Citations Affected: IC 6-2.5-4-5; IC 6-3-2; IC 6-3.1.
Synopsis: Closed military bases and enterprise zones. Provides the
following tax incentives to a business that locates new operations in
certain qualified areas containing a completely or partially inactive or
closed military base: (1) A sales tax exemption for sales of utility
services or commodities made to the business. (2) An adjusted gross
income tax rate of 5% for the year of relocation and the next
succeeding four taxable years. Provides a military base investment cost
credit against state tax liability for a taxpayer who purchases an
ownership interest in or otherwise invests in a business located in a
qualified area. Provides that the tax incentives are not available to a
business that does not have operations in a qualified area and that
substantially reduces or ceases its operations at another location in
Indiana in order to relocate them within the qualified area. Increases
the enterprise zone loan interest credit from 5% to 15% of the amount
of interest received by the taxpayer. Makes the enterprise zone
investment cost credit available to a taxpayer that makes an investment:
(1) in a business that locates new operations in an enterprise zone; and
(2) through which the taxpayer does not acquire an ownership interest
in the business.
Effective: July 1, 2004; January 1, 2005.
January 8, 2004, read first time and referred to Committee on Economic Development and
Technology.
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
SECTION 1. IC 6-2.5-4-5 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 5. (a) As used in this
section, a "power subsidiary" means a corporation which is owned or
controlled by one (1) or more public utilities that furnish or sell
electrical energy, natural or artificial gas, water, steam, or steam heat
and which produces power exclusively for the use of those public
utilities.
(b) A power subsidiary or a person engaged as a public utility is a
retail merchant making a retail transaction when the subsidiary or
person furnishes or sells electrical energy, natural or artificial gas,
water, steam, or steam heating service to a person for commercial or
domestic consumption.
(c) Notwithstanding subsection (b), a power subsidiary or a person
engaged as a public utility is not a retail merchant making a retail
transaction when: in any of the following transactions:
(1) The power subsidiary or person provides, installs, constructs,
services, or removes tangible personal property which is used in
connection with the furnishing of the services or commodities
listed in subsection (b).
(2) The power subsidiary or person sells the services or
commodities listed in subsection (b) to another public utility or
power subsidiary described in this section or a person described
in section 6 of this chapter. or
(3) The power subsidiary or person sells the services or
commodities listed in subsection (b) to a person for use in
manufacturing, mining, production, refining, oil extraction,
mineral extraction, irrigation, agriculture, or horticulture.
However, this exclusion for sales of the services and commodities
only applies if the services are consumed as an essential and
integral part of an integrated process that produces tangible
personal property and those sales are separately metered for the
excepted uses listed in this subdivision, or if those sales are not
separately metered but are predominately used by the purchaser
for the excepted uses listed in this subdivision.
(4) The power subsidiary or person sells the services or
commodities listed in subsection (b) to a business that locates
all or part of its operations in one (1) of the following areas
after June 30, 2004, and uses the services or commodities in
that area:
(A) A military base (as defined in IC 36-7-30-1(c)).
(B) A military base reuse area established under
IC 36-7-30.
(C) An economic development area established under
IC 36-7-14.5-12.5.
(D) A military base recovery site designated under
IC 6-3.1-11.5.
However, this subdivision does not apply to a business that
substantially reduces or ceases its operations at another
location in Indiana in order to relocate its operations in an
area described in this subdivision, unless the department
determines that the business had existing operations in the
area described in this subdivision and that the operations
relocated to the area are an expansion of the business's
operations in the area.
SECTION 2. IC 6-3-2-1, AS AMENDED BY P.L.192-2002(ss),
SECTION 70, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]: Sec. 1. (a) Each taxable year, a tax at the rate of
three and four-tenths percent (3.4%) of adjusted gross income is
imposed upon the adjusted gross income of every resident person, and
on that part of the adjusted gross income derived from sources within
Indiana of every nonresident person.
(b) Except as provided in section 1.5 of this chapter, each taxable
year, a tax at the rate of eight and five-tenths percent (8.5%) of adjusted
gross income is imposed on that part of the adjusted gross income
derived from sources within Indiana of every corporation.
SECTION 3. IC 6-3-2-1.5 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]: Sec. 1.5. (a) As used in this section, "qualified
area" means:
(1) a military base (as defined in IC 36-7-30-1(c));
(2) a military base reuse area established under IC 36-7-30;
(3) an economic development area established under
IC 36-7-14.5-12.5; or
(4) a military base recovery site designated under
IC 6-3.1-11.5.
