January 30, 2001





HOUSE BILL No. 1420

_____


DIGEST OF HB 1420 (Updated January 24, 2001 12:26 PM - DI 73)



Citations Affected: IC 6-3.5; IC 6-8.1.

Synopsis: Local option income tax for education. Allows a school corporation to adopt a local option income tax for education. Provides that the tax applies to individuals and to corporations that have net income for the taxable year. Provides that the tax may be imposed at a rate of not more than 0.25%. Provides that a school corporation may use the tax revenue only for the purpose of making employer contributions to the Indiana state teachers' retirement fund on behalf of the school corporation's employees who are members of that fund. Specifies that the county auditor shall each year reduce the general fund property tax levy of a school corporation receiving a distribution of local option income tax for education by an amount equal to the amount of the distribution.

Effective: Upon passage.





Bauer




    January 11, 2001, read first time and referred to Committee on Ways and Means.
    January 29, 2001, amended, reported _ Do Pass.







January 30, 2001

First Regular Session 112th General Assembly (2001)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the 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.
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HOUSE BILL No. 1420



    A BILL FOR AN ACT to amend the Indiana Code concerning education finance.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 6-3.5-8; (01)HB1420.1.1. -->     SECTION 1. IC 6-3.5-8 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]:
     Chapter 8. Local Option Income Tax for Education
    Sec. 1. As used in this chapter, "adjusted gross income" has the meaning set forth in IC 6-3-1-3.5(a).
    Sec. 2. As used in this chapter, "apportioned net income" means net income (as defined in IC 6-3-8-2) multiplied by:
        (1) the assessed value of all property of a corporation that is:
            (A) taxable under IC 6-1.1; and
            (B) located in the school corporation; divided by
        (2) the assessed value of all property of the corporation that is:
            (A) taxable under IC 6-1.1; and
            (B) located in Indiana.
    Sec. 3. As used in this chapter, "corporate taxpayer" means a corporation that has net income for the taxable year under

IC 6-3-8.
    Sec. 4. As used in this chapter, "department" refers to the department of state revenue.
    Sec. 5. As used in this chapter, "individual taxpayer" means an individual who resides in a school corporation on the date specified in section 16 of this chapter.

    Sec. 6. As used in this chapter, "school corporation" means a public school corporation established by Indiana law.
    Sec. 7. (a) The governing body of a school corporation may impose a local option income tax for education, which consists of a tax on the adjusted gross income of individual taxpayers and on the apportioned supplemental net income of corporations. If the tax is imposed, the tax takes effect July 1 of the year that the ordinance imposing the tax is adopted.
    (b) Except as provided in subsection (c), the tax on individual taxpayers and on corporate taxpayers may be imposed at a rate of not more than twenty-five hundredths percent (0.25%). The rate applies to the adjusted gross income of the school corporation's individual taxpayers and to the apportioned net income of the school corporation's corporate taxpayers. The rate must be the same for individual taxpayers and for corporate taxpayers.
    Sec. 8. (a) To impose the local option income tax for education, a governing body of a school corporation must, after January 1 but before May 1 of a year, adopt an ordinance. The ordinance must substantially state the following:
        "The ________ Governing Body imposes the local option income tax for education on the individual taxpayers and corporate taxpayers of the ________ (insert name of school corporation). The local option income tax for education consists of an individual income tax and a corporate surtax. The income tax is imposed at a rate of _____ percent (_____%) on the individual taxpayers and corporate taxpayers of the school corporation. The income tax takes effect July 1 of this year.".
    (b) An ordinance adopted under this section takes effect July 1 of the year the ordinance is adopted.
     Sec. 9. (a) The governing body of a school corporation may increase or decrease the local option income tax for education rate imposed on individual taxpayers and corporate taxpayers. To increase or decrease the rate, the governing body must, after January 1 but before May 1 of a year, adopt an ordinance. The ordinance must substantially state the following:


