Synopsis: Update of references to the Internal Revenue Code.
Provides that for taxable years beginning after December 31, 2005,
references in Indiana law to the Internal Revenue Code and related
regulations refer to the law and regulations in effect on January 1,
2006. Specifies that the category of children for which an additional
$1,500 state income tax deduction may be claimed is to be determined
under an Internal Revenue Code definition as it was in effect on
January 1, 2004.
Effective: January 1, 2005 (retroactive); January 1, 2006 (retroactive).
January 10, 2006, read first time and referred to Committee on Ways and Means.
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
subdivision (1).
federal adjusted gross income.
depreciation was allowed in the current taxable year or in an
earlier taxable year equal to the amount of adjusted gross income
that would have been computed had an election not been made
under Section 168(k) of the Internal Revenue Code to apply bonus
depreciation to the property in the year that it was placed in
service.
under Section 168(k) of the Internal Revenue Code to apply bonus
depreciation to the property in the year that it was placed in
service.
been made for the year in which the property was placed in
service to take deductions under Section 179 of the Internal
Revenue Code in a total amount exceeding twenty-five thousand
dollars ($25,000).
(SENATE SPONSORS _ KENLEY, SIMPSON)
January 19, 2006, amended, reported _ Do Pass.
January 23, 2006, read second time, ordered engrossed. Engrossed.
January 26, 2006, read third time, passed. Yeas 96, nays 0.
February 1, 2006, read first time and referred to Committee on Tax and Fiscal Policy.
February 14, 2006, amended, reported favorably _ Do Pass.
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.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
between statutes enacted by the 2005 Regular Session of the General Assembly.
(a) In the case of all individuals, "adjusted gross income" (as
defined in Section 62 of the Internal Revenue Code), modified as
follows:
(1) Subtract income that is exempt from taxation under this article
by the Constitution and statutes of the United States.
(2) Add an amount equal to any deduction or deductions allowed
or allowable pursuant to Section 62 of the Internal Revenue Code
for taxes based on or measured by income and levied at the state
level by any state of the United States.
(3) Subtract one thousand dollars ($1,000), or in the case of a
joint return filed by a husband and wife, subtract for each spouse
one thousand dollars ($1,000).
(4) Subtract one thousand dollars ($1,000) for:
(A) each of the exemptions provided by Section 151(c) of the
Internal Revenue Code;
(B) each additional amount allowable under Section 63(f) of
the Internal Revenue Code; and
(C) the spouse of the taxpayer if a separate return is made by
the taxpayer and if the spouse, for the calendar year in which
the taxable year of the taxpayer begins, has no gross income
and is not the dependent of another taxpayer.
(5) Subtract:
(A) for taxable years beginning after December 31, 2004,
one thousand five hundred dollars ($1,500) for each of the
exemptions allowed under Section 151(c)(1)(B) of the Internal
Revenue Code for taxable years beginning after December 31,
1996; (as effective January 1, 2004); and
(B) five hundred dollars ($500) for each additional amount
allowable under Section 63(f)(1) of the Internal Revenue Code
if the adjusted gross income of the taxpayer, or the taxpayer
and the taxpayer's spouse in the case of a joint return, is less
than forty thousand dollars ($40,000).
This amount is in addition to the amount subtracted under
subdivision (4).
(6) Subtract an amount equal to the lesser of:
(A) that part of the individual's adjusted gross income (as
defined in Section 62 of the Internal Revenue Code) for that
taxable year that is subject to a tax that is imposed by a
political subdivision of another state and that is imposed on or
measured by income; or
(B) two thousand dollars ($2,000).
(7) Add an amount equal to the total capital gain portion of a
lump sum distribution (as defined in Section 402(e)(4)(D) of the
Internal Revenue Code) if the lump sum distribution is received
by the individual during the taxable year and if the capital gain
portion of the distribution is taxed in the manner provided in
Section 402 of the Internal Revenue Code.
