Introduced Version






HOUSE BILL No. 1318

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DIGEST OF INTRODUCED BILL



Citations Affected: IC 6-3.1-4.

Synopsis: Research expense tax credit. Provides that the alternative research expense tax credit for jet propulsion systems also applies to taxpayers engaged in the production of or research and development related to military defense systems. Provides that a taxpayer must employ at least 1,000 employees in the United States, including at least 50 employees in Indiana (rather than 3,000 employees) to be eligible to claim the tax credit. Extends the tax credit to taxpayers that are primarily engaged in research and development (rather than only those taxpayers that are primarily engaged in production).

Effective: January 1, 2007.





Borror




    January 10, 2006, read first time and referred to Committee on Commerce, Economic Development and Small Business.







Introduced

Second Regular Session 114th General Assembly (2006)


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. 1318



    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 6-3.1-4-1; (06)IN1318.1.1. -->     SECTION 1. IC 6-3.1-4-1, AS AMENDED BY P.L.193-2005, SECTION 12, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2007]: Sec. 1. (a) As used in The definitions in this section apply throughout this chapter:
     (b) "Base amount" means base amount (as defined in Section 41(c) of the Internal Revenue Code as in effect on January 1, 2001), modified by considering only Indiana qualified research expenses and gross receipts attributable to Indiana in the calculation of the taxpayer's:
        (1) fixed base percentage; and
        (2) average annual gross receipts.
     (c) "Indiana qualified research expense" means qualified research expense that is incurred for research conducted in Indiana.
     (d) "Military defense system" means a product or equipment that is used in whole or in part:
        (1) for the purpose of military defense; or
        (2) in the production, manufacture, fabrication, or assembly of other products or equipment that will be used for the

purpose of military defense;
including aerospace, ground transportation, communication, or research and development products or equipment used for purposes described in subdivision (1) or (2).

     (e) "Qualified research expense" means qualified research expense (as defined in Section 41(b) of the Internal Revenue Code as in effect on January 1, 2001).
     (f) "Pass through entity" means:
        (1) a corporation that is exempt from the adjusted gross income tax under IC 6-3-2-2.8(2);
        (2) a partnership;
        (3) a limited liability company; or
        (4) a limited liability partnership.
     (g) "Research expense tax credit" means a credit provided under this chapter against any tax otherwise due and payable under IC 6-3.
     (h) "Taxpayer" means an individual, a corporation, a limited liability company, a limited liability partnership, a trust, or a partnership that has any tax liability under IC 6-3 (adjusted gross income tax).

SOURCE: IC 6-3.1-4-2.5; (06)IN1318.1.2. -->     SECTION 2. IC 6-3.1-4-2.5, AS ADDED BY P.L.197-2005, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2007]: Sec 2.5. (a) The general assembly makes the following findings pertaining to this section:
        (1) The aerospace industry is and the military defense system industry are adversely affected by the calculation of qualified research expense credits under this chapter, based on the Internal Revenue Code's treatment of federal defense spending trends in the 1980s.
        (2) This adverse impact creates a disincentive for making qualified research expenditures in Indiana.
        (3) Manufacturers of aerospace and jet propulsion equipment and military defense systems have been a major in-state employer of science and engineering graduates from Indiana universities.
        (4) The presence of a strong aerospace manufacturing base and military defense system manufacturing base furthers the state's interest in maintaining the viability of a United States government military installation that is used for the design, construction, maintenance, and testing of electronic devices and ordnance.
        (5) The creation of an alternative qualified research expense credit promotes vital state interests.
    (b) This section applies only to a taxpayer that:
        (1) is primarily engaged in:
             (A) the production of; or
            (B) research and development related to;

        civil and military jet propulsion systems or military defense systems;
        (2) is certified by the Indiana economic development corporation as an aerospace advanced manufacturer or as a military defense system manufacturer or researcher;
        (3) is a United States Department of Defense contractor; and
        (4) employs at least one thousand (1,000) employees in the United States and maintains one (1) or more manufacturing facilities in Indiana employing at least three thousand (3,000) fifty (50) employees in full-time employment positions that pay on average more than four hundred percent (400%) of the hourly minimum wage under IC 22-2-2-4 or its equivalent.
    (c) A taxpayer that incurs Indiana qualified research expense in a particular taxable year may elect to calculate the research expense tax credit under this section instead of under section 2 of this chapter.
    (d) An election under this section applies to the taxable year for which the election is made and all succeeding taxable years unless the election is revoked with the consent of the department. An election must be made in the manner and on the form prescribed by the department.
    (e) A credit may be authorized by the Indiana economic development corporation and, if authorized, shall be equal to a percentage determined by the Indiana economic development corporation, not to exceed ten percent (10%), multiplied by:
        (1) the taxpayer's Indiana qualified research expenses for the taxable year; minus
        (2) fifty percent (50%) of the taxpayer's average Indiana qualified research expenses for the three (3) taxable years preceding the taxable year for which the credit is being determined.
    (f) The credit amount determined in subsection (e) applies to the taxable year for which the determination is made and all succeeding taxable years unless the determination is changed by the Indiana economic development corporation. The duration of a determination made by the Indiana economic development corporation under subsection (e) shall be specified by the Indiana economic development corporation at the time of the determination.
SOURCE: ; (06)IN1318.1.3. -->     SECTION 3. [EFFECTIVE JANUARY 1, 2007] IC 6-3.1-4-1 and IC 6-3.1-4-2.5, both as amended by this act, apply to taxable years beginning after December 31, 2006.