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Indiana Senate Bill SB0316

Indiana 2025 Regular Session

Indiana Senate Bill SB0316 Compare Versions

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1-*SB0316.1*
2-February 5, 2025
1+
2+Introduced Version
33 SENATE BILL No. 316
44 _____
5-DIGEST OF SB 316 (Updated February 4, 2025 1:09 pm - DI 129)
5+DIGEST OF INTRODUCED BILL
66 Citations Affected: IC 6-3.
77 Synopsis: Investment partnership tax. Provides certain sourcing rules
88 for the adjusted gross income of an investment partnership. Defines
99 "investment partnership".
1010 Effective: January 1, 2026.
11-Baldwin, Holdman
11+Baldwin
1212 January 13, 2025, read first time and referred to Committee on Tax and Fiscal Policy.
13-February 4, 2025, amended, reported favorably — Do Pass.
14-SB 316—LS 7436/DI 120 February 5, 2025
13+2025 IN 316—LS 7436/DI 120 Introduced
1514 First Regular Session of the 124th General Assembly (2025)
1615 PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
1716 Constitution) is being amended, the text of the existing provision will appear in this style type,
1817 additions will appear in this style type, and deletions will appear in this style type.
1918 Additions: Whenever a new statutory provision is being enacted (or a new constitutional
2019 provision adopted), the text of the new provision will appear in this style type. Also, the
2120 word NEW will appear in that style type in the introductory clause of each SECTION that adds
2221 a new provision to the Indiana Code or the Indiana Constitution.
2322 Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
2423 between statutes enacted by the 2024 Regular Session of the General Assembly.
2524 SENATE BILL No. 316
2625 A BILL FOR AN ACT to amend the Indiana Code concerning
2726 taxation.
2827 Be it enacted by the General Assembly of the State of Indiana:
2928 1 SECTION 1. IC 6-3-1-41 IS ADDED TO THE INDIANA CODE
3029 2 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
3130 3 JANUARY 1, 2026]: Sec. 41. The term "investment partnership"
3231 4 means a partnership for federal income tax purposes that meets
3332 5 the following requirements:
3433 6 (1) Not less than ninety percent (90%) of the partnership's
3534 7 cost of its total assets consists of qualifying investment
3635 8 securities, deposits at banks or other financial institutions,
3736 9 and office space and equipment reasonably necessary to carry
3837 10 on its activities as an investment partnership.
3938 11 (2) Not less than ninety percent (90%) of the partnership's
4039 12 gross income consists of interest, dividends, gains from the
4140 13 sale or exchange of qualifying investment securities, and the
4241 14 distributive share of partnership income from lower-tier
4342 15 partnership interests meeting the definition of qualifying
4443 16 investment security. For purposes of this subdivision, gross
4544 17 income does not include income from partnerships that are
46-SB 316—LS 7436/DI 120 2
47-1 operating at a federal taxable loss. For purposes of this
48-2 subdivision, a partnership shall be treated as meeting the
49-3 percentage test set forth in this subdivision if the partnership
50-4 met the percentage test in three (3) of the five (5) most recent
51-5 taxable years, including the current taxable year.
52-6 (3) The partnership is not a dealer in qualifying investment
53-7 securities.
54-8 SECTION 2. IC 6-3-1-42 IS ADDED TO THE INDIANA CODE
55-9 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
56-10 JANUARY 1, 2026]: Sec. 42. The term "qualifying investment
57-11 securities" means the following:
58-12 (1) Common stock, including preferred or debt securities
59-13 convertible into common stock, and preferred stock.
60-14 (2) Bonds, debentures, and other debt securities.
61-15 (3) Foreign and domestic currency deposits secured by
62-16 federal, state, or local governmental agencies.
63-17 (4) Mortgage or asset-backed securities secured by federal,
64-18 state, or local governmental agencies.
65-19 (5) Repurchase agreements and loan participations.
66-20 (6) Foreign currency exchange contracts and forward and
67-21 futures contracts on foreign currencies.
68-22 (7) Stock and bond index securities and futures contracts and
69-23 other similar financial securities and futures contracts on
70-24 those securities.