        "The ________ Governing Body increases (or decreases) the local option income tax for education rate. The tax rate imposed upon the individual taxpayers and on corporate taxpayers of the school corporation is increased (or decreased) from (insert current rate) to (insert proposed rate). This tax rate increase (or decrease) takes effect July 1 of this year for individual taxpayers. The increased (or decreased) rate takes effect January 1 of next year for corporate taxpayers.".
    (b) An ordinance adopted under this section takes effect July 1 of the year the ordinance is adopted.
     Sec. 10. (a) The local option income tax for education imposed by a governing body under this chapter remains in effect until rescinded.
    (b) A
governing body may rescind the local option income tax for education by adopting an ordinance to rescind the tax after January 1 but before June 1 of a year.
    (c) An ordinance adopted under this section takes effect July 1 of the year the ordinance is adopted.
     Sec. 11. If the local option income tax for education is not in effect during an individual taxpayer's or a corporate taxpayer's entire taxable year, the amount of local option income tax for education that the taxpayer owes for that taxable year equals the product of:
        (1) the amount of the local option income tax for education the taxpayer would owe if the tax had been imposed during the taxpayer's entire taxable year; multiplied by
        (2) a fraction. The numerator equals the number of days during the taxpayer's taxable year that the local option income tax for education was in effect. The denominator equals the total number of days in the taxpayer's taxable year.
     Sec. 12. (a) If, for a particular taxable year, an individual taxpayer is allowed, or an individual taxpayer and the individual taxpayer's spouse who file a joint return are allowed, a credit for the elderly or the totally disabled under Section 22 of the Internal Revenue Code (as defined in IC 6-3-1-11), the individual taxpayer is entitled, or the individual taxpayer and the individual taxpayer's spouse are entitled, to a credit against their local option income tax for education liability for that same taxable year. The amount of the credit equals the lesser of the following:
        (1) The product of:
            (A) the credit for the elderly or the totally disabled for the

same taxable year; multiplied by
            (B) a fraction. The numerator is the local option income tax for education rate imposed against the individual taxpayer or the individual taxpayer and the individual taxpayer's spouse. The denominator is fifteen-hundredths (0.15).
        (2) The amount of local option income tax for education imposed on the individual taxpayer or the individual taxpayer and the individual taxpayer's spouse.
    (b) If an individual taxpayer and the individual taxpayer's spouse file a joint return and are subject to different local option income tax for education tax rates for the same taxable year, they shall compute the credit under this section by using the formula provided in subsection (a), except that they shall use the average of the two (2) tax rates imposed against them as the numerator referred to in subsection (a)(1)(B).
     Sec. 13. (a) A special account within the state general fund shall be established for each school corporation adopting the local option income tax for education. Revenue derived from the imposition of the local option income tax for education by a school corporation shall be deposited in that school corporation's account in the state general fund.
    (b) Income earned on money held in an account under subsection (a) becomes a part of that account.
    (c) Revenue remaining in an account established under subsection (a) at the end of a state fiscal year does not revert to the state general fund.
    Sec. 14. Revenue derived from the imposition of the local option income tax for education shall be distributed to the school corporation that imposed the tax not more than thirty (30) days after the tax is deposited within the school corporation's account.
    Sec. 15. (a) The county auditor shall each year reduce the general fund property tax levy of a school corporation receiving a distribution under this chapter in that year. The school corporation's general fund property tax levy shall be reduced by the amount of the distribution received or to be received by the school corporation during the year. The state board of tax commissioners shall certify to the auditor of each county in which a school corporation receiving a distribution is located the property tax rate applicable to the school corporation's general fund after the property tax reduction under this section.
    (b) A school corporation shall treat a distribution that the school

corporation receives or is to receive during a particular calendar year as a part of the school corporation's property tax levy for the general fund for that same calendar year for purposes of fixing the school corporation's budget and for purposes of the property tax levy limits imposed by IC 6-1.1-19 and the calculation of state tuition support under IC 21-3-1.7. However, the distributions shall not reduce the total county tax levy that is used to compute the state property tax replacement credit under IC 6-1.1-21. In addition, for the purposes of computing and distributing any excise taxes or income taxes in which the distribution is based on property taxes, the distributions shall be treated as though they were property taxes that were due and payable during that same calendar year.
    (c) A school corporation may use distributions received under this chapter only for the purpose of making employer contributions to the Indiana state teachers' retirement fund on behalf of the school corporation's employees who are members of that fund.
     Sec. 16. (a) For purposes of this chapter, an individual shall be treated as an individual taxpayer of the school corporation in which the individual:
        (1) maintains a residence, if the individual maintains only one (1) residence in Indiana;
        (2) if subdivision (1) does not apply, registers to vote;
        (3) if subdivision (1) or (2) does not apply, registers the individual's personal automobile; or
        (4) if subdivision (1), (2), or (3) does not apply, spends the majority of the individual's time in Indiana during the taxable year in question.
    (b) Whether an individual is an individual taxpayer is determined on January 1 of the calendar year in which the individual's taxable year commences. If an individual changes the location of the individual's residence to another school corporation in Indiana during a calendar year, the individual's liability for local option income tax for education is not affected.
     Sec. 17. (a) Except as otherwise provided in this chapter, all provisions of the adjusted gross income tax law (IC 6-3) concerning:
        (1) definitions;
        (2) declarations of estimated tax;
        (3) filing of returns;
        (4) remittances;
        (5) incorporation of the provisions of the Internal Revenue

