Introduced Version
SENATE BILL No. 451
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3.
Synopsis: Income tax rate. Provides for a decrease in the individual
adjusted gross income tax rate beginning in 2029 depending on certain
conditions being met.
Effective: July 1, 2025.
Holdman
January 13, 2025, read first time and referred to Committee on Tax and Fiscal Policy.
2025 IN 451—LS 6727/DI 120 Introduced
First Regular Session of the 124th General Assembly (2025)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
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Additions: Whenever a new statutory provision is being enacted (or a new constitutional
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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. 451
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) As used in this section, "state fiscal year"
4 means the annual period commencing July 1 of a given year and
5 ending June 30 of the following year.
6 (b) Each taxable year, a tax at the following rate of adjusted gross
7 income is imposed upon the adjusted gross income of every resident
8 person, and on that part of the adjusted gross income derived from
9 sources within Indiana of every nonresident person:
10 (1) For taxable years beginning before January 1, 2015, three and
11 four-tenths percent (3.4%).
12 (2) For taxable years beginning after December 31, 2014, and
13 before January 1, 2017, three and three-tenths percent (3.3%).
14 (3) For taxable years beginning after December 31, 2016, and
15 before January 1, 2023, three and twenty-three hundredths percent
16 (3.23%).
17 (4) For taxable years beginning after December 31, 2022, and
2025 IN 451—LS 6727/DI 120 2
1 before January 1, 2024, three and fifteen hundredths percent
2 (3.15%).
3 (5) For taxable years beginning after December 31, 2023, and
4 before January 1, 2025, three and five-hundredths percent
5 (3.05%).
6 (6) For taxable years beginning after December 31, 2024, and
7 before January 1, 2026, three percent (3%).
8 (7) For taxable years beginning after December 31, 2025, and
9 before January 1, 2027, two and ninety-five hundredths percent
10 (2.95%).
11 (8) For taxable years beginning after December 31, 2026, and
12 before January 1, 2029, two and nine-tenths percent (2.9%).
13 (9) For taxable years beginning after December 31, 2028, if
14 the actual amount of forecasted state general fund revenue
15 collections for the state fiscal year ending June 30, 2028, and
16 for state fiscal years ending June 30 of each even-numbered
17 year thereafter, exceed by at least three percent (3%) the
18 amount of forecasted state general fund revenue collections
19 for the state fiscal year ending June 30 of the immediately
20 preceding state fiscal year, as determined by the budget
21 agency under subsection (e), the tax rate shall be decreased by
22 the following percentage point:
23 (A) Five one-hundredths of one percent (0.05%) beginning
24 January 1 of the year immediately succeeding the year of
25 the budget agency determination under subsection (e).
26 (B) Five one-hundredths of one percent (0.05%) beginning
27 January 1 of the year next succeeding the year referenced
28 in clause (A).
29 (b) (c) Except as provided in section 1.5 of this chapter (before its
30 expiration), each taxable year, a tax at the following rate of adjusted
31 gross income is imposed on that part of the adjusted gross income
32 derived from sources within Indiana of every corporation:
33 (1) Before July 1, 2012, eight and five-tenths percent (8.5%).
34 (2) After June 30, 2012, and before July 1, 2013, eight percent
35 (8.0%).
36 (3) After June 30, 2013, and before July 1, 2014, seven and
37 five-tenths percent (7.5%).
38 (4) After June 30, 2014, and before July 1, 2015, seven percent
39 (7.0%).
40 (5) After June 30, 2015, and before July 1, 2016, six and
41 five-tenths percent (6.5%).
42 (6) After June 30, 2016, and before July 1, 2017, six and
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1 twenty-five hundredths percent (6.25%).
2 (7) After June 30, 2017, and before July 1, 2018, six percent
3 (6.0%).
4 (8) After June 30, 2018, and before July 1, 2019, five and
5 seventy-five hundredths percent (5.75%).
6 (9) After June 30, 2019, and before July 1, 2020, five and
7 five-tenths percent (5.5%).
8 (10) After June 30, 2020, and before July 1, 2021, five and
9 twenty-five hundredths percent (5.25%).
10 (11) After June 30, 2021, four and nine-tenths percent (4.9%).
