New Tax Guide a Valuable Asset for Indiana Businesses

We take great pride in helping to educate our members and customers through our many publications. The latest example is the newest edition of the Indiana Taxation Handbook, a valuable resource for those who deal with Indiana tax issues.

As a result of changes in tax law and policy over the last two legislative sessions, new and revised sections of the Indiana Tax Handbook: 2013-14 Edition include:

  • Elimination of the Indiana Inheritance Tax
  • Reduction in the Indiana Corporate Income Tax
  • New consolidated filing options for Indiana businesses
  • Overview of the new rolling reassessments for real property in Indiana
  • Adjustments to the property tax appeals process, and new obstacles that must be overcome in appealing property tax assessments
  • Impact of the automatic taxpayer refunds, and where Indiana taxpayers will receive savings

This informative publication is authored by attorneys at Ice Miller, LLP and is available for $111.75 for Indiana Chamber members and $149 for non-members. Order your copy today by calling (800) 824-6885 or through our web site.

Poll Question: It’s Grading Time

We asked a few weeks ago for your opinion about Gov. Pence's income tax cut proposal and where state legislators would end up in their budget. A 5% cut divided between 2015 (3%) and 2017 (additional 2%) was not one of the options.

I guess that would fall under what was choice D (other), which received 3% of the vote. The other choices were:

  • Full 10% cut as proposed by Pence: 43%
  • 3% cut per the bill passed by the Senate: 27%
  • No tax cut, which was part of the House bill: 27%

Lawmakers have termed the overall budget as the largest tax cut ($1 billion) in the state's history. The Indiana Chamber's upcoming legislative analysis will have more details, but that does include an immediate elimination of the state inheritance tax (in fact, it makes the elimination retroactive to January 1, 2013) instead of the nine-year phase-out that was passed in 2012.

The budget, as always, was a high-profile issue but just one of the topics that garnered attention. Again, more Chamber review is on the way but our new poll question asks for your overall grade of the 2013 General Assembly. Cast your vote at the top right of this page.

Pres. Brinegar Offers Chamber’s Reaction to State Budget Deal

Earlier today, Indiana House Speaker Brian Bosma and Indiana Senate President David Long announced a deal had been reached on House Bill 1001, the two-year state budget. Indiana Chamber of Commerce President and CEO Kevin Brinegar reacts to the budget provisions:

"The new state budget has a strong focus on jobs and economic growth, putting additional investments into education and workforce development while also making important tax cuts.

"Trimming the individual income tax rate by 5% will not only benefit working Hoosiers but also many of the state's smallest business owners.

"It was particularly important to see some K-12 funding restored (cut during the last budget process) and more dollars targeted for our highways and infrastructure system.

"Meanwhile, the immediate elimination of the inheritance tax is long overdue and will lift a significant burden off of small, family-owned businesses.

"We commend House and Senate leaders, the governor's office and all those who got the budget to where it is — fiscally sound and including a wide variety of positive provisions for Hoosiers."

The Ultimate Countdown: 100 Reasons to do Business in Indiana

If you’re an Indiana enthusiast, you’ll enjoy the Indiana Economic Development Corporation’s 100 Reasons to Move Your Business to Indiana. The list is complemented by a colorful, eye-catching web site.

We’re happy to relay the Indiana Chamber suggested some of the items on the list and has contributed mightily over the years to many of the factors that have created an outstanding business climate. Most notably from the 2012 legislative session, we’re enthusiastic about numbers 12 ("Indiana is a right-to-work state") and 14 ("Indiana is eliminating the inheritance tax").

Kudos to the IEDC and all the contributors to this list. We live in a truly great state — and we’re always happy to show it off.

And the Legislators’ Grades Are …

We asked you to evaluate the efforts of the Indiana General Assembly in 2012 and you responded with how I imagine most teacher gradebooks end up looking — a wide variety of marks.

The totals:

  • 28% give legislators a B, with the same percentage not so happy as they offered a D grade
  • 21% say A
  • 17% go down the middle with a C
  • About 7% are in the "other" category (likely an "F" grade)

Right-to-work, a smoking ban that covers 95% of workplaces and elimination of the state’s inheritance tax rank high on the Indiana Chamber’s list of priorities. Despite a few missteps, I’ll go with an "A" for the year.

Our new poll question (top right) offers you the chance to play Supreme Court justice on the health care reform law. Thanks for reading and voting.

A Different Kind of Inheritance Tax?

