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Update SB 1: Business Personal Property Tax Elimination--Part of Governor's RoadMap


Yesterday, a joint conference committee on SB 1 and HB 1001 met and unveiled what is likely to be the "compromise" on the Governor's initiative to eliminate yet another source of revenue for public services without replacement revenue identified--this time, the business personal property tax.  The language will ultimately go into SB 1.


Throughout the session, ISTA has been a partner in a coalition called "Replace Don't Erase" that is made up of various stakeholder groups (local government/schools/libraries) that rely, in part, on business personal property tax revenue.


While it is clear that the impact has been mitigated and the conference report will include a blue-ribbon committee to study this issue (the committee will include school representation), it is still troubling that anything other than just a true study is being proposed, especially in a short session.


In addition to the study committee, the details of the conference report include the following:


(1) There will be a reduction in the corporate gross income tax over 6 years, landing on 4.9%.

(2) There will be a reduction in the financial institutions tax rate over 6 years, landing on 4.9%.

(3)  There will also be "super-abatement" options (exempting the tax for up to 20 years) for certain new initatives.

(4)  Each of the SB 1 and HB 1001 original approaches (small business personal property tax exemption and local option elimination of the business property tax for new equipment, respectively) were maintained as parallel local options:


  • Local option small business personal property tax exemption:    If the local COIT board (schools do not have a seat on the COIT board) approves, small businesses may exempt personal property with an acquisition cost of less than $20,000.  This would eliminate 50% of those who filed under the tax previously.  The fiscal impact is being projected at $7.6 million if every county opted in.  Of this, about $2 million would be lost to schools.
  • Local option for the elimination of property tax on new business personal property:  If the loca COIT board approves, "new" business equipment would be exempted from the business property tax.  Eventually as all equipment is replaced, the property tax on equipment will disappear and revenue to local governments and schools will fall.

While it is undeniable that the scope of the Governor's original sweeping proposal has been scaled back dramatically, it is perplexing that changes potentially impacting the levels of Indiana's state revenues would be made prior to the long, budget-writing session.