that if an amount would have been excludible under Section 108(f)(5) of the Internal Revenue
Code as in effect on January 1, 2020, the amount is not required to be added back under the Indiana adjusted
gross income provisions.
(7) It requires certain state or local government employees to submit to criminal history background checks
at least once every five years (as opposed to 10 years under current law).
(8) It allows certain small businesses to deduct amounts paid for health insurance premiums from Indiana
adjusted gross income.
(9) It provides that the true tax value of a self-service storage facility must be determined based solely on the
land and the improvements, less normal depreciation and normal obsolescence, and must exclude business
intangible value.
(10) It allows nonresident shareholders and partners of a partnership to make an election to opt out of
withholding tax requirements in certain specified circumstances.
(11) It clarifies the reporting process used for distribution of Local Income Tax (LIT) revenue to conform
to current practice.
(12) It amends due date provisions for returns, refunds, assessments, or other submissions under the State
Income Tax and Financial Institutions Tax.
(13) It provides that an election by a corporation to make a consolidated return continues to apply following
a corporate reorganization or sale.
(14) It makes technical and clarifying changes to the procedures for reporting federal partnership audit
adjustments.
(15) It provides an affordable and workforce housing state tax credit against state tax liability to a taxpayer
for each taxable year in the state tax credit period of a qualified project in an aggregate amount that does not
exceed the product of a percentage between 40% and 100% and the amount of the taxpayer's aggregate
federal tax credit for the qualified project. The bill provides that an eligible applicant must apply to the
Indiana Housing and Community Development Authority for an award of an affordable and workforce
housing state tax credit. It provides that a holder of an affordable and workforce housing state tax credit may
transfer, sell, or assign all or part of the holder's right to claim the state tax credit for a taxable year.
(16) 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 January
1, 2019.
(17) 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.
(18) It makes a technical correction to tax penalty provisions that apply to pass through entities.
(19) 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
SB 382 2 taxable products. 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. 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.
(20) It provides that the DOR may require reporting of any information reasonably necessary to determine
Alcoholic Beverage Excise Tax liability.
(21) 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.
(22) The bill requires the Budget Agency (SBA) to transfer $7.1 M from the state General Fund to the
Indiana Mapping Data and Standards Fund to be used for: (1) the implementation of the geographic
information system (GIS) for the state and local income taxes, as well as listed taxes, administrated by the
department; and (2) the purposes of the Indiana Geographic Information Office. It 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 office and submit the report to the Interim
Study Committee on Fiscal Policy before November 1, 2022.
(23) It changes population parameters to reflect the population count determined under the 2020 decennial
census.
(24) It provides that revenue received from the Nashville food and beverage tax may be used for grants to
local businesses to make building improvements.
(25) It removes an outdated reference in the Indiana administrative code regarding a property tax exemption
for public airports.
(26) It makes an appropriation. It makes conforming changes.
Effective Date: Upon passage; January 1, 2020 (retroactive); January 1, 2021 (retroactive); July 1, 2021
(retroactive); July. 1, 2022; January 1, 2023; July 1, 2023.
Explanation of State Expenditures: Transfer from General Fund to Indiana Mapping Data and Standards
Fund: The bill requires that before July 1, 2023, the SBA must transfer from the state General Fund $7.1
M to the Indiana Mapping Data and Standards Fund to be used for the purposes of funding the Geographic
Information Office and the implementation of the geographic information system (GIS) for the DOR’s listed
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
SB 382 3 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 Nashville food and beverage tax would continue to be
collected and remitted to the (DOR) after July 1, 2023. The bill also provides that the city of Fishers may
adopt an ordinance to impose a food and beverage tax not later than December 31, 2023. 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.
Access to Tax Information: The bill increases the frequency of background checks currently required for state
and local employees, contractors, and subcontractors with access to certain tax information. Unchanged in
the bill, current law provides that the appointing agencies of state employees may pay the fee charged for
the cost of fingerprinting or conducting the criminal history background checks. A fingerprint-based national
full criminal history report is obtained through an Indiana State Police vendor and requires a search of the
criminal history record system maintained by all state and federal jurisdictions in the United States. As per
information provided by the Indiana State Police, the total cost for a national criminal history report is
$38.20. This includes a $11.25 federal fee, $15.00 state fee, and a $11.95 fingerprinting fee. The state fee
is not charged for a state agency employee, so the total cost for a state employee is $23.20. Any additional
expenditures related to this provision will begin in FY 2023.
Indiana Housing and Community Development Authority (IHCDA): The requirements related to housing tax
credits in the bill are within the IHCDA’s routine administrative functions and should be able to be
implemented with no additional appropriations, assuming near customary agency staffing and resource levels.