(b) Except as provided in subsection (c), a tax at the rate of five
percent (5%) of adjusted gross income is imposed on that part of
the adjusted gross income of a corporation that is derived from
sources within a qualified area if the corporation locates all or part
of its operations in a qualified area during the taxable year, as
determined under subsection (e). The tax rate under this section
applies to the taxable year in which the corporation locates its
operations in the qualified area and to the next succeeding four (4)
taxable years.
(c) A taxpayer is not entitled to the tax rate described in
subsection (b) to the extent that the taxpayer substantially reduces
or ceases its operations at another location in Indiana in order to
relocate its operations within the qualified area, unless:
(1) the taxpayer had existing operations in the qualified area;
and
(2) the operations relocated to the qualified area are an
expansion of the taxpayer's operations in the qualified area.
(d) A determination under subsection (c) that a taxpayer is not
entitled to the tax rate provided by this section as a result of a
substantial reduction or cessation of operations applies to the
taxable year in which the substantial reduction or cessation occurs
and in all subsequent years. Determinations under this section shall
be made by the department of state revenue.
(e) The department of state revenue:
(1) shall adopt rules under IC 4-22-2 to establish a procedure
for determining the part of a corporation's adjusted gross
income that was derived from sources within a qualified area;
and
(2) may adopt other rules that the department considers
necessary for the implementation of this chapter.
SECTION 4. IC 6-3.1-7-2, AS AMENDED BY P.L.73-2000,
SECTION 2, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]: Sec. 2. (a) A taxpayer is entitled to a credit
against the taxpayer's state tax liability for a taxable year if the
taxpayer:
(1) receives interest on a qualified loan in that taxable year;
(2) pays the registration fee charged to zone businesses under
IC 4-4-6.1-2;
(3) provides the assistance to urban enterprise associations
required from zone businesses under IC 4-4-6.1-2(b); and
(4) complies with any requirements adopted by the enterprise
zone board under IC 4-4-6.1 for taxpayers claiming the credit
under this chapter.
However, if a taxpayer is located outside of an enterprise zone,
subdivision (4) does not require the taxpayer to reinvest its incentives
under this section within the enterprise zone, except as provided in
subdivisions (2) and (3).
(b) The amount of the credit to which a taxpayer is entitled under
this section is five fifteen percent (5%) (15%) multiplied by the
amount of interest received by the taxpayer during the taxable year
from qualified loans.
(c) If a pass through entity is entitled to a credit under subsection (a)
but does not have state tax liability against which the tax credit may be
applied, an individual who is a shareholder, partner, beneficiary, or
member 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, partner, beneficiary, or member is
entitled.
The credit provided under this subsection is in addition to a tax credit
to which a shareholder, partner, beneficiary, or member of a pass
through entity is entitled. However, a pass through entity and an
individual who is a shareholder, partner, beneficiary, or member of a
pass through entity may not claim more than one (1) credit for the
qualified expenditure.
SECTION 5. IC 6-3.1-10-2 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JANUARY 1, 2005]: Sec. 2. As used in this
chapter, "qualified investment" means any of the following:
(1) The purchase of an ownership interest in a business located in
an enterprise zone if the purchase is approved by the department
of commerce under section 8 of this chapter.
(2) Subject to section 8.5 of this chapter, an investment:
(A) that is made in a business that locates all or part of its
operations in an enterprise zone during the taxable year;
(B) through which the taxpayer does not acquire an
ownership interest in the business; and
(C) that is approved by the department of commerce under
section 8 of this chapter.
SECTION 6. IC 6-3.1-10-8, AS AMENDED BY P.L.289-2001,
SECTION 13, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2005]: Sec. 8. (a) To be entitled to a credit for an
investment described in section 2(1) of this chapter, a taxpayer must
request the department of commerce to determine:
(1) whether a purchase of an ownership interest in a business
located in an enterprise zone is a qualified investment; and
(2) the percentage credit to be allowed.
The request must be made before a purchase is made.
(b) To be entitled to a credit for an investment described in
section 2(2) of this chapter, a taxpayer must request the
department of commerce to determine:
(1) whether an investment in a business that locates in an
enterprise zone during the taxable year is a qualified
investment; and
(2) the percentage credit to be allowed.
The request must be made before an investment is made.
