Indiana Taxes

Indiana Corporate Income Tax Reduction from 8.5% to 6.5%
The decrease will be phased in over a four year period starting on July 1, 2012 through June 30, 2015.  The dates align with the state budget year versus a calendar year.

SECTION 54. IC 6-3-2-1 IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2011]: 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 following rate of adjusted gross income is imposed on that part of the adjusted gross income derived from sources within Indiana of every corporation:
   (1)  Before July 1, 2012, eight and five-tenths percent (8.5%).
   (2)  After June 30, 2012, and before July 1, 2013, eight percent (8.0%).
   (3)  After June 30, 2013, and before July 1, 2014, seven and five-tenths percent (7.5%).
   (4)  After June 30, 2014, and before July 1, 2015, seven percent (7.0%).
   (5)  After June 30, 2015, six and five-tenths percent (6.5%).

(c) If for any taxable year a taxpayer is subject to different tax rates under subsection (b), the taxpayer's tax rate for that taxable year is the rate determined in the last STEP of the following STEPS:
STEP ONE: Multiply the number of months in the taxpayer's taxable year that precede the month the rate changed by the rate in effect before the rate change.
STEP TWO: Multiply the number of months in the taxpayer's taxable year that follow the month before the rate changed by the rate in effect after the rate change.
STEP THREE: Divide the sum of the amounts determined under STEPS ONE and TWO by twelve (12).
However, the rate determined under this subsection shall be rounded to the nearest one hundredth of one percent (0.01%).

Single-Sales Factor
Indiana is phasing in the single-sales factor for apportioning corporate income tax. Indiana had determined its share of an interstate or international corporation’s taxable income by weighing the Indiana portion of a company’s property, personnel and sales. The single-sales factor will calculate the Indiana portion of a corporation’s tax based solely on the portion of a company’s sales in Indiana. This change in the Indiana tax code is being phased in over five years and will
be complete in 2011.

Inventory Taxes
Taxes are no longer paid on inventory in Indiana.

Investment Deduction
Capital improvements to business properties in Indiana are eligible for simplified investment deduction from the increase in assessed valuation (AV) that occurs as a result of the investment. The deduction equals 75 percent of the property’s increase in AV in year one; 50 percent of the increase in AV in year two; and 25 percent of the increase in AV in year three. Investments in real and personal property are eligible for the investment deduction.

Research Expense Tax Credit
Companies making qualified research expenses are eligible for a tax credit equal to 10 percent of eligible investment. Beginning after December 31, 2007, the qualified research expense credit for the first $1 million of eligible investment will be equal to 15 percent of the investment amount. Eligible investment in excess of $1 million qualifies for a 10 percent credit.

Sales and use Tax
Indiana’s Sales and Use Tax is one of the lowest in the Midwest. Purchasers of tangible personal property, public utility services and renters pay a mere 6 percent. Exemptions include wholesale sales, items used directly in production and sales made in interstate commerce.

Research and development equipment acquired after June 30, 2007 will be completely exempt from the sales tax.

Transactions involving research and development equipment acquired after June 30, 2005, and before July 1, 2007, qualify a taxpayer for a 50 percent refund of the sales taxes paid.

Source:Indiana Economic Development Corp.

Indiana Workers Compensation Advantages
Low cost for employers - From highest to lowest, Indiana ranked 50 out of 51 jurisdictions with a rate of $1.24.
Source: State of Oregon report 2006 Oregon Workers'Compensation Premium Ranking. Rate indices range from from a low of $1.10 in North Dakota to a high of $5.00 in Alaska, with a median value of $2.48.

Unemployment Taxes

Indiana's workers compensation insurance rate is $1.88/$100 in payroll

Indiana Unemployment Taxes  
New Employee Rate 2.70%
Minimum Rate 1.10%
Maximum Rate 5.60%
Workers Training Assessment 0.09%

Real and Personal Property Tax Calculations

Real Property Tax Calculation

Buildings

Real estate assessments for buildings and improvements are determined by using the rules of the Department of Local Government Finance. Assessments are based on fair market value in use, which is usually somewhat less than market value on new construction. However, cost as well as market comparisons can be used to make a reasonable estimate of value.

  • Tax Formula: Cost x net tax rate

Land

The assessed value of land is the cost or value of the land, as it is currently used.

  • Tax Formula: Cost x net tax rate
Personal Property Tax Calculation

Depreciable Personal Property

The assessed value for depreciable personal property (machinery, equipment and office furniture) is multiplied by a percentage based on the life of the asset. Straight line depreciation procedures are used.

  • Tax Formula: Cost x depreciated % x net tax rate

Inventory

Inventory, which consists of raw materials, work-in-progress and finished goods, is currently taxed as personal property in Indiana. Inventory destined for out-of-state shipment and work-in-progress may be exempt. Hendricks and Morgan counties have already eliminated the inventory tax. All other counties will eliminate the inventory tax in the 2006 payable 2007.

  • Tax Formula: Cost (Indiana portion of inventory) – 35% x net tax rate

Special Tools

Special tools are property such as tools, dies, molds, jigs and patterns used for the production of specific products or product models. The usefulness of special tools ceases with the modification or discontinuation of the product or product model. The assessed value of special tools purchased in the previous twelve months is 76% of cost, while all other special tools on hand are valued at 53% of cost.

  • Tax Formula: Cost x depreciation% (1st yr. 42%, 2nd yr. 14%, 3rd yr. or more 2%) x net tax rate

Personal Property Not Placed in Service

Personal property not placed in service as of the assessment date (such as construction in progress) qualifies as a special valuation item. The assessed value of personal property not placed in service is 10% of cost.

  • Tax Formula: Cost x .10 x net tax rate