Legislative Services Agency (LSA): The housing tax credit is subject to review by the LSA under the tax
incentive evaluation program. The LSA’s current level of funding and resources should be sufficient to study
this tax credit.
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.
SB 382 4 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
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 also specifies in the case of a closed system cartridge sold in the same package as a vapor
product device that the tax only applies to the wholesale price of the closed system cartridge if it can be
isolated from the vapor product device on the invoice.
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 and a proportionate tax at the same rate on fractional parts of an ounce
beginning in FY 2023. These provisions would increase revenue by an indeterminable, but potentially
significant amount. The bill also imposes a penalty on a retailer who purchases cigarettes, tobacco products,
alternative nicotine products, or closed system cartridges 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
SB 382 5 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
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.
Small Business Insurance Premium Deduction: Currently, federal law provides a small business health care
tax credit to employers that offer a qualified health plan to its employees and pay at least 50% of the cost of
employee health care coverage. The law does not allow the business to take expense deduction for the portion
of the insurance premiums paid by an employer which is equal to the amount of the credit. The bill provides
that for state income tax purposes, the business may deduct these expenses occurred towards employee
insurance premium. This would result in reducing the state taxable income for businesses that would be able
to take the deduction starting tax year 2023. The tax deduction could reduce Individual Income Tax,
Corporate Income Tax, or Financial Institutions Tax by an indeterminable amount starting FY 2024.
Access to Tax Information: For every national full criminal history background check performed by the
Indiana State Police vendor for a person other than a state employee, $15 in state fees are deposited in the
state General Fund. Any impact could begin in FY 2023.
Housing Tax Credit: The bill provides for a nonrefundable affordable and workforce housing state tax credit.
The IHCDA may award between 40% and 100% of a taxpayer’s total federal low-income housing tax credit.
The credit may be allocated for five taxable years beginning with the taxable year in which any amount of
the federal low-income housing tax credit is first claimed. The IHCDA may award $30 M in each fiscal year
from FY 2024 to FY 2028. Unallocated credits from a prior year may not be awarded in a later fiscal year.
Taxpayers may begin applying for the tax credits in FY 2024 and may begin claiming awarded credits in tax
year 2024. Based upon the federal Low Income Housing Tax Credits awarded by the IHCDA in Indiana in
2020, the estimated reduction in General Fund revenue from the state credit could be about $2.1 M in FY
2024, $4.2 M in FY 2025, and $6.3 M in FY 2026.If the maximum credits allowed are awarded to projects
with a five year state tax credit period for claiming the credits, the estimated reduction in revenue could be
larger, but the revenue loss cannot exceed $30 M annually.
SB 382 6 The credit may be used to offset tax liabilities for Individual Adjusted Gross Income (AGI), Corporate AGI,
Financial Institutions, Insurance Premium Taxes, and Insurance Premiums Retaliatory Tax. The bill also
allows unused credits to be carried forward for up to nine consecutive years and assigned to other taxpayers.
The credits may not be carried back. No more than $150 M in tax credits may be awarded for the duration
of the program. The federal low-income tax credit is equal to 70% of present value for certain new buildings
and 30% of present value for other buildings. Qualified projects for the state tax credit include only certain
buildings that are awarded at 30% present value and that are subject to the federal activity bond volume cap.
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. It clarifies that the add back of exclusion of certain employer
payment of students loans under current law does not apply to exclusions as in effect on January 1, 2020.
Explanation of Local Expenditures: Access to Tax Information: The bill increases the frequency of
background checks currently required for state and local employees, contractors, and subcontractors with
access to certain tax information. Unchanged by the bill, current law provides that the appointing authority
of a local government employee may pay the fee charged for the cost of fingerprinting or conducting the
criminal history background checks. As per information provided by the Indiana State Police, the total cost
for a national criminal history report is $38.20. Any additional expenditures would occur starting FY 2023.
Nashville Food and Beverage Tax: In addition to the current uses of the Food and Beverage Tax Receipts
Fund, this bill allows funds to be used for grants to certain businesses. The grants may be used for:
• exterior improvements to the building in which the business is located, including signage, lighting,
and decor improvements; and
• architectural or engineering services or consultation.
The fiscal body of the municipality is required to develop criteria for awarding a grant, including eligibility
requirements, grant guidelines, and an application process.
Fishers Food and Beverage Tax: The city of Fishers could potentially incur a one-time increase in costs if
it holds an additional public hearing to discuss a proposed ordinance to impose a food and beverage tax.
If the city of Fishers imposes a food and beverage tax, the city fiscal body would establish a food and
beverage tax receipts fund, in which all revenue from he tax would be deposited. Money in the fund may
used to reduce the city’s property tax levy or for economic development purposes.