We were proud to join many Hoosiers and legislators in the 2012 session in striking down Indiana’s inheritance tax.

While it’s not quite the same thing, this story from Minnesota raises interesting questions about the government’s role in monitoring monetary gifts from one person to another. Read the saga of the waitress/mother of five and her alleged "drug money" donation, and let us know in the comments section if you think the police did the right thing. The Duluth News Tribune has the story:

For the struggling waitress with five children, the $12,000 left at the table in a to-go box must have seemed too good to be true.

Moorhead police decided it was just that.

Now, the waitress is suing in Clay County District Court, claiming the cash was given to her and police shouldn’t have seized it as drug money.

“The thing that’s sad about it is here’s somebody who truly needs this gift … and now the government is getting in the way of it,” said the woman’s attorney, Craig Richie of Fargo.

Moorhead police Lt. Tory Jacobson said he couldn’t discuss the matter.

“We certainly have an ongoing investigation with it, with suspicion of narcotics or the involvement of narcotics investigators,” he said.

Assistant County Attorney Michelle Lawson also declined to discuss the pending lawsuit.

The Forum isn’t identifying the waitress in order to protect her in case the cash was part of a drug deal.

According to the lawsuit filed three weeks ago:

The waitress was working at the Moorhead Fryn’ Pan when she noticed that a woman had left a to-go box from another restaurant on the table.

The waitress picked it up, followed the woman to her car and tried to give her the box, but the woman replied, “No, I am good; you keep it.”

The waitress thought that was strange, but she agreed and went back inside the restaurant, the lawsuit states. The box felt too heavy to contain only leftovers, so she looked inside and found cash rolled up in rubber bands.

“Even though I desperately needed the money as my husband and I have 5 children, I feel I did the right thing by calling Moorhead Police,” she states in the lawsuit.

Police arrived and seized the money, which the woman was told amounted to roughly $12,000. She was first told the money would be hers if it wasn’t claimed within 60 days, the lawsuit states. Then she claims she was told to wait 90 days. Continue reading

Short Session Long on Achievement

The following is a message from Indiana Chamber President Kevin Brinegar:

It was the tale of two sessions in 2012. Act one centered on making Indiana the 23rd right-to-work state, giving current and future Hoosier workers the right to choose whether or not to join a labor union. Act two set the stage for such vital public policies as a statewide smoking ban, protection of our water rights and the inheritance tax elimination to become reality.

The passage of right-to-work (HB 1001) was truly monumental. Now, Indiana has further distinguished itself from neighboring states and given companies another big reason to bring their business and jobs here – and not there. In the short time since it passed, there has already been documented interest from several companies now putting Indiana at the top of the list for their business relocation or expansion. And it’s only just beginning!

Under the state’s new smoking ban law (HB 1149), Indiana will now protect 95% of people while at work and also allow citizens to eat at any restaurant in the state without having to encounter cigarette or cigar smoke. That will make a huge difference in all parts of the state. Many Hoosier towns are not part of a metro area and did not have a non-smoking ordinance previously in place. This new state law will protect residents in those locations.

Also now covered are companies that wanted to make their workplaces smoke-free but couldn’t due to existing labor agreements. Meanwhile, local governments still can enact stricter ordinances and the ones already passed remain in place. Sure, an even more comprehensive ban would have been preferred. What passed, however, was the strongest possible that could be done at this time and nothing short of a major accomplishment.

You can also count the inheritance tax elimination (SB 293) as a big victory. This tax only amounts to 1% of the total state revenue but made things unnecessarily difficult for so many Hoosiers. For a small family-owned company, the inheritance tax was often a tremendous hindrance to even staying in business after the death of the owner.

Effective at the end of the year, the more favorably-treated Class A category of inheritors expands (to include stepchildren and children’s spouses) and the amount excluded from the tax increases from $100,000 to $250,000. Beginning next year, the inheritance tax will be phased out equally over nine years – going away completely in 2022.

One bill that didn’t get a lot of press, but was among the most important to pass involves the state’s water supply (SB 132). Now water utilities are required to report usage to the Indiana Utility Regulatory Commission; only 15% of utilities previously did so. It also clarifies the water usage laws to confirm that private property owners, not municipalities, have control of the underground wells on their property. Both are needed steps toward a statewide plan for the protection and effective regulation of Indiana’s water resources.