(c) The department of commerce shall find that a purchase or other
investment is a qualified investment if:
(1) the business is viable;
(2) the business has not been disqualified from enterprise zone
incentives or benefits under IC 4-4-6.1;
(3) the taxpayer has a legitimate purpose for purchase of the
ownership interest or the investment;
(4) the purchase or investment would not be made unless a credit
is allowed under this chapter; and
(5) the purchase or investment is critical to the commencement,
enhancement, or expansion of business operations in the zone
and:
(A) in the case of an investment described in section 2(1) of
this chapter, the purchase will not merely transfer
ownership, and the purchase proceeds will be used only in
business operations in the enterprise zone; and
(B) in the case of an investment described in section 2(2) of
this chapter, the investment will not be made in a business
that substantially reduces or ceases its operations at
another location in Indiana in order to relocate its
operations within the enterprise zone, as described in
section 8.5 of this chapter.
The department may delay making a finding under this subsection if,
at the time the request is filed under subsection (a) or (b), an urban
enterprise zone association has made a recommendation that the
business be disqualified from enterprise zone incentives or benefits
under IC 4-4-6.1 and the enterprise zone board has not acted on that
request. The delay by the department may not last for more than sixty
(60) days.
(c) (d) If the department of commerce finds that a purchase or other
investment is a qualified investment, the department shall certify the
percentage credit to be allowed under this chapter based upon the
following:
(1) For an investment described in section 2(1) of this chapter,
a percentage credit of ten percent (10%) may be allowed based
upon the need of the business for equity financing, as
demonstrated by the inability of the business to obtain debt
financing.
(2) A percentage credit of two percent (2%) may be allowed for
purchases of or investments in business operations in the retail,
professional, or warehouse/distribution codes of the SIC Manual.
(3) A percentage credit of five percent (5%) may be allowed for
purchases of or investments in business operations in the
manufacturing codes of the SIC Manual.
(4) A percentage credit of five percent (5%) may be allowed for
purchases of or investments in high technology business
operations (as defined in IC 4-4-6.1-1.3).
(5) A percentage credit may be allowed for jobs created during
the twelve (12) month period following the purchase of an
ownership interest in the zone business or other investment in
the zone business, as determined under the following table:
JOBS CREATED PERCENTAGE
Less than 11 jobs 1%
11 to 25 jobs 2%
26 to 40 jobs 3%
41 to 75 jobs 4%
through IC 6-3-7 (the adjusted gross income 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. 7. As used in this chapter, "taxpayer" means an individual
or pass through entity that has any state tax liability.
Sec. 8. As used in this chapter, "transfer ownership" means to
purchase existing investment in a business, including real property,
improvements to real property, or equipment.
Sec. 9. (a) A taxpayer is entitled to a credit against the
taxpayer's state tax liability for a taxable year if the taxpayer
makes a qualified investment in that taxable year.
(b) The amount of the credit to which a taxpayer is entitled is
the percentage determined under section 12 of this chapter
multiplied by the amount of the qualified investment made by the
taxpayer during the taxable year.
Sec. 10. (a) If a pass through entity is entitled to a credit under
section 9 of this chapter but does not have state tax liability against
which the tax credit may be applied, an individual who is a
shareholder, partner, or member 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, partner, or member is
entitled.
(b) The credit provided under subsection (a) is in addition to a
tax credit to which a shareholder, partner, or member of a pass
through entity is otherwise entitled under this chapter. However,
a pass through entity and an individual who is a shareholder,
partner, or member of the pass through entity may not claim more
than one (1) credit for the same investment.
Sec. 11. (a) If the amount determined under section 9(b) 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 a subsequent taxable year.
(b) A taxpayer is not entitled to a carryback or refund of unused
credit.
Sec. 12. (a) To be entitled to a credit for a purchase described in
section 4(1) of this chapter, a taxpayer must request the
department of commerce to determine:
(1) whether a purchase of an ownership interest in a business
located in a qualified area is a qualified investment; and
(2) the percentage credit to be allowed.
The request must be made before a purchase is made.
(b) To be entitled to a credit for an investment described in
section 4(2) of this chapter, a taxpayer must request the
department of commerce to determine:
(1) whether an investment in a business that locates in a
qualified area during the taxable year is a qualified
investment; and
(2) the percentage credit to be allowed.
The request must be made before an investment is made.
