News Briefings - State Taxes

The following article was taken from the 5/20/2013 issue of State & Local Taxes Weekly.

5/20/2013 -- Indiana Governor signs omnibus tax bill

by Rachel M. Stephens, Esq. (RIA)

On May 11, 2013, Indiana Governor Mike Pence signed an omnibus bill containing numerous amendments to Indiana tax law. The legislation makes changes to the Hoosier business investment credit, including the addition of logistics investments as a specific type of qualified investment under the tax credit. Other income tax changes include: modifications to the administration of the headquarters relocation tax credit and the venture capital investment tax credit; repeal of the military base recovery tax credit, the military base investment cost credit, the capital investment tax credit, and the coal combustion product tax credit; repeal of the tax incentives concerning airport development zones; and availability of a voluntary contribution to fund public education for kindergarten through grade 12 through an individual's income tax refund. Sales and use tax changes include: removal of certain requirements for the aircraft exemption regarding tangible personal property used for repair, maintenance, refurbishment, remodeling, or remanufacturing of an aircraft; an exemption for fuel used in powering an aircraft; and the expansion of the exemption for research and development equipment. Property tax changes include: amendments to the law regarding economic revitalization areas; clarification of the interest rates applicable to refunds due to taxpayer and taxpayer payments; and the forgiveness of property taxes, penalties or interest for various properties owned by nonprofit organizations. The bill also imposes an excise tax on the sale of aviation fuel. (L. 2013, H1545 (P.L. 288), effective as stated)

Income tax. Effective January 1, 2014, logistics investments are added as a specific type of qualified investment under the Hoosier Business Investment Tax Credit; expenditures that qualify as a logistics investments are specified. The bill also requires the Indiana Economic Development Corporation (IEDC) to find that an applicant's logistics investment project will enhance the logistics industry by creating new jobs, preserving existing jobs that otherwise would be lost, increasing wages in Indiana, or improving the overall Indiana economy in order to approve the applicant's project for a tax credit.

Tax credit modifications: Effective July 1, 2013, the bill makes numerous changes to the administration of the Headquarters Relocation Tax Credit, the Industrial Recovery Tax Credit, and the Venture Capital Investment Tax Credit.

Tax credit repeals: Effective January 1, 2014, the bill repeals the Military Base Recovery Tax Credit, the Military Base Investment Cost Credit, the Capital Investment Tax Credit, and the Coal Combustion Product Tax Credit. The following tax incentives concerning Airport Development Zones are also repealed effective January 1, 2014: qualified employee deductions; credits for qualified increased employment expenditures; loan interest credits; neighborhood assistance credits; and investment cost credits.

Income tax checkoff for K-12 education: Effective January 1, 2015, an individual may choose to give all or part of the individual's income tax refund as a charitable purpose to fund public education for kindergarten through grade 12.

Sales and use taxes. Effective July 1, 2013, the bill removes the requirements that aircraft be registered out of the United States and be of a certain size for the sales and use tax exemption regarding tangible personal property used for the repair, maintenance, refurbishment, remodeling, or remanufacturing of an aircraft or an avionics system of an aircraft.

Aviation fuel exemption: Effective July 1, 2013, fuel used in powering an aircraft is exempt from sales tax. Current law exempts aviation fuel purchases from sales tax if the fuel is used in public transportation. This bill exempts the remaining aviation fuel purchases.

Exemption for research and development property: Effective July 1, 2013, the sales tax exemption for research and development equipment is expanded to include any tangible personal property used for research and development, regardless of whether the person acquiring the property is the ultimate manufacturer or seller of the product that is the subject of the research and development.

Aviation fuel excise tax. Effective July 1, 2013, an excise tax of 10¢ per gallon is imposed on the gross retail income received by a retailer on each gallon of aviation fuel purchased in Indiana. The tax must be added to the selling price of each gallon of aviation fuel sold so that the ultimate consumer bears the burden of the tax. Aviation fuel placed into the fuel supply tank of an aircraft owned by the United States or an agency or instrumentality of the United States, the state of Indiana, the Indiana Air National Guard or a common carrier of passengers or freight is exempt from the aviation fuel excise tax. Retailers must remit the aviation fuel excise taxes to the Department before the 16th day of the following calendar month by electronic funds transfer. A retailer who properly remits aviation fuel excise taxes can retain 1.6% of the taxes to cover the costs of collecting, reporting, and timely remitting aviation fuel excise taxes. Penalties are provided for failure to collect or remit the tax.

Property taxes. Effective July 1, 2013, the law regarding economic revitalization areas is amended to: allow a designating body to establish an abatement schedule in all cases; provide that an abatement schedule approved for a particular taxpayer before July 1, 2013, remains in effect until the abatement schedule expires under the terms of the resolution approving the taxpayer's statement of benefits; repeal a statute authorizing enhanced abatements; and remove references to deadline dates that have already passed.

Common areas defined: Effective July 1, 2014, for purposes of the circuit breaker credit law, the land that is a common area shared by dwelling units of a building that includes two or more dwelling units is considered residential property.

Interest rates: Effective July 1, 2013, when a taxpayer is entitled to interest, the interest must be computed using the rate in effect for each particular year covered by a refund or credit; when a taxpayer is required to pay interest, the interest must be computed using the rate in effect for each particular year in which the interest accrued.

Exempt property: Effective May 11, 2013, the bill forgives property taxes, penalties, or interest for various properties owned by nonprofit organizations.