Introduced Version






HOUSE BILL No. 2127

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 6-1.1; IC 6-3.1-20.

Synopsis: Tax credit for raw materials and parts. Provides a credit beginning in 2002 against a taxpayer's state tax liability for property taxes paid on raw materials and parts that are to be incorporated into completed goods that will be shipped out of state. Provides that the credit is initially equal to 10% of the property taxes paid, and that the credit increases over ten years until the credit may be claimed for 100% of property taxes paid in 2011 and thereafter. Provides that if the credit exceeds a taxpayer's liability, the taxpayer may carry over the excess to subsequent taxable years. Provides that a taxpayer that receives an enterprise zone inventory credit may elect to apply the raw materials tax credit against either the taxpayer's state tax liability or the taxpayer's property tax liability.

Effective: January 1, 2002.





Klinker, Bauer, Espich




    January 17, 2001, read first time and referred to Committee on Ways and Means.







Introduced

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.
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HOUSE BILL No. 2127



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

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

SOURCE: IC 6-1.1-10-29; (01)IN2127.1.1. -->     SECTION 1. IC 6-1.1-10-29 , AS AMENDED BY P.L.260-1999, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2002]: Sec. 29. (a) As used in this section, "manufacturer" or "processor" means a person that performs an operation or a continuous series of operations on raw materials, goods, or other personal property to alter the raw materials, goods, or other personal property into a new or changed state or form. The operation may be performed by hand, machinery, or a chemical process directed or controlled by an individual. The terms include a person that:
        (1) dries or prepares grain for storage or delivery; or
        (2) publishes books or other printed materials.
    (b) Personal property owned by a manufacturer or processor is exempt from property taxation if the owner is able to show by adequate records that the property:
        (1) is stored and remains in its original package in an in-state warehouse for the purpose of shipment, without further processing, will be used in an operation or a continuous series

of operations to alter the personal property into a new or changed state or form and the resulting personal property will be shipped, or will be incorporated into personal property that will be shipped, to an out-of-state destination; or
        (2) consists of books or other printed materials that are stored at an in-state commercial printer's facility for the purpose of shipment, without further processing, to an out-of-state destination.
    (c) Personal property that is manufactured in Indiana and that would be exempt under subsection (b), except that it is not stored in its original package, is exempt from property taxation if the owner can establish in accordance with exempt inventory procedures, regulations, and rules of the state board of tax commissioners that:
        (1) the property is ready for shipment without additional manufacturing or processing, except for packaging; and
        (2) either:
            (A) the property will be damaged or have its value impaired if it is stored in its original package; or
            (B) the final packaging of finished inventory items is not practical until receipt of a final customer order because fulfillment of the customer order requires the accumulation of a number of distinct finished inventory items into a single shipping package.
A person may use an allocation percentage to claim an exemption under subdivision (1) for a part of the person's personal property if a person's business records substantiate that the allocation percentage accurately reflects the part of the personal property that will be altered into a new or changed state or form and then will be shipped, or will be incorporated into personal property that will be shipped, to an out-of-state destination. The percentage may include personal property that is sold to another processor or manufacturer if the personal property is incorporated into the personal property of the buyer and that personal property is shipped out of state.
    (d) (c) A manufacturer or processor that possesses personal property owned by another person may claim an exemption under subsection (b) or (c) if:
        (1) the manufacturer or processor includes the property on the manufacturer's or processor's personal property tax return; and
        (2) the manufacturer or processor is able to show that the owner of the personal property would otherwise have qualified for an exemption under subsection (b). or (c).


SOURCE: IC 6-1.1-20.8-4; (01)IN2127.1.2. -->     SECTION 2. IC 6-1.1-20.8-4 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2002]: Sec. 4. A person that claims the credit provided by section 1 of this chapter may claim the raw materials tax credit provided by IC 6-3.1-20-7.
SOURCE: IC 6-3.1-20; (01)IN2127.1.3. -->     SECTION 3. IC 6-3.1-20 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2002]:
     Chapter 20. Credit for Property Taxes Paid on Raw Materials and Parts
    Sec. 1. As used in this chapter, "assessed value" means the assessed value of raw materials and parts under IC 6-1.1.
    Sec. 2. As used in this chapter, "manufacturer" or "processor" means a person that performs an operation or a continuous series of operations on raw materials, goods, or other personal property to alter the raw materials, goods, or other personal property into a new or changed state or form. The operation may be performed by hand, machinery, or a chemical process directed or controlled by an individual.
    Sec. 3. As used in this chapter, "pass through entity" means:
        (1) a corporation that is exempt from the adjusted gross income tax under IC  6-3-2-2.8(2); or
        (2) a partnership.
    Sec. 4. As used in this chapter, "raw materials and parts" means personal property that:

