2022 Indiana Legislative Update

On March 15, 2022, Indiana Gov. Eric Holcomb signed into law two omnibus tax bills containing several key amendments to Indiana tax law.
 
House Bill 1002 (HEA 1002) significantly cuts individual income taxes by reducing the individual income tax rate from 3.23 percent to 3.15 percent in 2023 and 2024 with a gradual phasedown of the rate to 2.9 percent beginning in 2029, provided certain conditions are met. HEA 1002 also provides for the repeals of the utility receipts and utility service use taxes. Provisions included in earlier versions of HEA 1002 that were not enacted included elimination of the double direct test related to the manufacturing exemption for sales and use tax by eliminating purposes as well as the 30 percent floor for business personal property tax.

Senate Bill 382 (SEA 382) was the other omnibus tax bill passed during the session. Key provisions contained in SEA 382 include the following: 

• Effective July 1, 2022, the Indiana Department of Revenue (DOR) may prescribe procedures and guidelines by which a partner, shareholder, or beneficiary may elect to not be subject to withholding provided the partner, shareholder, or beneficiary agrees to be subject to the jurisdiction of the state of Indiana and agrees to file any returns otherwise due 
• Reorganizes and revises provisions that apply to the sales tax exemption for nonprofit organizations, including requiring organizations wanting to avail themselves of the sales tax exemption to file an application for the exemption with the DOR no later than 120 days after the organization’s formation, and to file the report every five years by the 15th day of the fifth month following the date of its formation 
• Clarifies that a marketplace facilitator shall be considered the retail merchant of each transaction that is facilitated on its marketplace regardless as to whether the marketplace facilitator has a contractual relationship with the seller 
• Provides that for tax years beginning after December 31, 2022, individuals and certain small businesses may deduct amounts paid for health insurance premiums when computing Indiana adjusted gross income that are otherwise disallowed under Internal Revenue Code Section 280C(h)
• Creates a state income tax credit for affordable housing developments 

In addition to the two omnibus tax bills, the governor also signed into law Senate Bill 361 (SEA 361), which was related to several Indiana tax credits. Specifically, SEA 361 provided for the following, effective July 1, 2022:    

• Provides that an eligible Economic Development for a Growing Economy (EDGE) tax credit recipient may with the approval of the Indiana Economic Development Corporation (IEDC) elect to forgo claiming the credit against any state tax liability on the taxpayer’s return and instead request to receive a payment for the credit amount directly from the IEDC
• Amends the criteria for receiving the headquarters relocation credit by removing the requirement for a minimum number of employees in Indiana
• With respect to the redevelopment credit, the maximum applicable credit percentage that may be awarded is increased to 30 percent and the definition of “rehabilitation” for purposes of the credit is broadened
• Establishes a credit for taxpayers who make qualified media production expenditures
• Effective January 1, 2023, for a calendar year beginning after December 31, 2021, veteran-owned businesses are added to the list of businesses that qualify for the venture capital investment credit    
• Establishes that the aggregate amount of applicable tax credits that the IEDC may award for a state fiscal year for all taxpayers is $300 million with respect to the following credits: EDGE; community revitalization enhancement district (CRED); Hoosier business investment (HBI); headquarters relocation; redevelopment; and film and media production.

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