71-25 (8) Options for the purchase or sale of any of the securities,
72-26 currencies, contracts, or financial instruments described in
73-27 subdivisions (1) through (7).
74-28 (9) Regulated futures contracts.
75-29 (10) Commodities (not described in Section 1221(a)(1) of the
76-30 Internal Revenue Code) or futures, forwards, and options
77-31 with respect to such commodities, provided, however, that any
78-32 item of a physical commodity to which title is actually
79-33 acquired in the partnership's capacity as a dealer in such
80-34 commodity shall not be a qualifying investment security.
81-35 (11) Derivatives.
82-36 (12) A partnership interest in another partnership that is an
83-37 investment partnership.
84-38 (13) A partnership interest that, in the hands of the
85-39 partnership, qualifies as a security within the meaning of 15
86-40 U.S.C. 77b(a)(1).
87-41 SECTION 3. IC 6-3-1-43 IS ADDED TO THE INDIANA CODE
88-42 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
89-SB 316—LS 7436/DI 120 3
90-1 JANUARY 1, 2026]: Sec. 43. The term "qualifying investment
91-2 partnership income" means the adjusted gross income from
92-3 qualifying investment securities, excluding any income or loss from
93-4 an asset described in section 42(13) of this chapter.
94-5 SECTION 4. IC 6-3-2-3.3 IS ADDED TO THE INDIANA CODE
95-6 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
96-7 JANUARY 1, 2026]: Sec. 3.3. (a) As used in this section,
97-8 "nonresident partner" has the meaning set forth in IC 6-3-4-12(n).
98-9 (b) For all taxable years beginning after December 31, 2025, in
99-10 the case of an investment partnership:
100-11 (1) any qualifying investment partnership income that is
101-12 distributable to a nonresident partner shall be allocated to the
102-13 partner's state of residence (in the case of an individual,
103-14 estate, or trust) or commercial domicile (in the case of any
104-15 corporation or other entity) for purposes of section 2 of this
105-16 chapter; and
106-17 (2) any qualifying investment partnership income that is
107-18 distributable to a nonresident partner shall be treated as
108-19 business income and apportioned as if such income had been
109-20 received directly by the partner if such income is from
110-21 investment activity:
111-22 (A) that is directly or integrally related to any other
112-23 business activity conducted in this state by the nonresident
113-24 partner (or another corporation or entity that is unitary
114-25 with the partner);
115-26 (B) that serves an operational function to any other
116-27 business activity of the nonresident partner (or another
117-28 corporation or entity that is unitary with the partner); or
118-29 (C) where assets of the investment partnership were
119-30 acquired with working capital from a trade or business
120-31 activity conducted in this state in which the nonresident
121-32 partner (or another corporation or entity that is unitary
122-33 with the partner) owns an interest.
123-34 (c) For purposes of this section, the following apply:
124-35 (1) If an entity is permitted to allocate qualifying investment
125-36 partnership income under subsection (b)(1), the entity shall
126-37 exclude the receipts derived from the investment partnership
127-38 and attributable to the investment partnership income from
128-39 the denominator of the sales factor in section 2(e) of this
129-40 chapter.
130-41 (2) If an entity is required to treat qualifying investment
131-42 partnership income as apportionable income, the entity's
132-SB 316—LS 7436/DI 120 4
133-1 share of receipts from the investment partnership and
134-2 attributable to the investment partnership shall be included
135-3 in the denominator of the sales factor and attributed to the
136-4 entity's state of domicile for purposes of section 2(e) of this
137-5 chapter.
138-6 (3) For purposes of subsection (b)(2), a corporation or other
139-7 entity shall be treated as unitary with the partner if the
140-8 partner and the corporation or other entity would be required
141-9 to be included in a combined income tax return under this
142-10 article, determined as if all relevant entities are subject to tax
143-11 under this article as corporations and are not corporations
144-12 described in section 2.4 of this chapter. However, in the case
145-13 of a partner and a corporate partnership, a unitary
146-14 relationship shall be determined without regard to the
147-15 corporate partner's percentage of ownership of the
148-16 partnership.