11 (c) (d) If for any taxable year a taxpayer is subject to different tax
12 rates under subsection (b), (c), the taxpayer's tax rate for that taxable
13 year is the rate determined in the last STEP of the following STEPS:
14 STEP ONE: Multiply the number of days in the taxpayer's taxable
15 year that precede the day the rate changed by the rate in effect
16 before the rate change.
17 STEP TWO: Multiply the number of days in the taxpayer's
18 taxable year that follow the day before the rate changed by the
19 rate in effect after the rate change.
20 STEP THREE: Divide the sum of the amounts determined under
21 STEPS ONE and TWO by the number of days in the taxpayer's
22 tax period.
23 However, the rate determined under this subsection shall be rounded
24 to the nearest one-hundredth of one percent (0.01%).
25 (e) This subsection applies beginning in 2028, and applies in
26 each even-numbered year thereafter. After the end of each
27 even-numbered state fiscal year, the budget agency shall calculate
28 and determine the percentage of revenue growth in the actual
29 amount of forecasted state general fund revenue collections
30 compared to the immediately preceding odd-numbered state fiscal
31 year for purposes of determining whether the tax rate will decrease
32 for a taxable year under subsection (b)(9). The budget agency shall
33 make the calculation not later than thirty (30) days after the end of
34 each even-numbered state fiscal year. Not later than September 1
35 of each even-numbered year, the budget agency shall certify the
36 results to the department and report to the budget committee for
37 review the following:
38 (1) The percentage of revenue growth determined under this
39 subsection.
40 (2) The adjusted gross income tax rate determination made
41 for each applicable year under this subsection.
42 Not later than November 1 of each even-numbered year, the
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1 department shall provide notice of the determination and the
2 applicable tax rates for each year under subsection (b)(9)(A) and
3 (b)(9)(B) on the department's website in a departmental notice.
4 SECTION 2. IC 6-3-2-1.7, AS ADDED BY P.L.137-2022,
5 SECTION 34, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
6 JULY 1, 2025]: Sec. 1.7. (a) For purposes of this section:
7 (1) "Distributor" means a person or entity located in this state that
8 purchases tangible personal property from an eligible corporation
9 for purposes of resale. For purposes of this section, a distributor
10 is not a person or entity that has a relationship described in
11 Section 267(b) of the Internal Revenue Code with the eligible
12 corporation.
13 (2) "Eligible corporation" means a corporation otherwise subject
14 to tax under section 1(b) 1(c) of this chapter. An eligible
15 corporation shall not include a corporation described in section
16 2.8(2) of this chapter or a corporation subject to tax under
17 IC 6-5.5.
18 (3) "Qualifying distribution sale" means a sale of tangible
19 personal property by an eligible corporation to a distributor that:
20 (A) is a purchase for resale by the distributor as defined in
21 IC 6-2.5-5-8; and
22 (B) for which the sourcing of the sale of the property to an
23 ultimate customer outside Indiana is agreed to by the
24 department and the eligible corporation, or, in the absence of
25 an agreement, sourced by the ratio of the population of Indiana
26 compared to the population of all states in which the qualified
27 distribution sales are sold to an ultimate customer.
28 For purposes of this section, a qualifying distribution sale shall
29 not include any sale for which the distributor does not issue an
30 exemption certificate in the manner provided by the department
31 under IC 6-2.5-8-8 or a purchase by the distributor for the
32 distributor's own use other than for resale. A qualifying
33 distribution sale shall not include any sale made by a pass through
34 entity that would otherwise be attributable under this article to the
35 eligible corporation.
36 (4) "Ultimate customer" means a purchaser of tangible personal
37 property who purchases the tangible personal property without an
38 intent of future resale of property.
39 (b) If an eligible corporation has greater than one billion dollars
40 ($1,000,000,000) of tangible personal property sales that otherwise
41 would be sourced to this state under section 2(e) of this chapter, and
42 would have an apportionment percentage under section 2 of this
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1 chapter of greater than ten percent (10%) prior to application of this
2 section the eligible corporation may elect to determine its tax as
3 follows:
4 STEP ONE: Determine the apportionment percentage under
5 sections 2 and 2.2 of this chapter, treating qualifying distribution
6 sales as if they were not receipts for purposes of the
7 apportionment numerator, but treating the portion where the
8 ultimate customer would be located in Indiana as part of the
9 receipts numerator.
