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 6259 NOTE PREPARED: Dec 4, 2023
BILL NUMBER: SB 98 BILL AMENDED:
SUBJECT: Dependent Child Exemptions.
FIRST AUTHOR: Sen. Zay BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
DEDICATED
FEDERAL
Summary of Legislation: The bill provides that a fetus is considered a dependent child for purposes of the
dependent child state adjusted gross income exemptions.
Effective Date: January 1, 2024 (retroactive).
Explanation of State Expenditures: Department of State Revenue (DOR): The DOR will incur additional
expenses to revise tax forms, instructions, and software to reflect the changes made by the bill. The DOR's
current level of resources should be sufficient to implement these changes.
Explanation of State Revenues: The bill would reduce state individual income tax revenue to the General
Fund by an estimated $4.6 M in FY 2025 and $4.5 M in FY 2026.
It allows a personal exemption of $1,000 and a dependent child exemption of $1,500 for a fetus that is
considered a dependent child under the bill. The bill would result in reducing state income tax revenues by
$1.83 M from the increase in personal exemptions and $2.74 M from the increase in dependent child
exemptions in FY 2025. Individual income tax is deposited in the state General Fund. The revenue impact
will decrease over time as the state income tax rate declines annually through 2027 from 3.05% in tax year
2024 to 2.90% for tax year 2027. The revenue impact will also decrease if the number of births in Indiana
continues to decline over time.
Additional Information - Current law defines a fetus as an unborn child, irrespective of gestational age or the
duration of the pregnancy. Approximately 80,000 births occurred in Indiana in 2021. About 60,000 of those
births are estimated to occur between January and September. Under the bill, the parents of these individuals
SB 98 1 could be able to claim an additional personal exemption and an additional dependent child exemption for the
previous tax year. The exemptions will be effective beginning in tax year 2024. The fiscal impact will occur
beginning in FY 2025. The number of births per year has been declining since 2007, which saw
approximately 90,000 births in the state. On average the state has seen an average of 700 fewer births in the
state each year between 2008 and 2021.
The bill requires that for a fetus to be considered a dependent child for purposes of the exemptions, a
taxpayer must submit a report from a radiologic imaging study reflecting the taxpayer's pregnancy during the
taxable year with the taxpayer's annual state tax return or returns in the manner prescribed by the DOR.
Explanation of Local Expenditures:
Explanation of Local Revenues: Because the increase in the tax exemptions will decrease taxable income,
counties imposing a Local Income Tax (LIT) would experience a decrease in revenue. Based on a weighted
average LIT rate of 1.67%, the revenue loss is estimated to be about $2.5 M in FY 2025 and in FY 2026. The
revenue loss in future years will be different depending on local tax rates and population growth.
State Agencies Affected: Department of State Revenue.
Local Agencies Affected:
Information Sources: STATS Indiana. Vital Statistics. Indiana Births 2021,
https://www.stats.indiana.edu/vitals/;
Centers for Disease Control and Prevention, https://stacks.cdc.gov/view/cdc/117899
Fiscal Analyst: Camille Tesch, 317-232-5293.
SB 98 2