Indiana Legislation Update
Author: Rich Boer
Indiana’s 2015 legislative session included numerous changes to state and local tax laws. Here are some of the more significant changes to sales and use tax, corporate income tax and income tax credits as well as the adoption of a new tax amnesty program.
Sales & Use Tax
Effective January 1, 2016, the state has expanded the exemption for transactions involving manufacturing machinery, tools and equipment acquired for direct use in the direct production, manufacture, fabrication, assembly, extraction, mining processing, refining or finishing of other tangible personal property. The exemption now includes material handling equipment purchased for the purpose of transporting materials into such activities from an on-site location.
Corporate Income Tax
Effective January 1, 2016, the term “business income” as defined in the statute is revised to mean all income apportionable to the state under the U.S. Constitution. Previously, “business income” was defined as income arising from transactions and activity in the regular course of the taxpayer’s trade or business; this would include income from tangible and intangible property if the acquisition, management and disposition of the property constitute integral parts of the taxpayer’s regular trade or business operations.
Effective January 1, 2016, the law is amended to eliminate the throwback provision for sales factor apportionment purposes. Previously, Indiana sales for apportionment purposes included sales of tangible personal property shipped from an office, store, warehouse, factory or other place of storage in Indiana to a state in which a taxpayer is not taxable.
In addition, effective January 1, 2016, sales of computer software will be treated as sales of tangible personal property for sale-factor apportionment purposes.
Effective January 1, 2016, the state’s intercompany interest add-back provision is broadened to apply to all directly related interest expenses. Previously, the intercompany interest add-back applied only to intercompany interest expenses related to a payment for the use of intangibles.
Income Tax Credits
Effective July 1, 2015, the sunset dates for the Venture Capital Investment Tax Credit and Hoosier Business Investment Tax Credit are amended to extend the credits to qualifying investments made prior to January 1, 2021.
Tax Amnesty Program
Indiana has approved the establishment of a new tax amnesty program with the following features:
- The program applies to unpaid tax liabilities for a listed tax due and payable for a tax period ending before January 1, 2013
- Taxpayers are ineligible if they participated in any previous amnesty program in effect on December 31, 2014
- Program length is limited to a period of up to eight weeks—determined by the Indiana Department of Revenue (DOR)—ending before the earlier of the date set by the department or January 1, 2017
- The DOR may abate interest, penalties, collection fees or otherwise applicable costs
- For any unpaid tax liability due and payable for a tax period ending before January 1, 2013, that’s not paid under the amnesty program, the DOR may impose an additional penalty equal to the amount of the penalties imposed related to such liability
For more information on how these changes could affect your organization, contact your BKD advisor.