10 STEP TWO: Determine Indiana adjusted gross income in the
11 manner otherwise provided in this article, applying the
12 apportionment percentage in STEP ONE. For purposes of this
13 STEP, any adjusted gross income arising from qualified
14 distribution sales shall be treated as business income of the
15 eligible corporation.
16 STEP THREE: Determine the tax due under this chapter on the
17 amount computed in STEP TWO, reduced by any nonrefundable
18 credits under IC 6-3-3 or IC 6-3.1, but not less than zero (0). For
19 purposes of this article, any application of a credit under this
20 STEP shall reduce the amount available for carryforward in the
21 same manner as otherwise provided under IC 6-3-3 or IC 6-3.1.
22 STEP FOUR:
23 (A) If the eligible corporation's qualified distribution sales are
24 not in excess of two billion dollars ($2,000,000,000),
25 determine one-half of one percent (0.5%) of the qualified
26 distribution sales.
27 (B) If the eligible corporation's qualified distribution sales are
28 in excess of two billion dollars ($2,000,000,000) but not in
29 excess of three billion dollars ($3,000,000,000), determine
30 three-eighths of one percent (0.375%) of the qualified
31 distribution sales in excess of two billion dollars
32 ($2,000,000,000) plus ten million dollars ($10,000,000).
33 (C) If the eligible corporation's qualified distribution sales are
34 in excess of three billion dollars ($3,000,000,000) but not in
35 excess of four billion dollars ($4,000,000,000), determine
36 one-fourth of one percent (0.25%) of the qualified distribution
37 sales in excess of three billion dollars ($3,000,000,000) plus
38 thirteen million seven hundred fifty thousand dollars
39 ($13,750,000).
40 (D) If the eligible corporation's qualified distribution sales are
41 in excess of four billion dollars ($4,000,000,000), determine
42 one-eighth of one percent (0.125%) of the qualified
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1 distribution sales in excess of four billion dollars
2 ($4,000,000,000) plus sixteen million two hundred fifty
3 thousand dollars ($16,250,000).
4 STEP FIVE: Add the amounts determined under STEP THREE
5 and STEP FOUR.
6 (c) Notwithstanding any other provision of this section, for an
7 eligible corporation that makes an election:
8 (1) if the tax for a taxable year covered by the election as
9 computed under subsection (b) is less than twenty-six million
10 dollars ($26,000,000), the tax shall be twenty-six million dollars
11 ($26,000,000); and
12 (2) if the tax for the taxable year covered by an election as
13 computed under subsection (b) is greater than the amount
14 specified in clauses (A) through (C), the amount of tax shall be
15 the following amounts:
16 (A) For a taxable year ending after December 31, 2018, and
17 before January 1, 2025, forty million dollars ($40,000,000).
18 (B) For a taxable year ending after December 31, 2024, and
19 before January 1, 2026, forty-two million dollars
20 ($42,000,000).
21 (C) For each taxable year ending after December 31, 2025,
22 forty-two million dollars ($42,000,000) plus one million
23 dollars ($1,000,000) for each taxable year ending after
24 December 31, 2025.
25 For purposes of this subsection, the tax for a taxable year under this
26 section shall be determined after application of any credit allowable
27 under IC 6-3-3 and IC 6-3.1.
28 (d) If an eligible corporation makes an election under this section,
29 the following apply:
30 (1) The eligible corporation shall be subject to the election for the
31 taxable year of the election and each taxable year thereafter until
32 the first taxable year ending ten (10) years after the first year in
33 which an election is made under this section, even if the
34 corporation would not be an eligible corporation for a taxable year
35 after the taxable year in which the election is made, and shall be
36 binding on any successor corporation or group of corporations to
37 the eligible corporation.
38 (2) After the period of the initial election under subdivision (1),
39 the department may permit a taxpayer to make an election under
40 this section for each subsequent taxable year after the election
41 expires under subdivision (1). However:
42 (A) an election under this subdivision is only permitted for one
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1 (1) taxable year; and
2 (B) if an eligible corporation does make an election for a
3 taxable year, the eligible corporation may only make a new
4 election if the new election is subject to the terms of
5 subdivision (1).
