*SB0316.1*
February 5, 2025
SENATE BILL No. 316
_____
DIGEST OF SB 316 (Updated February 4, 2025 1:09 pm - DI 129)
Citations Affected: IC 6-3.
Synopsis: Investment partnership tax. Provides certain sourcing rules
for the adjusted gross income of an investment partnership. Defines
"investment partnership".
Effective: January 1, 2026.
Baldwin, Holdman
January 13, 2025, read first time and referred to Committee on Tax and Fiscal Policy.
February 4, 2025, amended, reported favorably — Do Pass.
SB 316—LS 7436/DI 120 February 5, 2025
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.
SENATE BILL No. 316
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 SECTION TO READ AS FOLLOWS [EFFECTIVE
3 JANUARY 1, 2026]: Sec. 41. The term "investment partnership"
4 means a partnership for federal income tax purposes that meets
5 the following requirements:
6 (1) Not less than ninety percent (90%) of the partnership's
7 cost of its total assets consists of qualifying investment
8 securities, deposits at banks or other financial institutions,
9 and office space and equipment reasonably necessary to carry
10 on its activities as an investment partnership.
11 (2) Not less than ninety percent (90%) of the partnership's
12 gross income consists of interest, dividends, gains from the
13 sale or exchange of qualifying investment securities, and the
14 distributive share of partnership income from lower-tier
15 partnership interests meeting the definition of qualifying
16 investment security. For purposes of this subdivision, gross
17 income does not include income from partnerships that are
SB 316—LS 7436/DI 120 2
1 operating at a federal taxable loss. For purposes of this
2 subdivision, a partnership shall be treated as meeting the
3 percentage test set forth in this subdivision if the partnership
4 met the percentage test in three (3) of the five (5) most recent
5 taxable years, including the current taxable year.
6 (3) The partnership is not a dealer in qualifying investment
7 securities.
8 SECTION 2. IC 6-3-1-42 IS ADDED TO THE INDIANA CODE
9 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
10 JANUARY 1, 2026]: Sec. 42. The term "qualifying investment
11 securities" means the following:
12 (1) Common stock, including preferred or debt securities
13 convertible into common stock, and preferred stock.
14 (2) Bonds, debentures, and other debt securities.
15 (3) Foreign and domestic currency deposits secured by
16 federal, state, or local governmental agencies.
17 (4) Mortgage or asset-backed securities secured by federal,
18 state, or local governmental agencies.
19 (5) Repurchase agreements and loan participations.
20 (6) Foreign currency exchange contracts and forward and
21 futures contracts on foreign currencies.
22 (7) Stock and bond index securities and futures contracts and
23 other similar financial securities and futures contracts on
24 those securities.
25 (8) Options for the purchase or sale of any of the securities,
26 currencies, contracts, or financial instruments described in
27 subdivisions (1) through (7).
28 (9) Regulated futures contracts.
29 (10) Commodities (not described in Section 1221(a)(1) of the
30 Internal Revenue Code) or futures, forwards, and options
31 with respect to such commodities, provided, however, that any
32 item of a physical commodity to which title is actually
33 acquired in the partnership's capacity as a dealer in such
34 commodity shall not be a qualifying investment security.
35 (11) Derivatives.
36 (12) A partnership interest in another partnership that is an
37 investment partnership.
38 (13) A partnership interest that, in the hands of the
39 partnership, qualifies as a security within the meaning of 15
40 U.S.C. 77b(a)(1).
41 SECTION 3. IC 6-3-1-43 IS ADDED TO THE INDIANA CODE
42 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
SB 316—LS 7436/DI 120 3
1 JANUARY 1, 2026]: Sec. 43. The term "qualifying investment
2 partnership income" means the adjusted gross income from
3 qualifying investment securities, excluding any income or loss from
4 an asset described in section 42(13) of this chapter.
5 SECTION 4. IC 6-3-2-3.3 IS ADDED TO THE INDIANA CODE
6 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
7 JANUARY 1, 2026]: Sec. 3.3. (a) As used in this section,
8 "nonresident partner" has the meaning set forth in IC 6-3-4-12(n).
9 (b) For all taxable years beginning after December 31, 2025, in
10 the case of an investment partnership:
11 (1) any qualifying investment partnership income that is
12 distributable to a nonresident partner shall be allocated to the
13 partner's state of residence (in the case of an individual,
14 estate, or trust) or commercial domicile (in the case of any
15 corporation or other entity) for purposes of section 2 of this
16 chapter; and
17 (2) any qualifying investment partnership income that is
18 distributable to a nonresident partner shall be treated as
19 business income and apportioned as if such income had been
20 received directly by the partner if such income is from
21 investment activity:
22 (A) that is directly or integrally related to any other
23 business activity conducted in this state by the nonresident
24 partner (or another corporation or entity that is unitary
25 with the partner);
26 (B) that serves an operational function to any other
27 business activity of the nonresident partner (or another
28 corporation or entity that is unitary with the partner); or
29 (C) where assets of the investment partnership were
30 acquired with working capital from a trade or business
31 activity conducted in this state in which the nonresident
32 partner (or another corporation or entity that is unitary
33 with the partner) owns an interest.
