Usual End of Session Tax Legislation Hodgepodge

19145168A few big bills filled with various tax provisions remain. Ones dealing primarily with property tax are SB 308 and HB 1290, and another affecting sales and income taxes is SB 309. Meanwhile, a couple bills – SB 323 and HB 1215 – call for important issues to be studied during the interim. And another bill cleans up last year’s “de minimus” legislation in HB 1169. All par for the course going into the final leg of the session.

Senate Bill 308, authored by Sen. Brandt Hershman (R-Buck Creek), and HB 1290 authored by Rep. Tim Brown (R-Crawfordsville), are intended to take another shot at the “big box” property assessment issue and will require the Senate Tax and Fiscal Policy Committee chair (Hershman) and the House Ways and Means Committee chair (Brown) to work out some differences in conference committee. There is much agreement on a new approach to incorporate the concept of market segmentation into the process, but disagreement on the need to include a provision concerning actual building construction costs (that was part of the legislation from last year that is being repealed and replaced with the market segmentation provisions).

The two chairmen will also have to sit down and sort through differences in SB 309 that gets into all kinds of other tax matters. This bill is the one that effectively overturns the Tax Court case regarding the taxation of materials used in construction projects (the Lowe’s case.) Senate Bill 323, also a Sen. Hershman bill, directs the Legislative Services Agency to study mandatory unitary combined reporting for apportioning Indiana’s corporate income tax. This is an issue of great significance and concern to the Chamber. The House amended this bill to add transfer pricing, a related issue, to the scope of the study. Transfer pricing was at the heart of the Tax Court cases that spurred Sen. Hershman to promote the idea of combined reporting.

Another bill, HB 1215, authored by Rep. Brown, asks for the study of the personal property audit process. The Chamber welcomes this initiative to take a closer look at how these audits are conducted by private consultants working for the county assessing officials.

And lastly, we are pleased to report the passage of HB 1169, introduced by Rep. Tom Saunders (R-Lewisville) to remove the notarization requirement attached to last year’s “de minimus” personal property tax exemption. Last week, the Senate took out the House’s reduction of the maximum county option fee; Rep. Saunders and the House concurred to that change and the legislation now moves to the Governor for signature.

Chamber Convenes Infrastructure Leadership to Discuss I-65, Long-Term Solutions

10049160The Indiana Chamber recently brought together a trio of the state’s top leadership on infrastructure issues to discuss Indiana’s current maintenance and funding challenges, including the closure of Interstate 65 near Lafayette due to emergency bridge repairs, and long-term solutions to an estimated $1 billion annual road and bridge maintenance funding gap.

Indiana Department of Transportation (INDOT) Commissioner Brandye Hendrickson, House Ways and Means Committee Chairman Tim Brown M.D. (R-Crawfordsville), and House Roads and Transportation Committee Chairman Ed Soliday (R-Valparaiso) appeared before the Chamber’s Infrastructure Policy Committee to share their views and hear the viewpoints of the state’s business leadership.

INDOT Commissioner Hendrickson stated that the I-65 closure represented significant logistical and engineering challenges and economic costs, but that the bridge repairs should be completed and the interstate back online by mid-September. She stated that INDOT was doing all it could to expedite the process, but that the bridge failure pointed to the state’s maintenance needs. A statutorily required study of potential funding mechanisms has been underway and will be made public at a legislative interim study committee this fall, most likely in October.

Both Brown and Soliday agreed that the state needs to commit for funding to road and bridge maintenance – and that was the case prior to the I-65 bridge incident. Brown suggested that revenue projections look pretty good for the $200 million appropriated to the 2020 fund to be deployed later this year, but acknowledged that more needed to be done – most likely in 2017, the next budget-writing session of the General Assembly. He also said he was open to using the $500 million in the Next Generation Trust Fund for immediate infrastructure maintenance needs. Brown would like to see a “consistent funding stream on an annual basis for transportation infrastructure” enacted in the future, but left all options on the table pending review of the INDOT study.

Soliday praised the INDOT study and described it as a “tool to look at a number of funding mechanisms and options”; he plans to hold a study committee hearing in October to review the tool and various options. Soliday said that the average Hoosier driving 12,000 miles/year pays about $108/year in taxes for transportation infrastructure and described that as a “bargain” compared to the average monthly cell phone or cable TV bills consumers pay. Both legislators were supportive of public-private partnerships and progress on existing road projects; they expressed frustration that county wheel taxes had not been more fully utilized to address local funding needs for local and county roads.

It was clear from the panel discussion that it is a question of when and how the transportation funding gap will be addressed, not “if” it will be addressed. Most likely, these issues will begin to be discussed in-depth in the 2016 legislative session with some supplemental funding being found, but that a longer-term solution will be waiting until the budget-writing process in 2017.