6 (e) If two (2) or more eligible corporations are part of a consolidated
7 return or combined return, the computation under STEP FOUR of
8 subsection (b) shall be determined separately for each corporation.
9 (f) For purposes of computing net operating losses for the taxable
10 year under section 2.6 of this chapter and the deduction allowable
11 against adjusted gross income under section 2.6 of this chapter, the loss
12 for the taxable year or deduction allowable shall be computed pursuant
13 to STEP TWO of subsection (b).
14 (g) An election under this section shall be in the form and manner
15 prescribed by the department. The election must be completed and filed
16 with the department on or before the date of filing of the original return
17 for a taxable year to be effective beginning with that taxable year. In
18 addition, if an eligible corporation files a consolidated return or
19 combined return for the first taxable year of the election, or for any year
20 subsequent to the first taxable year of the election, the eligible
21 corporation and the department shall enter into an agreement regarding
22 issues specific to consolidated or combined returns. In the absence of
23 such an agreement, any such issues shall be treated in a manner
24 prescribed by the department and published in the Indiana Register. If
25 the original return for a taxable year is filed after the due date for the
26 original return, including any extensions, an election will not be
27 allowed for that taxable year or any subsequent year to which the
28 election otherwise would apply. However, the eligible corporation may
29 file an election for subsequent taxable years, provided the eligible
30 corporation otherwise meets the requirements of this section.
31 SECTION 3. IC 6-3-4.5-1, AS AMENDED BY P.L.9-2024,
32 SECTION 186, IS AMENDED TO READ AS FOLLOWS
33 [EFFECTIVE JULY 1, 2025]: Sec. 1. The following definitions apply
34 throughout this chapter:
35 (1) "Adjustment year" means the partnership taxable year
36 described in Section 6225(d)(2) of the Internal Revenue Code.
37 (2) "Administrative adjustment request" means an administrative
38 adjustment request filed by a partnership under Section 6227 of
39 the Internal Revenue Code.
40 (3) "Affected year" means any taxable year for a taxpayer that is
41 affected by an adjustment under this chapter, regardless of
42 whether the partnership has received an adjustment for that
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1 taxable year.
2 (4) "Audited partnership" means a partnership subject to a
3 partnership level audit resulting in a federal adjustment.
4 (5) "Corporate partner" means a partner that is subject to the state
5 adjusted gross income tax under IC 6-3-2-1(b) IC 6-3-2-1(c) or
6 the financial institutions tax under IC 6-5.5-2-1. In the case of a
7 partner that is a corporation described in IC 6-3-2-2.8(2) that also
8 is subject to tax under IC 6-3-2-1(b), IC 6-3-2-1(c), the
9 corporation is a corporate partner only to the extent that its
10 income is subject to tax under IC 6-3-2-1(b). IC 6-3-2-1(c).
11 (6) "Direct partner" means a partner that holds an interest directly
12 in a partnership or pass through entity.
13 (7) "Exempt partner" means a partner that is exempt from the
14 adjusted gross income tax under IC 6-3-2-2.8(1) or the financial
15 institutions tax under IC 6-5.5-2-7(4), except to the extent of
16 unrelated business taxable income.
17 (8) "Federal adjustment" means a change to an item or amount
18 determined under the Internal Revenue Code or a change to any
19 other tax attribute that is used by a taxpayer to compute state
20 adjusted gross income taxes or financial institutions tax owed,
21 whether that change results from action by the Internal Revenue
22 Service, including a partnership level audit, or the filing of an
23 amended federal return, a federal refund claim, or an
24 administrative adjustment request by the taxpayer. A federal
25 adjustment is positive to the extent that it increases state adjusted
26 gross income as determined under IC 6-3 or IC 6-5.5 and is
27 negative to the extent that it decreases state adjusted gross income
28 as determined under IC 6-3 or IC 6-5.5.
29 (9) "Federal adjustment reports" includes methods or forms
30 required by the department for use by a taxpayer to report final
31 federal adjustments for purposes of this chapter, including an
32 amended Indiana tax return, information return, or uniform
33 multistate report.