149-17 (4) Nothing in this section shall affect the apportionment and
150-18 allocation of income and receipts derived from partnerships
151-19 other than qualified investment partnership income from
152-20 investment partnerships.
153-21 (5) If a nonresident person, corporation, or other entity
154-22 reasonably determines that it received qualified investment
155-23 partnership income from an investment partnership and the
156-24 partnership is determined to not be an investment
157-25 partnership, the person, corporation, or entity shall be
158-26 relieved of any penalty under IC 6-3-4-4.1, IC 6-5.5-7-1, or
159-27 IC 6-8.1-10-2.1(b) resulting from the underpayment.
160-SB 316—LS 7436/DI 120 5
161-COMMITTEE REPORT
162-Mr. President: The Senate Committee on Tax and Fiscal Policy, to
163-which was referred Senate Bill No. 316, has had the same under
164-consideration and begs leave to report the same back to the Senate with
165-the recommendation that said bill be AMENDED as follows:
166-Page 2, line 1, delete "loss." and insert "loss. For purposes of this
167-subdivision, a partnership shall be treated as meeting the
168-percentage test set forth in this subdivision if the partnership met
169-the percentage test in three (3) of the five (5) most recent taxable
170-years, including the current taxable year.".
171-Page 2, line 7, delete "includes" and insert "means".
172-Page 3, delete lines 1 through 4, begin a new paragraph and insert:
173-"SECTION 4. IC 6-3-2-3.3 IS ADDED TO THE INDIANA CODE
174-AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
175-JANUARY 1, 2026]: Sec. 3.3. (a) As used in this section,
176-"nonresident partner" has the meaning set forth in IC 6-3-4-12(n).
177-(b) For all taxable years beginning after December 31, 2025, in
178-the case of an investment partnership:".
179-Page 3, line 7, delete "individual)" and insert "individual, estate, or
180-trust)".
181-Page 3, line 8, delete "other person);" and insert "corporation or
182-other entity) for purposes of section 2 of this chapter;".
183-Page 3, line 16, delete "(or a member filing a combined return in
184-this state" and insert "(or another corporation or entity that is
185-unitary with the partner);".
186-Page 3, delete line 17.
187-Page 3, line 19, delete "(or a member" and insert "(or another
188-corporation or entity that is unitary with the partner); or".
189-Page 3, delete lines 20 through 21.
190-Page 3, line 25, delete "(or a member filing a combined return in
191-this state" and insert "(or another corporation or entity that is
192-unitary with the partner)".
193-Page 3, line 26, delete "that includes the partner)".
194-Page 3, after line 26, begin a new paragraph and insert:
195-"(c) For purposes of this section, the following apply:
196-(1) If an entity is permitted to allocate qualifying investment
197-partnership income under subsection (b)(1), the entity shall
198-exclude the receipts derived from the investment partnership
199-and attributable to the investment partnership income from
200-the denominator of the sales factor in section 2(e) of this
201-chapter.
202-SB 316—LS 7436/DI 120 6
203-(2) If an entity is required to treat qualifying investment
204-partnership income as apportionable income, the entity's
205-share of receipts from the investment partnership and
206-attributable to the investment partnership shall be included
207-in the denominator of the sales factor and attributed to the
208-entity's state of domicile for purposes of section 2(e) of this
209-chapter.
210-(3) For purposes of subsection (b)(2), a corporation or other
211-entity shall be treated as unitary with the partner if the
212-partner and the corporation or other entity would be required
213-to be included in a combined income tax return under this
214-article, determined as if all relevant entities are subject to tax
215-under this article as corporations and are not corporations
216-described in section 2.4 of this chapter. However, in the case
217-of a partner and a corporate partnership, a unitary
218-relationship shall be determined without regard to the
219-corporate partner's percentage of ownership of the
220-partnership.
221-(4) Nothing in this section shall affect the apportionment and
222-allocation of income and receipts derived from partnerships
223-other than qualified investment partnership income from
224-investment partnerships.
225-(5) If a nonresident person, corporation, or other entity
226-reasonably determines that it received qualified investment
227-partnership income from an investment partnership and the
228-partnership is determined to not be an investment
229-partnership, the person, corporation, or entity shall be
230-relieved of any penalty under IC 6-3-4-4.1, IC 6-5.5-7-1, or
231-IC 6-8.1-10-2.1(b) resulting from the underpayment.".