(c) The department of commerce shall find that a purchase or
other investment is a qualified investment if:
(1) the business is viable;
(2) the taxpayer has a legitimate purpose for purchase of the
ownership interest or the investment;
(3) the purchase or investment would not be made unless a
credit is allowed under this chapter; and
(4) the purchase or investment is critical to the
commencement, enhancement, or expansion of business
operations in the qualified area and:
(A) in the case of a purchase described in section 4(1) of
this chapter, the purchase will not merely transfer
ownership, and the purchase proceeds will be used only in
business operations in the qualified area; and
(B) in the case of an investment described in section 4(2) of
this chapter, the investment will not be made in a business
that substantially reduces or ceases its operations at
another location in Indiana in order to relocate its
operations within the qualified area, as described in section
13 of this chapter.
(d) If the department of commerce finds that a purchase or
other investment is a qualified investment, the department of
commerce shall certify the percentage credit to be allowed under
this chapter based upon the following:
(1) For a purchase described in section 4(1) of this chapter, a
percentage credit of ten percent (10%) may be allowed based
on the need of the business for equity financing, as
demonstrated by the inability of the business to obtain debt
financing.
(2) A percentage credit of two percent (2%) may be allowed
for purchases of or investments in business operations in the
retail, professional, or warehouse/distribution codes of the
SIC Manual (or corresponding sectors in the NAICS Manual).
(3) A percentage credit of five percent (5%) may be allowed
for purchases of or investments in business operations in the
manufacturing codes of the SIC Manual (or corresponding
sectors in the NAICS Manual).
(4) A percentage credit of five percent (5%) may be allowed
for purchases of or investments in high technology business
operations (as defined in IC 4-4-6.1-1.3).
(5) A percentage credit may be allowed for jobs created
during the twelve (12) month period following the purchase of
an ownership interest in the business or other investment in
the business, as determined under the following table:
JOBS CREATED PERCENTAGE
Less than 11 jobs 1%
11 to 25 jobs 2%
26 to 40 jobs 3%
41 to 75 jobs 4%
More than 75 jobs 5%
(6) A percentage credit of five percent (5%) may be allowed
if fifty percent (50%) or more of the jobs created in the twelve
(12) month period following the purchase of an ownership
interest in the business or other investment in the business will
be reserved for residents in the qualified area.
(7) A percentage credit may be allowed for investments made
in real or depreciable personal property, as determined under
the following table:
AMOUNT OF INVESTMENT PERCENTAGE
Less than $25,001 1%
$25,001 to $50,000 2%
$50,001 to $100,000 3%
$100,001 to $200,000 4%
More than $200,000 5%
The total percentage credit may not exceed thirty percent (30%).
(e) In the case of a purchase described in section 4(1) of this
chapter, if all or a part of a purchaser's intent is to transfer
ownership, the tax credit shall be applied only to that part of the
purchase that relates directly to the enhancement or expansion of
business operations in the qualified area.
Sec. 13. (a) This subsection applies to an investment described
in section 4(2) of this chapter.
(b) A taxpayer is not entitled to claim the credit provided by this
chapter to the extent that the taxpayer invests in a business that
substantially reduces or ceases its operations at another location in
Indiana in order to relocate its operations within the qualified
area, unless:
(1) the business had existing operations in the qualified area;
and
(2) the operations relocated to the qualified area are an
expansion of the business's operations in the qualified area.
(c) A determination under subsection (b) that a taxpayer is not
entitled to the credit provided by this chapter as a result of a
business's substantial reduction or cessation of operations applies
to credits that would otherwise arise in the taxable year:
(1) in which the substantial reduction or cessation occurs; or
(2) in which the taxpayer proposes to make the investment in
the business, if different than the taxable year described in
subdivision (1).
Determinations under this section shall be made by the department
of state revenue.
Sec. 14. To receive the credit provided by this chapter, a
taxpayer must claim the credit on the taxpayer's annual state tax
return or returns in the manner prescribed by the department of
state revenue. The taxpayer shall submit to the department of state
revenue the certification of the percentage credit by the
department of commerce and all information that the department
of state revenue determines is necessary for the calculation of the
credit provided by this chapter and for the determination of
whether an investment is a qualified investment.
SECTION 9. [EFFECTIVE JANUARY 1, 2005] IC 6-3-2-1,
IC 6-3.1-7-2, IC 6-3.1-10-2, and IC 6-3.1-10-8, all as amended by
this act, and IC 6-3-2-1.5, IC 6-3.1-10-8.5, and IC 6-3.1-11.6, all as
added by this act, apply to taxable years beginning after December
31, 2004.
SECTION 10. [EFFECTIVE JULY 1, 2004] IC 6-2.5-4-5, as
amended by this act, applies to transactions that occur after June
30, 2004.