34 (10) "Federal partnership representative" means a person the
35 partnership designates for the taxable year as the partnership's
36 representative, or the person the Internal Revenue Service has
37 appointed to act as the federal partnership representative,
38 pursuant to Section 6223(a) of the Internal Revenue Code.
39 (11) "Final determination date" means the following:
40 (A) Except as provided in clause (B) or (C), if the federal
41 adjustment arises from an Internal Revenue Service audit or
42 other action by the Internal Revenue Service, the final
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1 determination date is the date on which the federal adjustment
2 is a final determination under IC 6-3-4-6(d).
3 (B) For federal adjustments arising from an Internal Revenue
4 Service audit or other action by the Internal Revenue Service,
5 if the taxpayer filed as a member of a consolidated tax return
6 filed under IC 6-3-4-14, a combined return filed under
7 IC 6-3-2-2 or IC 6-5.5-5-1, or a return combined by the
8 department under IC 6-3-2-2(p), the final determination date
9 means the first date on which no related federal adjustments
10 arising from that audit remain to be finally determined, as
11 described in clause (A), for the entire group.
12 (C) If the federal adjustment results from filing an amended
13 federal return, a federal refund claim, or an administrative
14 adjustment request, the final determination date means the day
15 on which the amended return, refund claim, administrative
16 adjustment request, or other similar report was filed.
17 (12) "Final federal adjustment" means a federal adjustment after
18 the final determination date for that federal adjustment has
19 passed.
20 (13) "Indirect partner" means a partner in a partnership or pass
21 through entity that itself holds an interest directly, or through
22 another indirect partner, in a partnership or pass through entity.
23 (14) "Internal Revenue Code" has the meaning set forth in
24 IC 6-3-1-11.
25 (15) "Nonresident partner" has the meaning provided in
26 IC 6-3-4-12(n).
27 (16) "Partner" means a person or entity that holds an interest
28 directly or indirectly in a partnership or other pass through entity.
29 (17) "Partner level adjustments report" means a report provided
30 by a partnership to its partners as a result of a department action
31 with regard to the partnership. A partner level adjustments report
32 does not include an amended statement provided by a partnership
33 or other entity as a result of an adjustment reported by the
34 partnership.
35 (18) "Partnership" has the meaning set forth in IC 6-3-1-19.
36 (19) "Partnership level audit" means an examination by the
37 Internal Revenue Service at the partnership level under Sections
38 6221 through 6241 of the Internal Revenue Code, as enacted by
39 the Bipartisan Budget Act of 2015, Public Law 114-74, which
40 results in federal adjustments.
41 (20) "Partnership return" means a return required to be filed by a
42 partnership pursuant to IC 6-3-4-10. In the case of a partnership
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1 that is required to withhold tax or file a composite return pursuant
2 to IC 6-3-4-12 or IC 6-5.5-2-8, the term also includes the returns
3 or schedules required for tax withholding or composite filing. In
4 the case of a partnership that is an electing entity under
5 IC 6-3-2.1, the term also includes the returns or schedules
6 required for the pass through entity tax under IC 6-3-2.1.
7 (21) "Pass through entity" means an entity defined in IC 6-3-1-35,
8 other than a partnership, that:
9 (A) is not subject to tax except as provided in IC 6-3-2-2.8(2),
10 in the case of a corporation described in IC 6-3-2-2.8(2); or
11 (B) is not subject to tax except on its undistributed taxable
12 income, in the case of an estate or a trust.
13 (22) "Reallocation adjustment" means a federal adjustment
14 resulting from a partnership level audit or an administrative
15 adjustment request that changes the shares of one (1) or more
16 items of partnership income, gain, loss, expense, or credit
17 allocated to direct partners. A positive reallocation adjustment
18 means the portion of a reallocation adjustment that would
19 increase federal adjusted gross income or federal taxable income
20 for one (1) or more direct partners, and a negative reallocation
21 adjustment means the portion of a reallocation adjustment that
22 would decrease federal adjusted gross income or federal taxable
23 income for one (1) or more direct partners, according to Section
24 6225 of the Internal Revenue Code and the regulations under that
25 section.
