LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 7709 NOTE PREPARED: Jan 13, 2025
BILL NUMBER: HB 1588 BILL AMENDED:
SUBJECT: Long Term Care Savings Accounts.
FIRST AUTHOR: Rep. Barrett BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: Primary Care Access Revolving Fund: The bill establishes the Primary Care
Access Revolving Fund for the purpose of making loans to primary care medical practices in Indiana. It
specifies the purposes for which money in the fund may be loaned. It also provides that the Indiana Finance
Authority shall administer the fund. The bill requires the Indiana Economic Development Corporation
(IEDC) to transfer $15 M to the fund from the amount appropriated to the IEDC by the General Assembly
in FY 2026.
Health Reimbursement Arrangement Tax Credit: The bill increases the employee threshold for purposes of
eligibility for the Health Reimbursement Arrangement Income Tax Credit. It increases the maximum amount
of tax credits that may be granted in a year. It also specifies the procedure for claiming the credit.
Long Term Care Savings Account Program: The bill allows an employer to establish a long term care savings
account program that allows an employee to save with favorable tax treatment for services required when
the employee's or the employee's dependents' functional capacities become chronically impaired due to
advanced age or other circumstances.
Physician Practice Ownership Tax Credit: The bill expands the Physician Practice Ownership Tax Credit
against state tax liability to practicing physicians (instead of only primary care physicians) who have an
ownership interest in a physician practice and meet other eligibility criteria. The bill requires a taxpayer
claiming the tax credit to certify that each physician with an ownership interest provides health care services
to patients. The bill provides that the total amount of tax credits awarded in a state fiscal year may not exceed
$20 M.
Effective Date: January 1, 2025 (retroactive); July 1, 2025.
Explanation of State Expenditures: Primary Care Access Revolving Fund: The bill establishes a new fund
for the purpose of making loans to primary care medical practices. The fund shall include a transfer in the
amount of $15 M from the money appropriated to the IEDC during FY 2026. The fund will also receive
repayment proceeds of loans made to primary care practices.
HB 1588 1 The bill will increase workload at the Indiana Finance Authority to administer the fund. Existing staffing and
resource levels, if currently being used to capacity, may be insufficient for full implementation. As of
December 1, 2024, the Indiana Finance Authority had four vacant positions.
Department of State Revenue (DOR): The DOR will incur additional expenses to revise tax forms,
instructions, computer programs, and to fulfill administrative requirements related to tax credits under the
bill. The DOR may also have additional workload to collect penalties for unauthorized withdrawals from
long term care savings accounts. The DOR’s current level of resources should be sufficient to implement
these changes.
The DOR and the Department of Insurance may also have additional workload to adopt rules to implement
the long term care savings account program.
Explanation of State Revenues: Physician Practice Ownership Tax Credit: The bill expands the population
of physicians who could claim the physician practice ownership tax credit to include practicing physicians
with an ownership interest in a physician practice. If additional credits are claimed as a result of the
expansion, state General Fund revenue would decrease. The state General Fund revenue impact would be
limited by the credit cap imposed by the bill. The bill caps the amount of the tax credit that can be awarded
in a state fiscal year to $20 M beginning in FY 2026. The amount of new credits awarded in any fiscal year
would equal $20 M minus any credit amounts carried forward from prior years.
Eligible physicians are eligible for a credit of $20,000 for a tax year in the initial year the medical practice
opens and for the following two years. If the credit exceeds the taxpayer’s state income tax liability for the
taxable year, the taxpayer may carry the excess credit over for a period to not exceed ten years. The tax credit
may be applied to AGI Tax liabilities. To claim the credit, a physician’s ownership interest must be at least
5% if the practice has 10 or fewer owners, or at least 50% if the practice has more than 10 owners.
The physician practice ownership tax credit, as it passed in HEA 1004-2023, is first available to be claimed
in tax year 2024.
Health Reimbursement Arrangement Tax Credit: The bill expands the nonrefundable tax credit for employers
who adopt health reimbursement arrangements instead of traditional employer health insurance plans. The
bill could reduce state General Fund revenue by an estimated $5 M per year beginning in FY 2026. The tax
credit will reduce the tax liability for taxpayers starting in tax year 2025.
The bill allows employers with fewer than 75 employees to claim the credit for two years. Current law
applies to employers with fewer than 50 employees. The bill also increases the cap on the amount of tax
credits that may be awarded in a year from $10 M to $15 M.
The credit amount is equal to $400 per covered employee in a health reimbursement arrangement in the first
year and $200 per covered employee in the second year. The tax credit may be applied to Adjusted Gross
Income (AGI) Tax, Financial Institutions Tax, Insurance Premiums Tax, and Nonprofit Agricultural
Organization Health Coverage Tax liabilities.
The health reimbursement arrangement income tax credit, as passed in HEA 1004-2023, will first be
available for taxpayers to claim in tax year 2024.
Long Term Care Savings Accounts: The bill allows employers to establish long term care savings accounts
HB 1588 2 for their employees under favorable tax treatment beginning in tax year 2026. Deposits into long term care
savings accounts, qualified withdrawals, and interest earned on the accounts will not be subject to state AGI
tax. This would reduce state revenues by an indeterminable amount beginning in FY 2027.
Account holders who make unauthorized withdrawals from their accounts for purposes other than long term
care expenses would pay a penalty of 10% of the amount of the withdrawal. They would also be required to
pay state income tax on the amount of the withdrawal and interest earned on the account. Penalties would
be withheld by account administrators and paid to DOR. Penalty collections will be deposited in the Local
Public Health Fund.
Explanation of Local Expenditures:
Explanation of Local Revenues: Primary Care Access Revolving Fund: Local hospitals providing primary
health care services could receive loans under the fund for the purposes outlined in the bill, including capital
improvements and equipment purchases. The loan would be subject to the terms and a repayment schedule
as determined by the IFA.
Long Term Care Savings Accounts: Exempting deposits, withdrawals, and interest earned on long term care
saving accounts under the bill may decrease taxable income. Counties imposing Local Income Taxes (LIT)
may experience revenue loss. The fiscal impact will begin in FY 2027 and continue in future years.
State Agencies Affected: Department of State Revenue, Indiana Finance Authority, Indiana Economic
Development Corporation.
Local Agencies Affected: Local hospitals providing primary health care services.
Information Sources: State Personnel Department, Staffing Data Table.
Fiscal Analyst: Camille Tesch, 317-232-5293.
HB 1588 3