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 6818 NOTE PREPARED: Feb 15, 2022
BILL NUMBER: SB 408 BILL AMENDED: Jan 20, 2022
SUBJECT: Community Investments by Financial Institutions.
FIRST AUTHOR: Sen. Zay BILL STATUS: CR Adopted - 2
nd
House
FIRST SPONSOR: Rep. Carbaugh
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
DEDICATED
FEDERAL
Summary of Legislation: The bill amends the statute authorizing a bank or trust company to make
investments in community based economic development to also authorize investments in: (1) any community
and economic development entity, community development project, or other public welfare investment; and
(2) tax equity finance transactions; subject to the investments being made in compliance with applicable
federal regulations and any regulation, rule, policy, or guidance adopted by the Department of Financial
Institutions (DFI). It authorizes savings banks and savings associations to engage in tax equity finance
transactions.
Effective Date: July 1, 2022.
Explanation of State Expenditures: Department of Financial Institutions (DFI): The bill authorizes a bank
or a trust to make certain investments including direct or indirect investments in any tax equity finance
transaction. This could provide additional investment options to these companies. The DFI will have to adopt
regulation, rule, policy, or guidance to implement the requirements in the bill. These requirements are within
customary duties of the DFI.
Additional Information
Community and Economic Development Entity (CEDE): Federal law defines CEDE as an entity that makes
investments or conducts activities that primarily benefit low and moderate income individuals, low and
moderate income areas, or other areas targeted by a governmental entity for redevelopment or the investment
would receive consideration under 12 CFR 25.23 as a “qualified investment.”
SB 408 1 Public Welfare Investment: Federal laws under the public welfare investment statute provides that a national
bank or national bank subsidiary may make an investment directly or indirectly if the investment primarily
benefits low and moderate income individuals, low and moderate income areas or other areas targeted by a
governmental entity for redevelopment, or if the investment would receive consideration under 12 CFR 25.23
as a “qualified investment.”
Community Development Project: Community Development Project means a project to make an investment
that meets the requirements under public welfare investment statute.
Tax Equity Finance Transaction: Federal laws allow a national bank or federal savings association to engage
in a tax equity finance transaction if the transaction is the functional equivalent of a loan, and the transaction
satisfies certain other conditions. The law defines tax equity finance transactions as a transaction in which
a national bank or federal savings association provides equity financing to fund a project or projects that
generate tax credits or other tax benefits and the use of an equity-based structure allows the transfer of those
credits and other tax benefits to the national bank or federal savings association.
Explanation of State Revenues: Financial Institutions Tax: The provisions in the bill could lead to an
increase in taxable income of the financial institutions. This could potentially increase the Financial
Institutions Tax (FIT) deposited in the state General Fund. The potential fiscal impact from the provision is
indeterminable.
Additional Information:
Financial Institutions Tax: FIT is assessed on apportioned adjusted gross income of a financial institution.
It applies to any business which is primarily engaged in the business of extending credit, engaged in leasing
that is the economic equivalent of extending credit, or credit card operations. Insurance companies,
international banking facilities, federally chartered credit unions, and S corporations are exempt. Local units
of government are guaranteed distributions of FIT up to certain amount, and the remaining revenue collected
is deposited in the state General Fund.
Explanation of Local Expenditures:
Explanation of Local Revenues: Financial Institutions Tax: If the bill increases the FIT, it will result in
additional revenue for local units receiving FIT distributions. Current law requires that the total amount of
FIT distributions to local entities in a fiscal year would be equal to 40% of the total FIT revenue collected
during the preceding state fiscal year. The potential fiscal impact is indeterminable.
State Agencies Affected: Department of Financial Institutions.
Local Agencies Affected:
Information Sources: 12 CFR 24, https://www.govinfo.gov/app/collection/cfr/2021/title12/chapterI
Fiscal Analyst: Randhir Jha, 317-232-9556.
SB 408 2