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 6710 NOTE PREPARED: Jan 10, 2024
BILL NUMBER: HB 1388 BILL AMENDED:
SUBJECT: Use of Digital Assets.
FIRST AUTHOR: Rep. VanNatter BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: The bill provides an income tax deduction for short term or long term capital gain
that is attributable to the sale or exchange of digital assets in a transaction and that is included in federal
adjusted gross income, in an amount not to exceed $200 per transaction for the 2024 taxable year, and
adjusted annually for inflation each taxable year thereafter.
It provides that a county or municipality may not:
(1) impose a tax that is assessed based on use of a digital asset as payment in a transaction; or
(2) impose a tax on transactions at a different rate based on the use of a digital asset for payment in the
transaction.
It prohibits the Indiana Utility Regulatory Commission (IURC) from approving a rate schedule for electricity
supplied by an electricity supplier to digital asset mining businesses that is unreasonable or unjustly
discriminatory as compared to the rate schedule approved by the commission for electricity supplied by the
electricity supplier to industrial customers.
It provides that a person is not required to be licensed as a securities broker-dealer solely because the person
provides, or offers to provide, specified services with respect to transactions involving digital assets. It
provides that specified operations conducted with respect to maintenance of a blockchain do not constitute
money transmission for purposes of statutes regarding licensure of money transmitters.
It provides immunity from civil liability for a person that performs specified actions with respect to
validation of a transaction on a blockchain network.
HB 1388 1 It prohibits a county, municipality, or township from adopting or enforcing an ordinance that would have the
effect of prohibiting, restricting, or impairing an individual's ability to: (1) use digital assets to purchase legal
goods and services; or (2) use a hardware wallet or self-hosted wallet to store the individual's digital assets.
It provides that use of a property for digital asset mining is a permitted industrial use under any applicable
zoning ordinance of a unit and may not be disallowed by a zoning ordinance in a zoning district that permits
industrial use. It prohibits a unit from applying the unit's zoning ordinances in specified ways to regulate
digital asset mining. It makes conforming amendments and technical corrections.
Effective Date: January 1, 2024 (retroactive); July 1, 2024.
Explanation of State Expenditures: Department of State Revenue (DOR): The DOR will incur additional
expenses to revise tax forms, instructions, and computer programs to enact the provisions in the bill. The
DOR’s current level of resources should be sufficient to implement these changes.
Indiana Utility Regulatory Commission: The bill sets guidelines for the IURC for approving a rate schedule
for electricity supplied by an electricity supplier to digital asset mining businesses.
Explanation of State Revenues: Deduction of Capital Gains on Digital Assets: The bill defines a digital
asset as: (1) virtual currency; (2) cryptocurrencies; (3) natively electronic assets, including stablecoins and
nonfungible tokens; and (4) other digital only assets that confer economic, proprietary, or access rights or
powers. Starting tax year 2024, the bill allows a taxpayer to deduct the capital gains on digital asset
transactions. Federal Adjusted Gross Income (FAGI) is the starting point of computing Indiana individual
income tax and Federal Taxable Income Before Net Operating Loss and Special Deduction is the starting
point for computing Indiana corporate income tax. Both, FAGI and federal taxable income include income
from capital gains on transactions conducted by taxpayers. This income is currently taxable at the federal
and state level. The bill allows a deduction for a portion of the capital gains on digital asset transactions. It
provides a method using consumer price index to calculate the deductible portion of the capital gains after
tax year 2024.
Between 4% to 5% of income of Indiana taxpayers is in capital gains. Most capital gains occur from sale of
corporate stocks, mutual funds, businesses, residential rental property and other assets. Currently digital
assets form a very small share of the total capital gains, yet the deduction could have significant but
indeterminable impact beginning FY 2025.
Licensing: The bill states that a service provider involving digital assets is not required to be licensed as a
securities broker-dealer. This could reduce any potential licensing fee received by the Securities Division
of the Secretary of State’s Office from entities transacting in digital assets. The fee is deposited in state
General Fund and some state dedicated funds. The bill states that certain specific operations with respect to
blockchain do not constitute money transmission. This could remove the licensing requirement for certain
entities as money transmitters and potentially reduce money transmitters license fee revenue collected by the
Department of Financial Institutions. The fee is deposited in the Financial Institution Fund.
Civil Immunity: The bill provides immunity from civil liability for a person validating transactions on a
blockchain network. This provision may reduce civil actions filed in the courts. The total revenue per case
would range between $100 and $122. The amount deposited will vary depending on whether the case is filed
in a court of record or a municipal court. The following linked document describes the fees and distribution
of the revenue: Court fees imposed in civil, probate, and small claims cases.
HB 1388 2 Explanation of Local Expenditures: Civil Immunity: This provision could reduce local expenditures by
avoiding the costs for litigation and, if any, civil fines and court fees.
Local Ordinances: The provision in the bill prohibiting ordinances and proving guidelines for zoning
ordinances will not have any fiscal impact.
Explanation of Local Revenues: Deduction of Capital Gains on Digital Assets: This tax deduction will
decrease taxable income of individual taxpayers. Counties imposing a local income tax (LIT) would
experience a decrease in revenue. The potential fiscal impact is currently indeterminable.
Prohibition of Tax on Digital Assets: The bill provides that local units may not adopt a tax or a separate tax
rate based on digital asset as payment in a transaction. This could impact future tax policy by local units
related to the use of digital assets as payment. The amount of any potential fiscal impact is currently
indeterminable.
Civil Immunity: To the extent this bill reduces potential civil filings, revenue from court fees may be
impacted. However, reductions in revenue from court fees are expected to be minimal. [If the case is filed
in a court of record, the county will receive $32 and qualifying municipalities will receive a share of $3. If
the case is filed in a municipal court, the county receives $20, and the municipality will receive $37. The
following linked document describes the fees and distribution of the revenue: Court fees imposed in civil,
probate, and small claims cases.]
State Agencies Affected: Department of State Revenue; Secretary of State; Indiana Utility Regulatory
Commission; Department of Financial Institutions.
Local Agencies Affected: All local units.
Information Sources: SOI Tax Stats - Sales of Capital Assets Reported on Individual Tax Returns,
https://www.irs.gov/statistics/soi-tax-stats-sales-of-capital-assets-reported-on-individual-tax-returns;
SOI Tax Stats - Historic Table 2, https://www.irs.gov/statistics/soi-tax-stats-historic-table-2-2015-2019
Fiscal Analyst: Randhir Jha, 317-232-9556.
HB 1388 3