Code;
        (6) penalties and interest;
        (7) exclusion of military pay credits for withholding; and
        (8) exemptions and deductions;
apply to the imposition, collection, and administration of the tax imposed by this chapter. The local option income tax for education is a listed tax and an income tax for purposes of IC 6-8.1.
    (b) The provisions of IC 6-3-1-3.5(a)(5), IC 6-3-3-3, IC 6-3-3-5, and IC 6-3-5-1 do not apply to the tax imposed by this chapter.
    (c) Each employer shall report to the department the amount of withholdings attributable to each school corporation. This report shall annually be submitted with the employer's withholding report.
     Sec. 18. Before February 1 of each year, the department shall submit a report to each county treasurer indicating the balance in the school corporation's education income tax account at the end of the preceding year. The county treasurer shall forward a copy of the report to the school corporation.

SOURCE: IC 6-8.1-1-1; (01)HB1420.1.2. -->     SECTION 2. IC 6-8.1-1-1, AS AMENDED BY P.L.181-1999, SECTION 3, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 1. "Listed taxes" or "taxes" includes only the pari-mutuel taxes (IC 4-31-9-3 through IC 4-31-9-5); the riverboat admissions tax (IC 4-33-12); the riverboat wagering tax (IC 4-33-13); the gross income tax (IC 6-2.1); the state gross retail and use taxes (IC 6-2.5); the adjusted gross income tax (IC 6-3); the supplemental net income tax (IC 6-3-8); the county adjusted gross income tax (IC 6-3.5-1.1); the county option income tax (IC 6-3.5-6); the county economic development income tax (IC 6-3.5-7); the local option income tax for education (IC 6-3.5-8); the auto rental excise tax (IC 6-6-9); the bank tax (IC 6-5-10); the savings and loan association tax (IC 6-5-11); the production credit association tax (IC 6-5-12); the financial institutions tax (IC 6-5.5); the gasoline tax (IC 6-6-1.1); the alternative fuel permit fee (IC 6-6-2.1); the special fuel tax (IC 6-6-2.5); the motor carrier fuel tax (IC 6-6-4.1); a motor fuel tax collected under a reciprocal agreement under IC 6-8.1-3; the motor vehicle excise tax (IC 6-6-5); the commercial vehicle excise tax (IC 6-6-5.5); the hazardous waste disposal tax (IC 6-6-6.6); the cigarette tax (IC 6-7-1); the beer excise tax (IC 7.1-4-2); the liquor excise tax (IC 7.1-4-3); the wine excise tax (IC 7.1-4-4); the hard cider excise tax (IC 7.1-4-4.5); the malt excise tax (IC 7.1-4-5); the petroleum severance tax (IC 6-8-1); the various innkeeper's taxes (IC 6-9); the various county food and beverage taxes (IC 6-9); the

county admissions tax (IC 6-9-13 and IC 6-9-28); the oil inspection fee (IC 16-44-2); the emergency and hazardous chemical inventory form fee (IC 6-6-10); the penalties assessed for oversize vehicles (IC 9-20-3 and IC 9-30); the fees and penalties assessed for overweight vehicles (IC 9-20-4 and IC 9-30); the underground storage tank fee (IC 13-23); the solid waste management fee (IC 13-20-22); and any other tax or fee that the department is required to collect or administer.

SOURCE: ; (01)HB1420.1.3. -->     SECTION 3. An emergency is declared for this act.