(8) Subtract any amounts included in federal adjusted gross
income under Section 111 of the Internal Revenue Code as a
recovery of items previously deducted as an itemized deduction
from adjusted gross income.
(9) Subtract any amounts included in federal adjusted gross
income under the Internal Revenue Code which amounts were
received by the individual as supplemental railroad retirement
annuities under 45 U.S.C. 231 and which are not deductible under
(10) Add an amount equal to the deduction allowed under Section
221 of the Internal Revenue Code for married couples filing joint
returns if the taxable year began before January 1, 1987.
(11) Add an amount equal to the interest excluded from federal
gross income by the individual for the taxable year under Section
128 of the Internal Revenue Code if the taxable year began before
January 1, 1985.
(12) Subtract an amount equal to the amount of federal Social
Security and Railroad Retirement benefits included in a taxpayer's
federal gross income by Section 86 of the Internal Revenue Code.
(13) In the case of a nonresident taxpayer or a resident taxpayer
residing in Indiana for a period of less than the taxpayer's entire
taxable year, the total amount of the deductions allowed pursuant
to subdivisions (3), (4), (5), and (6) shall be reduced to an amount
which bears the same ratio to the total as the taxpayer's income
taxable in Indiana bears to the taxpayer's total income.
(14) In the case of an individual who is a recipient of assistance
under IC 12-10-6-1, IC 12-10-6-2.1, IC 12-15-2-2, or IC 12-15-7,
subtract an amount equal to that portion of the individual's
adjusted gross income with respect to which the individual is not
allowed under federal law to retain an amount to pay state and
local income taxes.
(15) In the case of an eligible individual, subtract the amount of
a Holocaust victim's settlement payment included in the
individual's federal adjusted gross income.
(16) For taxable years beginning after December 31, 1999,
subtract an amount equal to the portion of any premiums paid
during the taxable year by the taxpayer for a qualified long term
care policy (as defined in IC 12-15-39.6-5) for the taxpayer or the
taxpayer's spouse, or both.
(17) Subtract an amount equal to the lesser of:
(A) for a taxable year:
(i) including any part of 2004, the amount determined under
subsection (f); and
(ii) beginning after December 31, 2004, two thousand five
hundred dollars ($2,500); or
(B) the amount of property taxes that are paid during the
taxable year in Indiana by the individual on the individual's
principal place of residence.
(18) Subtract an amount equal to the amount of a September 11
terrorist attack settlement payment included in the individual's
(19) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that owns property for which bonus
depreciation was allowed in the current taxable year or in an
earlier taxable year equal to the amount of adjusted gross income
that would have been computed had an election not been made
under Section 168(k) of the Internal Revenue Code to apply bonus
depreciation to the property in the year that it was placed in
service.
(20) Add an amount equal to any deduction allowed under
Section 172 of the Internal Revenue Code.
(21) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that placed Section 179 property (as
defined in Section 179 of the Internal Revenue Code) in service
in the current taxable year or in an earlier taxable year equal to
the amount of adjusted gross income that would have been
computed had an election for federal income tax purposes not
been made for the year in which the property was placed in
service to take deductions under Section 179 of the Internal
Revenue Code in a total amount exceeding twenty-five thousand
dollars ($25,000).
(22) Add an amount equal to the amount that a taxpayer claimed
as a deduction for domestic production activities for the taxable
year under Section 199 of the Internal Revenue Code for federal
income tax purposes.
(b) In the case of corporations, the same as "taxable income" (as
defined in Section 63 of the Internal Revenue Code) adjusted as
follows:
(1) Subtract income that is exempt from taxation under this article
by the Constitution and statutes of the United States.
(2) Add an amount equal to any deduction or deductions allowed
or allowable pursuant to Section 170 of the Internal Revenue
Code.
(3) Add an amount equal to any deduction or deductions allowed
or allowable pursuant to Section 63 of the Internal Revenue Code
for taxes based on or measured by income and levied at the state
level by any state of the United States.