In the local government arena, a multi-year effort to eliminate nepotism and conflict of interest for local government office holders and employees (HB 1005) finally made it across the finish line. There are too many examples where taxpayers pay for excessive costs because an employee also serves on the legislative body that approves that local government unit’s budget.

The grandfathering in of current employees is too generous, but nonetheless was a positive step that new local government employees will have to abide by.

We thank House and Senate leaders, along with Gov. Daniels, who took on several high-profile, emotional issues this session and guided them to passage. It was a fitting conclusion for Daniels’ final legislative session, with accomplishments that will leave a lasting positive impact on Hoosiers for generations to come.

See the full 2012 Legislative Report and Scorecard.

Chamber Celebrates Three Key Highlights of the 2012 Session

The 2012 legislative session should be remembered for far more than being the forum for Indiana becoming the 23rd right-to-work state, says Indiana Chamber President Kevin Brinegar.

"While right-to-work was deservedly the headliner, we finished with the passage of two impressive supporting acts: the statewide smoking ban and the inheritance tax elimination. Both have the potential to positively impact Hoosiers for generations to come," he offers
Details and specific comments from Brinegar on these three public policies:

Right-to-work for employees (HB 1001) – Prohibits unions from forcing Indiana workers to join or pay dues and fees to a labor union to get or keep a job in this state; makes it the employees’ choice. Does not eliminate unions or collective bargaining.

"With the passage of right-to-work, Indiana has further distinguished itself from neighboring states and given companies another big reason to bring their business and jobs here – and not there. In the five weeks since it passed, there has already been documented interest from several companies now putting Indiana at the top of the list for their business relocation or expansion."

Statewide smoking ban (HB 1149) – Prohibits smoking in the majority of workplaces (bars/taverns, gambling institutions are biggest exceptions), all restaurants and within eight feet of a building’s public entrance. Local governments may enact stricter ordinances.

"Smoking has direct financial ramifications for all businesses that offer health care insurance and the employees who are covered, not to mention the health implications for those non-smokers who unavoidably encounter second-hand smoke.

"Indiana will now protect 95% of Hoosiers while at work and also allow citizens to eat at a restaurant without having to encounter cigarette or cigar smoke. That is a huge positive development and legislators should be commended for coming together and taking that important step at this time."

Elimination of the state’s inheritance tax (SB 293) – Phases out the inheritance tax incrementally over a nine-year period beginning in 2013, with elimination of the tax complete in 2022. Also expands the more favorably-treated Class A category of inheritors and raises the inheritance amount (currently very low) that’s excluded from the tax; both provisions take effect this year.

"This tax only amounted to 1% of total state revenue but made things unnecessarily burdensome for so many Hoosiers. For a small family-owned business, the inheritance tax could be a tremendous hindrance to even continuing after the death of the owner."

Inheritance Tax Bills Aim to Lessen Burden on Small Businesses

Both the House and the Senate have now passed legislation addressing the inheritance tax. However, the bills take very different approaches in how they choose to deal with the egregious tax. The House bill (HB 1199) is simple and straightforward, slowly phasing the tax out over 10 years. The Senate bill (SB 293) is a little more complicated but makes a combination of meaningful improvements that offers more immediate relief for many.

These bills and their approaches are different but they are by no means incompatible. They could easily be combined to produce a ‘best of both’ bill – immediate relief, in the form of raised exemption thresholds and expanding the beneficiaries that are most favorably treated (as in the Senate bill) coupled with the permanence of a phase-out (as in the House bill). The easiest way to make this blend happen would be to replace the 50% rate reduction in SB 293 with a 50% credit, then proceed to phase the tax out over the following five years by increasing the credit an additional 10% each year thereafter. The hope is that would be a final product everyone can live with.

Bill # and Title: SB 293 – Inheritance Tax
Author: Sen. Jim Smith (R–Charlestown)
Summary: Reclassifies a spouse, widow or widower of a child of the transferor as a Class A transferee instead of a Class B transferee. Reclassifies a spouse, widow or widower of a stepchild of the transferor as a Class A transferee instead of a Class C transferee. Annually increases the inheritance tax exemption amounts through 2015. Reduces the inheritance tax rates by 50% beginning June 30, 2016.
Chamber Position: Support
Status: Passed the full Senate on Tuesday 50-0.