        (1) is not exempt under IC 6-1.1-10 ; and
        (2) is owned by a manufacturer or processor if the owner is able to show by adequate records that the property will be used in an operation or a continuous series of operations to alter the personal property into a new or changed state or form and the resulting personal property will be shipped to an out-of-state destination.
    Sec. 5. As used in this chapter, "state tax liability" means a taxpayer's total tax liability that is incurred under:

        (1) IC 6-2.1 (gross income tax);
        (2) IC 6-3-1 through IC 6-3-7 (adjusted gross income tax);
        (3) IC 6-3-8 (supplemental net income tax);
        (4) IC 6-5.5 (financial institutions tax); and
        (5) IC 27-1-18-2 (insurance premiums tax);
as computed after the application of the credits that under IC 6-3.1-1-2 are to be applied before the credit provided by this chapter.
    Sec. 6. As used in this chapter, "taxpayer" means a manufacturer or processor that has state tax liability.
    Sec. 7. (a) A taxpayer is entitled to a credit for a taxable year for the ad valorem property taxes paid by the taxpayer in the taxable year on raw materials and parts.
    (b) The amount of the credit is equal to the product of:

        (1) the appropriate percentage specified in subsection (c); multiplied by
        (2) the amount of property taxes paid on raw materials and parts by the taxpayer during the taxable year.
    (c) The percentage described in subsection (b)(1) is determined by the calendar year in which the property taxes on raw materials and parts are paid and is set forth in the following table:
CALENDAR YEAR    PERCENTAGE
    2002    10%
    2003    20%
    2004    30%
    2005    40%
    2006    50%
    2007    60%
    2008    70%
    2009    80%
    2010    90%
    2011 and thereafter    100%
    (d) If a taxpayer pays property taxes in two (2) different calendar years during the taxpayer's same taxable year, the taxpayer shall apply the appropriate percentage specified for each calendar year to the property taxes paid in each calendar year to compute the credit for the taxable year.
    Sec. 8. (a) A taxpayer that receives an enterprise zone inventory credit under IC 6-1.1-20.8 may elect to apply the credit available under section 7 of this chapter against the taxpayer's:

        (1) state tax liability; or
        (2) property tax liability;
for a taxable year.
    (b) A taxpayer that does not receive an enterprise zone inventory credit under IC 6-1.1-20.8 shall apply the credit under section 7 of this chapter against the taxpayer's state tax liability.
    Sec. 9. (a) If the amount determined under section 7 of this chapter for a taxpayer in a taxable year exceeds the taxpayer's state tax liability for that taxable year, the taxpayer may carry the excess over to the following taxable years. The amount of the credit

carryover from a taxable year shall be reduced to the extent that the carryover is used by the taxpayer to obtain a credit under this chapter for any subsequent taxable year. A taxpayer is not entitled to a carryback.
    (b) A taxpayer is not entitled to a refund of any unused credit.
    Sec. 10. If a pass through entity does not have state income tax liability against which the tax credit may be applied, a shareholder or partner of the pass through entity is entitled to a tax credit equal to:
        (1) the tax credit determined for the pass through entity for the taxable year; multiplied by
        (2) the percentage of the pass through entity's distributive income to which the shareholder or partner is entitled.
    Sec. 11. A person may use an allocation percentage to claim a credit under section 10(1) of this chapter for a part of the person's personal property if a person's business records substantiate that the allocation percentage accurately reflects the portion of the personal property that will be altered into a new or changed state or form and then will be shipped to an out-of-state destination.
    Sec. 12. A manufacturer or processor that possesses personal property owned by another person may claim the credit under this chapter if:

         (1) the manufacturer or processor includes the property on the manufacturer's or processor's personal property tax return; and
        (2) the manufacturer or processor is able to show that the owner of the personal property would otherwise have qualified for the credit under this chapter.
    Sec. 13. To receive the credit provided by this chapter, a taxpayer must claim the credit on the taxpayer's state tax return or returns in the manner prescribed by the department. The taxpayer shall submit to the department proof of payment of an ad valorem property tax and all information that the department determines is necessary for the calculation of the credit provided by this chapter.

SOURCE: ; (01)IN2127.1.4. -->     SECTION 4. [EFFECTIVE JANUARY 1, 2002] IC 6-3.1-20 , as added by this act, applies only to taxable years that begin after December 31, 2001.