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.
January 11, 2001, read first time and referred to Committee on Ways and Means.
January 29, 2001, amended, reported _ Do Pass.
A BILL FOR AN ACT to amend the Indiana Code concerning
education finance.
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.
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.