232-Renumber all SECTIONS consecutively.
233-and when so amended that said bill do pass.
234-(Reference is to SB 316 as introduced.)
235-HOLDMAN, Chairperson
236-Committee Vote: Yeas 12, Nays 0.
237-SB 316—LS 7436/DI 120
45+2025 IN 316—LS 7436/DI 120 2
46+1 operating at a federal taxable loss.
47+2 (3) The partnership is not a dealer in qualifying investment
48+3 securities.
49+4 SECTION 2. IC 6-3-1-42 IS ADDED TO THE INDIANA CODE
50+5 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
51+6 JANUARY 1, 2026]: Sec. 42. The term "qualifying investment
52+7 securities" includes the following:
53+8 (1) Common stock, including preferred or debt securities
54+9 convertible into common stock, and preferred stock.
55+10 (2) Bonds, debentures, and other debt securities.
56+11 (3) Foreign and domestic currency deposits secured by
57+12 federal, state, or local governmental agencies.
58+13 (4) Mortgage or asset-backed securities secured by federal,
59+14 state, or local governmental agencies.
60+15 (5) Repurchase agreements and loan participations.
61+16 (6) Foreign currency exchange contracts and forward and
62+17 futures contracts on foreign currencies.
63+18 (7) Stock and bond index securities and futures contracts and
64+19 other similar financial securities and futures contracts on
65+20 those securities.
66+21 (8) Options for the purchase or sale of any of the securities,
67+22 currencies, contracts, or financial instruments described in
68+23 subdivisions (1) through (7).
69+24 (9) Regulated futures contracts.
70+25 (10) Commodities (not described in Section 1221(a)(1) of the
71+26 Internal Revenue Code) or futures, forwards, and options
72+27 with respect to such commodities, provided, however, that any
73+28 item of a physical commodity to which title is actually
74+29 acquired in the partnership's capacity as a dealer in such
75+30 commodity shall not be a qualifying investment security.
76+31 (11) Derivatives.
77+32 (12) A partnership interest in another partnership that is an
78+33 investment partnership.
79+34 (13) A partnership interest that, in the hands of the
80+35 partnership, qualifies as a security within the meaning of 15
81+36 U.S.C. 77b(a)(1).
82+37 SECTION 3. IC 6-3-1-43 IS ADDED TO THE INDIANA CODE
83+38 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
84+39 JANUARY 1, 2026]: Sec. 43. The term "qualifying investment
85+40 partnership income" means the adjusted gross income from
86+41 qualifying investment securities, excluding any income or loss from
87+42 an asset described in section 42(13) of this chapter.
88+2025 IN 316—LS 7436/DI 120 3
89+1 SECTION 4. IC 6-3-4-12.5 IS ADDED TO THE INDIANA CODE
90+2 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
91+3 JANUARY 1, 2026]: Sec. 12.5. For all taxable years beginning after
92+4 December 31, 2025, in the case of an investment partnership:
93+5 (1) any qualifying investment partnership income that is
94+6 distributable to a nonresident partner shall be allocated to the
95+7 partner's state of residence (in the case of an individual) or
96+8 commercial domicile (in the case of any other person); and
97+9 (2) any qualifying investment partnership income that is
98+10 distributable to a nonresident partner shall be treated as
99+11 business income and apportioned as if such income had been
100+12 received directly by the partner if such income is from
101+13 investment activity:
102+14 (A) that is directly or integrally related to any other
103+15 business activity conducted in this state by the nonresident
104+16 partner (or a member filing a combined return in this state
105+17 that includes the partner);
106+18 (B) that serves an operational function to any other
107+19 business activity of the nonresident partner (or a member
108+20 filing a combined return in this state that includes the
109+21 partner); or
110+22 (C) where assets of the investment partnership were
111+23 acquired with working capital from a trade or business
112+24 activity conducted in this state in which the nonresident
113+25 partner (or a member filing a combined return in this state
114+26 that includes the partner) owns an interest.
115+2025 IN 316—LS 7436/DI 120