34 (c) For purposes of this section, the following apply:
35 (1) If an entity is permitted to allocate qualifying investment
36 partnership income under subsection (b)(1), the entity shall
37 exclude the receipts derived from the investment partnership
38 and attributable to the investment partnership income from
39 the denominator of the sales factor in section 2(e) of this
40 chapter.
41 (2) If an entity is required to treat qualifying investment
42 partnership income as apportionable income, the entity's
SB 316—LS 7436/DI 120 4
1 share of receipts from the investment partnership and
2 attributable to the investment partnership shall be included
3 in the denominator of the sales factor and attributed to the
4 entity's state of domicile for purposes of section 2(e) of this
5 chapter.
6 (3) For purposes of subsection (b)(2), a corporation or other
7 entity shall be treated as unitary with the partner if the
8 partner and the corporation or other entity would be required
9 to be included in a combined income tax return under this
10 article, determined as if all relevant entities are subject to tax
11 under this article as corporations and are not corporations
12 described in section 2.4 of this chapter. However, in the case
13 of a partner and a corporate partnership, a unitary
14 relationship shall be determined without regard to the
15 corporate partner's percentage of ownership of the
16 partnership.
17 (4) Nothing in this section shall affect the apportionment and
18 allocation of income and receipts derived from partnerships
19 other than qualified investment partnership income from
20 investment partnerships.
21 (5) If a nonresident person, corporation, or other entity
22 reasonably determines that it received qualified investment
23 partnership income from an investment partnership and the
24 partnership is determined to not be an investment
25 partnership, the person, corporation, or entity shall be
26 relieved of any penalty under IC 6-3-4-4.1, IC 6-5.5-7-1, or
27 IC 6-8.1-10-2.1(b) resulting from the underpayment.
SB 316—LS 7436/DI 120 5
COMMITTEE REPORT
Mr. President: The Senate Committee on Tax and Fiscal Policy, to
which was referred Senate Bill No. 316, has had the same under
consideration and begs leave to report the same back to the Senate with
the recommendation that said bill be AMENDED as follows:
Page 2, line 1, delete "loss." and insert "loss. For purposes of this
subdivision, a partnership shall be treated as meeting the
percentage test set forth in this subdivision if the partnership met
the percentage test in three (3) of the five (5) most recent taxable
years, including the current taxable year.".
Page 2, line 7, delete "includes" and insert "means".
Page 3, delete lines 1 through 4, begin a new paragraph and insert:
"SECTION 4. IC 6-3-2-3.3 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2026]: Sec. 3.3. (a) As used in this section,
"nonresident partner" has the meaning set forth in IC 6-3-4-12(n).
(b) For all taxable years beginning after December 31, 2025, in
the case of an investment partnership:".
Page 3, line 7, delete "individual)" and insert "individual, estate, or
trust)".
Page 3, line 8, delete "other person);" and insert "corporation or
other entity) for purposes of section 2 of this chapter;".
Page 3, line 16, delete "(or a member filing a combined return in
this state" and insert "(or another corporation or entity that is
unitary with the partner);".
Page 3, delete line 17.
Page 3, line 19, delete "(or a member" and insert "(or another
corporation or entity that is unitary with the partner); or".
Page 3, delete lines 20 through 21.
Page 3, line 25, delete "(or a member filing a combined return in
this state" and insert "(or another corporation or entity that is
unitary with the partner)".
Page 3, line 26, delete "that includes the partner)".
Page 3, after line 26, begin a new paragraph and insert:
"(c) For purposes of this section, the following apply:
(1) If an entity is permitted to allocate qualifying investment
partnership income under subsection (b)(1), the entity shall
exclude the receipts derived from the investment partnership
and attributable to the investment partnership income from
the denominator of the sales factor in section 2(e) of this
chapter.
SB 316—LS 7436/DI 120 6
(2) If an entity is required to treat qualifying investment
partnership income as apportionable income, the entity's
share of receipts from the investment partnership and
attributable to the investment partnership shall be included
in the denominator of the sales factor and attributed to the
entity's state of domicile for purposes of section 2(e) of this
chapter.
(3) For purposes of subsection (b)(2), a corporation or other
entity shall be treated as unitary with the partner if the
partner and the corporation or other entity would be required
to be included in a combined income tax return under this
article, determined as if all relevant entities are subject to tax
under this article as corporations and are not corporations
described in section 2.4 of this chapter. However, in the case
of a partner and a corporate partnership, a unitary
relationship shall be determined without regard to the
corporate partner's percentage of ownership of the
partnership.
(4) Nothing in this section shall affect the apportionment and
allocation of income and receipts derived from partnerships
other than qualified investment partnership income from
investment partnerships.
(5) If a nonresident person, corporation, or other entity
reasonably determines that it received qualified investment
partnership income from an investment partnership and the
partnership is determined to not be an investment
partnership, the person, corporation, or entity shall be
relieved of any penalty under IC 6-3-4-4.1, IC 6-5.5-7-1, or
IC 6-8.1-10-2.1(b) resulting from the underpayment.".
Renumber all SECTIONS consecutively.
and when so amended that said bill do pass.
(Reference is to SB 316 as introduced.)
HOLDMAN, Chairperson
Committee Vote: Yeas 12, Nays 0.
SB 316—LS 7436/DI 120