(4) Subtract an amount equal to the amount included in the
corporation's taxable income under Section 78 of the Internal
Revenue Code.
(5) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that owns property for which bonus
(6) Add an amount equal to any deduction allowed under Section
172 of the Internal Revenue Code.
(7) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that placed Section 179 property (as
defined in Section 179 of the Internal Revenue Code) in service
in the current taxable year or in an earlier taxable year equal to
the amount of adjusted gross income that would have been
computed had an election for federal income tax purposes not
been made for the year in which the property was placed in
service to take deductions under Section 179 of the Internal
Revenue Code in a total amount exceeding twenty-five thousand
dollars ($25,000).
(8) Add an amount equal to the amount that a taxpayer claimed as
a deduction for domestic production activities for the taxable year
under Section 199 of the Internal Revenue Code for federal
income tax purposes.
(c) In the case of life insurance companies (as defined in Section
816(a) of the Internal Revenue Code) that are organized under Indiana
law, the same as "life insurance company taxable income" (as defined
in Section 801 of the Internal Revenue Code), adjusted as follows:
(1) Subtract income that is exempt from taxation under this article
by the Constitution and statutes of the United States.
(2) Add an amount equal to any deduction allowed or allowable
under Section 170 of the Internal Revenue Code.
(3) Add an amount equal to a deduction allowed or allowable
under Section 805 or Section 831(c) of the Internal Revenue Code
for taxes based on or measured by income and levied at the state
level by any state.
(4) Subtract an amount equal to the amount included in the
company's taxable income under Section 78 of the Internal
Revenue Code.
(5) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that owns property for which bonus
depreciation was allowed in the current taxable year or in an
earlier taxable year equal to the amount of adjusted gross income
that would have been computed had an election not been made
(6) Add an amount equal to any deduction allowed under Section
172 or Section 810 of the Internal Revenue Code.
(7) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that placed Section 179 property (as
defined in Section 179 of the Internal Revenue Code) in service
in the current taxable year or in an earlier taxable year equal to
the amount of adjusted gross income that would have been
computed had an election for federal income tax purposes not
been made for the year in which the property was placed in
service to take deductions under Section 179 of the Internal
Revenue Code in a total amount exceeding twenty-five thousand
dollars ($25,000).
(8) Add an amount equal to the amount that a taxpayer claimed as
a deduction for domestic production activities for the taxable year
under Section 199 of the Internal Revenue Code for federal
income tax purposes.
(d) In the case of insurance companies subject to tax under Section
831 of the Internal Revenue Code and organized under Indiana law, the
same as "taxable income" (as defined in Section 832 of the Internal
Revenue Code), adjusted as follows:
(1) Subtract income that is exempt from taxation under this article
by the Constitution and statutes of the United States.
(2) Add an amount equal to any deduction allowed or allowable
under Section 170 of the Internal Revenue Code.
(3) Add an amount equal to a deduction allowed or allowable
under Section 805 or Section 831(c) of the Internal Revenue Code
for taxes based on or measured by income and levied at the state
level by any state.
(4) Subtract an amount equal to the amount included in the
company's taxable income under Section 78 of the Internal
Revenue Code.
(5) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that owns property for which bonus
depreciation was allowed in the current taxable year or in an
earlier taxable year equal to the amount of adjusted gross income
that would have been computed had an election not been made
under Section 168(k) of the Internal Revenue Code to apply bonus
depreciation to the property in the year that it was placed in
service.
(6) Add an amount equal to any deduction allowed under Section
172 of the Internal Revenue Code.
(7) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that placed Section 179 property (as
defined in Section 179 of the Internal Revenue Code) in service
in the current taxable year or in an earlier taxable year equal to
the amount of adjusted gross income that would have been
computed had an election for federal income tax purposes not
been made for the year in which the property was placed in
service to take deductions under Section 179 of the Internal
Revenue Code in a total amount exceeding twenty-five thousand
dollars ($25,000).