Update/Chamber Action: This bill addresses several negative aspects of Indiana’s inheritance tax. It updates who is included in the more favorably-treated category of inheritors (Class A beneficiaries) by redefining the group to encompass not just the children, but also the spouses of a child or stepchild. It also phases in significant increases in the ridiculously low threshold for the amounts that are excluded/exempted from the tax. And finally, starting in 2016, it cuts the rates in half. So the bill takes very meaningful steps to improve the tax, but it doesn’t go all the way and put Indiana on a course to completely rid our citizens of the onerous tax.

The Indiana Chamber, in its testimony at the hearing, acknowledged the very substantial steps that this bill provides in terms of lessening the detrimental impact of this tax and that it smartly addresses the standout problems. However, we took the opportunity to point out that while this bill provides more immediate relief than the House approach (see below), it falls short by not eliminating the tax altogether like the House version does via a scheduled (albeit slow) 10-year phase-out. We suggested that blending this bill’s more immediate improvements with the House bill’s ultimate elimination would represent the best amalgamation of policy choices. Our efforts during the second half of the session will be to promote the wisdom of combining the best provisions of the House and Senate bills as each is considered by the opposite chamber.

Bill # and Title:  HB 1199 – Inheritance Tax
Author: Rep. Eric Turner (R-Cicero)
Summary: Provides for a gradual, 10-year phase out of the inheritance tax, beginning July 1, 2013.
Chamber Position: Support
Status: Passed the full House 78-17.

Update/Chamber Action: The merits of doing away with this offensive tax are becoming more widely accepted as legislators consider its impact on small family businesses in their communities. This was evidenced by the bipartisan support it received as it easily passed out of the Ways and Means Committee. The Indiana Chamber is working hard to make sure everyone truly appreciates just how counter-productive the tax is, who is impacted, how they are impacted and why the state would be better off without it.

Buckeye State Bucks Estate Tax

Ohio has succeeded in something that many in Indiana have been pushing toward for years (and it has nothing to do with a Big Ten football championship). The Buckeye State successfully repealed its state estate tax. The Washington, D.C.-based American Family Business Foundation recently issued a statement on the matter:

Ohio will become the first state since 2009 to repeal its state estate tax, which was one of the worst in the nation, taxing any family with more than $338,333 in assets. The repeal goes into effect on January 1, 2013, and is a part of Ohio’s FY 2012-2013 budget, which Governor John Kasich is expected to sign into law by the end of today.

The American Family Business Institute (AFBI), a national trade association of family business owners, farmers and entrepreneurs across the country, applauds Ohio’s Governor and the State House for passing repeal, which was included in Ohio’s 2012-2013 biennial budget and which goes into effect starting January 1, 2013.

AFBI’s President Dick Patten, who testified before both the Ohio House of Representatives and Ohio Senate in support of the legislation, said: “By repealing and not just ‘reforming’ their state estate tax, Ohio has set an example for the 21 other states and the District of Columbia that still impose these onerous taxes.”

Those remaining states with estate or inheritance taxes include: 
Connecticut – Estate Tax
Delaware – Estate Tax
Hawaii – Estate Tax
Illinois – Estate Tax
Indiana – Inheritance Tax
Iowa – Inheritance Tax
Kentucky – Inheritance Tax
Maine – Estate Tax
Maryland – Estate and Inheritance Tax
Massachusetts – Estate Tax
Minnesota – Estate Tax
 Nebraska – Inheritance Tax
New Jersey – Estate and Inheritance Tax
New York – Estate Tax
North Carolina – Estate Tax
Oregon – Estate Tax
Pennsylvania – Inheritance Tax
Rhode Island – Estate Tax
Tennessee – Inheritance Tax
Vermont – Estate Tax
Washington – Estate Tax
Washington, DC – Estate Tax

“Ohio’s estate tax repeal is emblematic of the larger trend towards repeal or positive reform of estate taxes that is occurring throughout the nation,” said Patten.

For example:

  • In Oregon, voters spoke out and legislators backed away from a proposal to turn the state inheritance tax into an estate tax with the highest rate in the nation.
  • In Maine, the Governor signed into law a proposal to double the estate tax exemption.
  • In North Carolina, the State Senate rejected the governor’s proposal to do away with the current exemption, which would have caused more Tarheel state residents to be hit with an even heavier death tax.
  • In Minnesota, the legislature has proposed quadrupling the estate tax exemption as part of the state budget.
  • On Capitol Hill, nearly 150 Members of Congress – both Republican and Democrat – have cosponsored the “Death Tax Repeal Permanency Act” (HR 1259), a bill that would permanently repeal the Federal Estate Tax.