Property Tax Exemption Filing: Local assessors will realize some administrative savings as a result of this
provision. Under current law, taxpayers who have less than $80,000 of depreciable asset acquisition cost in
the county are exempt from personal property tax. Taxpayers must currently file a minimal return, claiming
the exemption. Under this provision, a taxpayer who has filed a return claiming the exemption for a year and
who continues to qualify for the exemption will not have to file a return to claim the exemption in subsequent
years. Local assessors will no longer have to process these returns.
For taxes payable in CY 2022, taxpayers filed 94,900 returns claiming the exemption which was available
for taxpayers with a total cost in the county that was less than $40,000. An additional estimated 34,000
taxpayers will qualify under the new $80,000 threshold for taxes payable in CY 2023.
SB 382 7 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.
Nashville Food and Beverage Tax: The bill repeals the expiration date of the Nashville food and beverage
tax. The tax generated $218,802 in CY 2019 and $217,725 in CY 2020.
Fishers Food and Beverage Tax: The bill allows Fishers to impose a food and beverage tax at a rate not to
exceed 1% of the gross retail income from food and beverage transactions in the city. The tax could go into
effect as early as September 1, 2022, in which case Fishers could receive 3 months of revenue in CY 2022
and a full year of revenue beginning in CY 2023. The following table shows the estimated potential revenue
from CY 2022 through CY 2024. [These estimates are based on actual revenue collected in Hamilton County
and a portion of the county total that was allocated to Fishers based on the city’s estimated share of food and
beverage in the county].
Estimated Potential Fishers Food and Beverage Tax Revenue, 1%
CY 2022 CY 2023 CY 2024
$63,000 - $68,500 $283,100 - $307,600 $299,200 - $325,100
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 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 applies to tax rates imposed by an ordinance adopted on or after January 1, 2019. As of January 1,
2022, 28 counties impose an expenditure tax rate for correctional facilities and rehabilitation facilities. The
provision would extend the duration of the tax rate for 18 of those counties.
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.]
Self-Storage Assessments: This provision will most likely result in a reduction of the assessed valuation
(AV) of some self-service storage facilities. Under current law, there are three approaches that may be used
to determine real property’s assessed value. They are (1) Reproduction cost less depreciation; (2)
Comparative sales; and (3) Capitalization of income. Under this provision, the value of self-service storage
facilities will equal the lowest value computed under the three approaches, excluding any business intangible
value.
SB 382 8 For taxes payable in CY 2021, there were 2,052 parcels coded as “Commercial - Mini Warehouse” in 91
counties. This classification appears to include self-service storage facilities but could also include other
types of warehouse property. For taxes payable in CY 2021, these 2,052 parcels had a total gross AV of
almost $1.2 B and had tax bills totaling $29.3 M. If AV is reduced then a portion of the $29 M in taxes paid
by the owners of these facilities will get shifted to other property types and a portion will be lost to tax caps.
The extent to which AV will be reduced is uncertain.
Airport Exemption: This provision removes the section of the Indiana Administrative Code governing airport
property tax exemptions. Under current law, public airports are exempt from property tax regardless of
whether they are publicly or privately owned. The administrative rule was adopted in 1979, but the statute
has been amended several times since then resulting in a conflict between the two. By removing the
administrative rule, this provision clarifies that the current statute defines the property that is exempt.
Property Tax Exemption Filing: This provision will have no effect on local revenues.
Small Business Insurance Premium Deduction: Because the small business heath insurance deduction will
decrease taxable income, counties imposing local income taxes could potentially experience a decrease in
revenue.
State Agencies Affected: Department of State Revenues, Geographic Information Office, State Budget
Agency, Department of Local Government Finance.
Local Agencies Affected: All Local Units; Local assessors; County auditors; Civil taxing units and
school corporations.
Information Sources: LSA property tax database. Indiana Handbook of Taxes, Revenues, and
Appropriations, FY 2021 & FY 2020; OFMA ES-202 Data; IHS Markit; Small Business Healthcare Tax
Credit, https://www.irs.gov/newsroom/small-business-health-care-tax-credit-questions-and-answers;
Criminal History Check Fee Schedule,
https://www.in.gov/isp/criminal-history-services/get-more-information/fees/
LSA, 2021 Tax Incentive Review; Indiana Housing an Community Development Authority, 2020 Annual
Report.
Fiscal Analyst: Randhir Jha, 317-232-9556; Lauren Tanselle, 317-232-9586; Bob Sigalow, 317-232-
9859; Seth Payton, 317-233-3546.
SB 382 9