(8) Add an amount equal to the amount that a taxpayer claimed as
a deduction for domestic production activities for the taxable year
under Section 199 of the Internal Revenue Code for federal
income tax purposes.
(e) In the case of trusts and estates, "taxable income" (as defined for
trusts and estates in Section 641(b) of the Internal Revenue Code)
adjusted as follows:
(1) Subtract income that is exempt from taxation under this article
by the Constitution and statutes of the United States.
(2) Subtract an amount equal to the amount of a September 11
terrorist attack settlement payment included in the federal
adjusted gross income of the estate of a victim of the September
11 terrorist attack or a trust to the extent the trust benefits a victim
of the September 11 terrorist attack.
(3) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that owns property for which bonus
depreciation was allowed in the current taxable year or in an
earlier taxable year equal to the amount of adjusted gross income
that would have been computed had an election not been made
under Section 168(k) of the Internal Revenue Code to apply bonus
depreciation to the property in the year that it was placed in
service.
(4) Add an amount equal to any deduction allowed under Section
172 of the Internal Revenue Code.
(5) Add or subtract the amount necessary to make the adjusted
gross income of any taxpayer that placed Section 179 property (as
defined in Section 179 of the Internal Revenue Code) in service
in the current taxable year or in an earlier taxable year equal to
the amount of adjusted gross income that would have been
computed had an election for federal income tax purposes not
(6) Add an amount equal to the amount that a taxpayer claimed as
a deduction for domestic production activities for the taxable year
under Section 199 of the Internal Revenue Code for federal
income tax purposes.
(f) This subsection applies only to the extent that an individual paid
property taxes in 2004 that were imposed for the March 1, 2002,
assessment date or the January 15, 2003, assessment date. The
maximum amount of the deduction under subsection (a)(17) is equal
to the amount determined under STEP FIVE of the following formula:
STEP ONE: Determine the amount of property taxes that the
taxpayer paid after December 31, 2003, in the taxable year for
property taxes imposed for the March 1, 2002, assessment date
and the January 15, 2003, assessment date.
STEP TWO: Determine the amount of property taxes that the
taxpayer paid in the taxable year for the March 1, 2003,
assessment date and the January 15, 2004, assessment date.
STEP THREE: Determine the result of the STEP ONE amount
divided by the STEP TWO amount.
STEP FOUR: Multiply the STEP THREE amount by two
thousand five hundred dollars ($2,500).
STEP FIVE: Determine the sum of the STEP FOUR amount and
two thousand five hundred dollars ($2,500).
2005. 2006.
(b) Whenever the Internal Revenue Code is mentioned in this
article, the particular provisions that are referred to, together with all
the other provisions of the Internal Revenue Code in effect on January
1, 2005, 2006, that pertain to the provisions specifically mentioned,
shall be regarded as incorporated in this article by reference and have
the same force and effect as though fully set forth in this article. To the
extent the provisions apply to this article, regulations adopted under
Section 7805(a) of the Internal Revenue Code and in effect on January
1, 2005, 2006, shall be regarded as rules adopted by the department
under this article, unless the department adopts specific rules that
supersede the regulation.
(c) An amendment to the Internal Revenue Code made by an act
passed by Congress before January 1, 2005, 2006, that is effective for
any taxable year that began before January 1, 2005, 2006, and that
affects:
(1) individual adjusted gross income (as defined in Section 62 of
the Internal Revenue Code);
(2) corporate taxable income (as defined in Section 63 of the
Internal Revenue Code);
(3) trust and estate taxable income (as defined in Section 641(b)
of the Internal Revenue Code);
(4) life insurance company taxable income (as defined in Section
801(b) of the Internal Revenue Code);
(5) mutual insurance company taxable income (as defined in
Section 821(b) of the Internal Revenue Code); or
(6) taxable income (as defined in Section 832 of the Internal
Revenue Code);
is also effective for that same taxable year for purposes of determining
adjusted gross income under section 3.5 of this chapter.