Introduced Version
HOUSE BILL No. 1345
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DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3-2-1; IC 6-3.6-2-2.
Synopsis: Income tax replacement. Eliminates the state adjusted gross
income tax by reducing the rate to zero. Provides that the reduction in
revenue resulting from the elimination of the state adjusted gross
income tax must be offset by adjustments to the state gross retail tax.
Provides that in calculating the local income tax (LIT), which is
imposed based on a local taxpayer's state adjusted gross income, the
calculation of a taxpayer's state adjusted gross income for LIT purposes
shall be calculated under the adjusted gross income tax provisions as
if those provisions, and the most recent adjusted gross income tax rate
before its elimination, were still in effect.
Effective: July 1, 2025.
Borders
January 13, 2025, read first time and referred to Committee on Ways and Means.
2025 IN 1345—LS 6984/DI 134 Introduced
First Regular Session of the 124th General Assembly (2025)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
Constitution) is being amended, the text of the existing provision will appear in this style type,
additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional
provision adopted), the text of the new provision will appear in this style type. Also, the
word NEW will appear in that style type in the introductory clause of each SECTION that adds
a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
between statutes enacted by the 2024 Regular Session of the General Assembly.
HOUSE BILL No. 1345
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Be it enacted by the General Assembly of the State of Indiana:
1 SECTION 1. IC 6-3-2-1, AS AMENDED BY P.L.201-2023,
2 SECTION 95, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
3 JULY 1, 2025]: Sec. 1. (a) Each taxable year, a tax at the following rate
4 of adjusted gross income is imposed upon the adjusted gross income of
5 every resident person, and on that part of the adjusted gross income
6 derived from sources within Indiana of every nonresident person:
7 (1) For taxable years beginning before January 1, 2015, three and
8 four-tenths percent (3.4%).
9 (2) For taxable years beginning after December 31, 2014, and
10 before January 1, 2017, three and three-tenths percent (3.3%).
11 (3) For taxable years beginning after December 31, 2016, and
12 before January 1, 2023, three and twenty-three hundredths percent
13 (3.23%).
14 (4) For taxable years beginning after December 31, 2022, and
15 before January 1, 2024, three and fifteen hundredths percent
16 (3.15%).
17 (5) For taxable years beginning after December 31, 2023, and
2025 IN 1345—LS 6984/DI 134 2
1 before January 1, 2025, three and five-hundredths percent
2 (3.05%).
3 (6) For taxable years beginning after December 31, 2024, and
4 before January 1, 2026, three percent (3%).
5 (7) For taxable years beginning after December 31, 2025, and
6 before January 1, 2027, two and ninety-five hundredths percent
7 (2.95%). zero percent (0%).
8 (8) For taxable years beginning after December 31, 2026, two and
9 nine-tenths percent (2.9%).
10 (b) Except as provided in section 1.5 of this chapter (before its
11 expiration), each taxable year, a tax at the following rate of adjusted
12 gross income is imposed on that part of the adjusted gross income
13 derived from sources within Indiana of every corporation:
14 (1) Before July 1, 2012, eight and five-tenths percent (8.5%).
15 (2) After June 30, 2012, and before July 1, 2013, eight percent
16 (8.0%).
17 (3) After June 30, 2013, and before July 1, 2014, seven and
18 five-tenths percent (7.5%).
19 (4) After June 30, 2014, and before July 1, 2015, seven percent
20 (7.0%).
21 (5) After June 30, 2015, and before July 1, 2016, six and
22 five-tenths percent (6.5%).
23 (6) After June 30, 2016, and before July 1, 2017, six and
24 twenty-five hundredths percent (6.25%).
25 (7) After June 30, 2017, and before July 1, 2018, six percent
26 (6.0%).
27 (8) After June 30, 2018, and before July 1, 2019, five and
28 seventy-five hundredths percent (5.75%).
29 (9) After June 30, 2019, and before July 1, 2020, five and
30 five-tenths percent (5.5%).
31 (10) After June 30, 2020, and before July 1, 2021, five and
32 twenty-five hundredths percent (5.25%).
33 (11) After June 30, 2021, and before July 1, 2026, four and
34 nine-tenths percent (4.9%).
35 (12) After June 30, 2026, zero percent (0%).
36 (c) If for any taxable year a taxpayer is subject to different tax rates
37 under subsection (b), the taxpayer's tax rate for that taxable year is the
38 rate determined in the last STEP of the following STEPS:
39 STEP ONE: Multiply the number of days in the taxpayer's taxable
40 year that precede the day the rate changed by the rate in effect
41 before the rate change.
42 STEP TWO: Multiply the number of days in the taxpayer's
2025 IN 1345—LS 6984/DI 134 3
1 taxable year that follow the day before the rate changed by the
2 rate in effect after the rate change.
3 STEP THREE: Divide the sum of the amounts determined under
4 STEPS ONE and TWO by the number of days in the taxpayer's
5 tax period.
6 However, the rate determined under this subsection shall be rounded
7 to the nearest one-hundredth of one percent (0.01%).
8 (d) The reduction in revenue resulting from the elimination of
9 the state income tax under subsection (a)(7) and subsection (b)(12)
10 must be offset by adjustments to the state gross retail tax under
11 IC 6-2.5-2.
12 SECTION 2. IC 6-3.6-2-2, AS AMENDED BY P.L.239-2017,
13 SECTION 14, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
14 JULY 1, 2025]: Sec. 2. "Adjusted gross income" has the meaning set
15 forth in IC 6-3-1-3.5 and shall be calculated under IC 6-3 as if the
16 rate under IC 6-3-2-1(a)(6) were still in effect. However:
17 (1) except as provided in subdivision (3), in the case of a local
18 taxpayer who is not treated as a resident local taxpayer of a
19 county, the term includes only adjusted gross income derived
20 from the taxpayer's principal place of business or employment;
21 (2) in the case of a resident local taxpayer of Perry County, the
22 term does not include adjusted gross income described in
23 IC 6-3.6-8-7; and
24 (3) in the case of a local taxpayer described in section 13(3) of
25 this chapter, the term includes only that part of the individual's
26 total income that:
27 (A) is apportioned to Indiana under IC 6-3-2-2.7 or
28 IC 6-3-2-3.2; and
29 (B) is paid to the individual as compensation for services
30 rendered in the county as a team member or race team
31 member.
2025 IN 1345—LS 6984/DI 134