26 (23) "Resident partner" means a partner that is not a nonresident
27 partner.
28 (24) "Review year" means the taxable year of a partnership that
29 is subject to a partnership level audit, an administrative
30 adjustment request, or an amended federal return that results in
31 federal adjustments, regardless of whether any federal tax
32 determined to be due is the responsibility of the partnership or
33 partners.
34 (25) "Statement" means a form or schedule prescribed by the
35 department through which a partnership or pass through entity
36 reports tax attributes to its owners or beneficiaries.
37 (26) "Tax attribute" means any item of income, deduction, credit,
38 receipts for apportionment, or other amount or status that
39 determines a partner's liability under IC 6-3, IC 6-3.6, or IC 6-5.5.
40 (27) "Taxable year" means, in the case of a partnership, the year
41 or partial year for which a partnership files a return for state and
42 federal purposes and, in the case of a partner, the taxable year in
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1 which the partner reports tax attributes from the partnership.
2 (28) "Taxpayer" has the meaning set forth in IC 6-3-1-15 (in the
3 case of the adjusted gross income tax) and IC 6-5.5-1-17 (in the
4 case of the financial institutions tax) and, unless the context
5 clearly indicates otherwise, includes a partnership subject to a
6 partnership level audit or a partnership that has made an
7 administrative adjustment request, as well as a tiered partner of
8 that partnership.
9 (29) "Tiered partner" means any partner that is a partnership or
10 pass through entity.
11 (30) "Unrelated business taxable income" has the meaning set
12 forth in Section 512 of the Internal Revenue Code.
13 SECTION 4. IC 6-3-4.5-9, AS AMENDED BY P.L.9-2024,
14 SECTION 188, IS AMENDED TO READ AS FOLLOWS
15 [EFFECTIVE JULY 1, 2025]: Sec. 9. (a) Partnerships and partners
16 shall report final federal adjustments arising from a partnership level
17 audit or an administrative adjustment request and make payments as
18 required under this section.
19 (b) Final federal adjustments subject to the requirements of this
20 section, except those subject to a properly made election under
21 subsection (c), shall be reported as follows:
22 (1) Not later than the applicable deadline, the partnership shall:
23 (A) file an amended partnership return for the review year and
24 any other taxable year affected by the final federal adjustments
25 with the department as provided in section 8 of this chapter
26 and provide any other information required by the department;
27 (B) notify each of its direct partners of their distributive share
28 of the final federal adjustments as provided in section 8 of this
29 chapter for all affected taxable years for which the partnership
30 filed an amended partnership return by an amended statement
31 or a report in the form and manner prescribed by the
32 department;
33 (C) file an amended composite return for direct partners and
34 an amended withholding return for direct partners for the
35 review year and any affected taxable years as otherwise
36 required by IC 6-3-4-12 or IC 6-5.5-2-8 and pay any tax due
37 for the taxable years; and
38 (D) if the partnership is an electing entity, file an amended
39 return under IC 6-3-2.1 for the review year and any affected
40 taxable year and pay any tax due for the taxable year.
41 (2) Each direct partner that is subject to tax under IC 6-3,
42 IC 6-3.6, or IC 6-5.5 shall, on or before the applicable deadline:
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1 (A) file an amended return as provided in section 8 of this
2 chapter reporting their distributive share of the adjustments
3 reported to them under subdivision (1)(B) for the taxable year
4 in which affected taxable year attributes would be reported by
5 the direct partner as provided in section 8 of this chapter; and
6 (B) pay any additional amount of tax due as if final federal
7 partnership adjustments had been properly reported, less any
8 credit for related amounts paid or withheld and remitted on
9 behalf of the direct partner.
10 (3) Each tiered partner shall treat any final federal partnership
11 adjustments under this section in a manner consistent with the
12 treatment of tiered partners under section 8 of this chapter.
13 (c) Except as provided in subsection (d), an audited partnership
14 making an election under this subsection shall:
15 (1) not later than the applicable deadline, file an amended
16 partnership return for the review year and for any other affected
17 taxable year elected by the audited partnership, including
18 information as required by the department, and notify the
19 department that it is making the election under this subsection;
20 and
21 (2) not later than ninety (90) days after the applicable deadline,
22 pay an amount, determined as follows, in lieu of taxes owed by its
23 direct or indirect partners:
24 (A) Exclude from final federal adjustments the distributive
25 share of these adjustments reported to a direct exempt partner
26 that is not unrelated business income.
