Introduced Version
HOUSE BILL No. 1396
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3.1-41.
Synopsis: Tax credit for employer guard and reserve expenses.
Establishes a tax credit for a taxpayer that employs a member of a
reserve component of the armed forces of the United States or the
Indiana National Guard. Requires the taxpayer to submit certain
information to the department of state revenue to claim the credit.
Effective: January 1, 2025 (retroactive).
Genda
January 13, 2025, read first time and referred to Committee on Ways and Means.
2025 IN 1396—LS 7641/DI 116 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. 1396
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 6-3.1-41 IS ADDED TO THE INDIANA CODE
2 AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
3 JANUARY 1, 2025 (RETROACTIVE)]:
4 Chapter 41. Employment of Individuals in the Military
5 Sec. 1. As used in this chapter, "pass through entity" means:
6 (1) a corporation that is exempt from the adjusted gross
7 income tax under IC 6-3-2-2.8(2);
8 (2) a partnership;
9 (3) a trust;
10 (4) an estate;
11 (5) a limited liability company; or
12 (6) a limited liability partnership.
13 Sec. 2. As used in this chapter, "qualified individual" means an
14 individual who resides in Indiana and serves as a member of:
15 (1) a reserve component of the armed forces of the United
16 States; or
17 (2) the Indiana National Guard.
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1 Sec. 3. As used in this chapter, "state tax liability" means the
2 taxpayer's total tax liability that is incurred under:
3 (1) IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);
4 (2) IC 27-1-18-2 (the insurance premiums tax) or IC 6-8-15
5 (the nonprofit agricultural organization health coverage tax);
6 and
7 (3) IC 6-5.5 (the financial institutions tax);
8 as computed after the application of the credits that, under
9 IC 6-3.1-1-2, are to be applied before the credit provided by this
10 chapter.
11 Sec. 4. (a) Subject to subsection (c), a taxpayer who employs a
12 qualified individual during a taxable year is entitled to a credit
13 against the taxpayer's state tax liability for the taxable year based
14 on the time in which the qualified individual is:
15 (1) employed by the taxpayer; and
16 (2) training, drilling, or otherwise on active duty orders with
17 a reserve component of the armed forces of the United States
18 or the Indiana National Guard during the qualified
19 individual's normal working hours;
20 during the taxable year.
21 (b) The amount of the tax credit with respect to a particular
22 qualified individual is the amount determined in the last STEP of
23 the following STEPS:
24 STEP ONE: Determine the number of hours that the qualified
25 individual is training, drilling, or otherwise on active duty
26 orders with a reserve component of the armed forces of the
27 United States or the Indiana National Guard during the
28 qualified individual's normal working hours during the
29 taxable year.
30 STEP TWO: Multiply the STEP ONE result by the qualified
31 individual's normal hourly wage.
32 STEP THREE: Multiply the STEP TWO result by five-tenths
33 (0.5).
34 (c) A taxpayer may not claim the credit under this chapter for
35 a qualified individual who uses any type of paid leave during the
36 time for which the qualified individual is training, drilling, or
37 otherwise on active duty orders with a reserve component of the
38 armed forces of the United States or the Indiana National Guard
39 during the taxable year.
40 Sec. 5. In order to receive the credit provided under this
41 chapter, a taxpayer must claim the credit on the taxpayer's annual
42 state tax return in the manner prescribed by the department. The
2025 IN 1396—LS 7641/DI 116 3
1 taxpayer shall submit to the department any information that the
2 department determines is necessary for the calculation of the
3 credit.
4 Sec. 6. (a) If the amount determined under section 4(b) of this
5 chapter for a taxable year exceeds the taxpayer's state tax liability
6 for that taxable year, the taxpayer may carry the excess over to the
7 immediately following taxable years. The amount of the credit
8 carryover from a taxable year shall be reduced to the extent that
9 the carryover is used by the taxpayer to obtain a credit under this
10 chapter for any subsequent taxable year.
11 (b) A taxpayer is not entitled to any carryback or refund of any
12 unused credit.
13 (c) A taxpayer may not assign any part of a credit to which the
14 taxpayer is entitled under this chapter.
15 Sec. 7. If a pass through entity is entitled to a credit under this
16 chapter but does not have state tax liability against which the tax
17 credit may be applied, an individual who is a shareholder, partner,
18 beneficiary, or member of the pass through entity is entitled to a
19 tax credit equal to:
20 (1) the tax credit determined for the pass through entity for
21 the taxable year; multiplied by
22 (2) the percentage of the pass through entity's distributive
23 income to which the shareholder, partner, beneficiary, or
24 member is entitled.
25 The credit provided under this section is in addition to a tax credit
26 to which a shareholder, partner, beneficiary, or member of a pass
27 through entity is entitled. However, a pass through entity and an
28 individual who is a shareholder, partner, beneficiary, or member
29 of a pass through entity may not claim more than one (1) credit.
30 SECTION 2. [EFFECTIVE JANUARY 1, 2025 (RETROACTIVE)]
31 (a) IC 6-3.1-41, as added by this act, applies to taxable years
32 beginning after December 31, 2024.
33 (b) This SECTION expires July 1, 2028.
34 SECTION 3. An emergency is declared for this act.
2025 IN 1396—LS 7641/DI 116