27 (B) For the total distributive shares of the remaining final
28 federal adjustments reported to direct corporate partners and
29 to direct exempt partners, apportion and allocate such
30 adjustments as provided under IC 6-3-2-2 or IC 6-3-2-2.2 (in
31 the case of the adjusted gross income tax) or IC 6-5.5-4 (in the
32 case of the financial institutions tax), and multiply the
33 resulting amount by the tax rate for the taxable year under
34 IC 6-3-2-1(b), IC 6-3-2-1(c), IC 6-3-2-1.5, or IC 6-5.5-2-1, as
35 applicable.
36 (C) For the total distributive shares of the remaining final
37 federal adjustments reported to nonresident direct partners
38 other than tiered partners or corporate partners, determine the
39 amount of such adjustments which is Indiana source income
40 under IC 6-3-2-2 or IC 6-3-2-2.2, and multiply the resulting
41 amount by the tax rate under IC 6-3-2-1(a), IC 6-3-2-1(b), and
42 if applicable IC 6-3.6. If a partnership is unable to determine
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1 whether a nonresident is subject to tax under IC 6-3.6, or to
2 determine in what county the nonresident is subject to tax
3 under IC 6-3.6, tax shall also be imposed at the highest rate for
4 which a county imposes a tax under IC 6-3.6 for the taxable
5 year.
6 (D) For the total distributive shares of the remaining final
7 federal adjustments reported to tiered partners:
8 (i) determine the amount of any adjustment that is of a type
9 that it would be subject to sourcing in Indiana under
10 IC 6-3-2-2, IC 6-3-2-2.2, or IC 6-5.5-4, as applicable, and
11 determine the portion of this amount that would be sourced
12 to Indiana;
13 (ii) determine the amount of any adjustment that is of a type
14 that it would not be subject to sourcing to Indiana by a
15 nonresident partner under IC 6-3-2-2, IC 6-3-2-2.2, or
16 IC 6-5.5-4, as applicable;
17 (iii) determine the portion of the amount determined under
18 item (ii) that can be established, as prescribed by the
19 department by rule under IC 4-22-2, to be properly allocable
20 to nonresident indirect partners or other partners not subject
21 to tax on the adjustments; and
22 (iv) multiply the sum of the amounts determined in items (i)
23 and (ii) reduced by the amount determined in item (iii) by
24 the highest combined rate for the taxable year under
25 IC 6-3-2-1(a) IC 6-3-2-1(b) and IC 6-3.6 for any county, the
26 rate under IC 6-3-2-1(b), IC 6-3-2-1(c), or the rate under
27 6-5.5-2-1 for the taxable year, whichever is highest.
28 (E) For the total distributive shares of the remaining final
29 federal adjustments reported to resident individual, estate, or
30 trust direct partners, multiply that amount by the tax rate under
31 IC 6-3-2-1(a) IC 6-3-2-1(b) and IC 6-3.6. If a partnership does
32 not reasonably ascertain the county of residence for an
33 individual direct partner, the rate under IC 6-3.6 for that
34 partner shall be treated as the highest rate imposed in any
35 county under IC 6-3.6 for the taxable year.
36 (F) Add an amount equal to any credit reduction under
37 IC 6-3-3, IC 6-3.1, and IC 6-5.5 attributable as a result of final
38 federal adjustments.
39 (G) Add the amounts determined in clauses (B), (C), (D)(iv),
40 (E), and (F). For purposes of determining interest and
41 penalties, the due date of payment shall be the due date of the
42 partnership's return under IC 6-3-4-10 for the taxable year,
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1 determined without regard to any extensions.
2 (d) Final federal adjustments subject to an election under subsection
3 (c) shall not include:
4 (1) the distributive share of final federal adjustments that would
5 constitute income derived from a partnership to any direct or
6 indirect partner that is a corporation taxable under IC 6-3-2-1(b),
7 IC 6-3-2-1(c), IC 6-3-2-1.5, or IC 6-5.5-2-1 and is considered
8 unitary to the partnership; or
9 (2) any other circumstances that the department determines would
10 result in avoidance or evasion of any tax otherwise due from one
11 (1) or more partners under IC 6-3 or IC 6-5.5.
12 (e) No election under subsection (c) may be made for federal audit
13 adjustments received by the department after April 30, 2023.
14 (f) Notwithstanding IC 6-3-4-11, an audited partnership not
15 otherwise subject to any reporting or payment obligations to Indiana
16 that makes an election under subsection (c) consents to be subject to
17 Indiana law related to reporting, assessment, payment, and collection
18 of Indiana tax calculated under the election.
19 SECTION 5. IC 6-3-4.5-18, AS AMENDED BY P.L.201-2023,
20 SECTION 99, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
21 JULY 1, 2025]: Sec. 18. (a) If a partnership or tiered partner is required
22 to issue a report, issue an amended statement, or issue other
23 information to a partner, owner, or beneficiary under this chapter, and
24 does not issue such report, statement, or information within the period
25 such issuance is required under this chapter, the partnership or tiered
26 partner shall be liable for any tax that otherwise may be due from the
27 partner, owner, or beneficiary, notwithstanding any other provision in
28 IC 6-3 or IC 6-5.5. The tax rate under this section shall be computed at
29 the highest rate for the taxable year under:
30 (1) IC 6-3-2-1(a), IC 6-3-2-1(b), plus the highest rate imposed in
31 any county under IC 6-3.6;
32 (2) IC 6-3-2-1(b); IC 6-3-2-1(c); or
33 (3) IC 6-5.5-2-1;
34 unless the partnership or tiered partner can establish that a lower rate
35 should apply, the partnership or tiered partner has made an election to
36 be subject to tax under sections 6, 8, or 9 of this chapter, or to the
37 extent the partnership, tiered partner, or the department can determine
38 that the tax was otherwise properly reported and remitted. Such tax
39 shall be considered to be due on the due date of the partnership's or
40 tiered partner's return for the taxable year, determined without regard
41 to extensions.
42 (b) If a partnership or tiered partner issues the report, amended
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1 statement, or other information:
2 (1) to an address that the partnership or tiered partner knows or
3 reasonably should know is incorrect; or
4 (2) if the report, amended statement, or other information not
5 described in subdivision (1) is returned and the partnership or
6 tiered partner:
7 (A) fails to take reasonable steps to determine a proper address
8 for reissuance within thirty (30) days after the report, amended
9 statement, or other information is returned; or
10 (B) takes such steps and fails to reissue the report, amended
11 statement, or other information to a proper address within
12 thirty (30) days after the report, amended statement, or other
13 information is returned;
14 such report, amended statement, or other information shall be
15 considered to have not been issued for purposes of this section.
16 (c) The department may issue a proposed assessment under this
17 section not later than three (3) years after the department receives a
18 return or amended return from the partnership or tiered partner for
19 which the partnership or tiered partner fails to issue reports, amended
20 statements, or other information, or from the date a partnership is
21 required to issue partner level adjustments reports to its partners.
22 (d) If:
23 (1) a direct or indirect partner files and remits the tax otherwise
24 due under this section, the assessment to the partnership or tiered
25 partner under this section shall be reduced by the portion of the
26 tax attributable to the direct or indirect partner; and
27 (2) a partnership or tiered partner files and remits the tax under
28 this section, such tax shall be treated as payment of tax to the
29 direct or indirect partners. However, in no event shall the direct
30 or indirect partners be permitted a refund of tax paid by a
31 partnership or tiered partner under this section unless otherwise
32 permitted under this chapter or IC 6-8.1-9-1.
33 (e) Nothing in this section shall be construed to relieve a partnership
34 or tiered partner from any duty to issue a report, amended statement, or
35 other information otherwise required under this chapter or under any
36 other provision of IC 6-3 or IC 6-5.5. If a partnership or tiered partner
37 issues a report, amended statement, or other information provided
38 under this chapter after the date otherwise required for issuance, the
39 department may grant relief to any tiered partner, direct partner, or
40 indirect partner affected by the late issuance, including extension of
41 applicable deadlines.
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