Community Audit

For businesses, Indiana has two main taxes - Income and Property, both real and personal. Unlike some other States, Indiana does not have a franchise tax, an intangibles tax, or an employment tax.

In 2002, the Indiana legislature enacted sweeping changes to the State's tax structure making Indiana's friendly business climate even friendlier. Included among the changes are:

Corporate Taxes
The Business Gross Income Tax was eliminated.

The supplemental Net Income Tax and the Adjusted Gross Income Tax were consolidated into one Adjusted Gross Income Tax with a rate of 8.5%.

Property Taxes
Overall Indiana's property tax rates are lower due to the elimination of 60% of school general fund property tax levies. Inventory Taxes will be completely eliminated to all Indiana taxpayers for assessments made in 2006 for taxes payable in 2007.

A Work-in-Process Interstate Inventory Tax Exemption was extended to inventory that is used in an operation to alter the personal property into a new or changed state that will be shipped out-of-state, or will be incorporated into personal property that will be shipped out-of-state.

For depreciable personal property, Indiana utilizes the Federal accelerated depreciation schedule. Most manufacturing equipment falls into Pool #2 (5-8 year life), so most equipment is fully depreciated by the 5th year.

Establishes a 20% property tax replacement credit on all real property effective January 1, 2003.

Research Expense Tax Credit (R & D Tax Credit)
R & D Tax Credit was increased from 5% to 10% of qualified research expenses paid or incurred in the current year over the base amount.

The apportionment provision contained within the Research Expenses statue was eliminated.

The termination date for the qualified expenses was extended to December 31, 2004. (Note also the fact that the 2003 Indiana General Assembly extended this date further through December 31, 2013.)

New Economic Development Tools
Venture Capital Investment Tax Credit - A non-refundable tax credit in the amount of 20% of a qualified investment amount provided to a qualified Indiana business is available through IDOC. Qualified investments may be made only after receiving qualification from IDOC after December 31, 2004.

Additional Changes Enacted in 2002
Increased the sales tax from 5% to 6%.

Provided additional funding to Indiana's Twenty-First Century Research and Technology Fund in the amount of $15 million. This amount was subsequently increased during the 2003 Legislative Session to $37.5 million for FY '03 & $37 million for FY '04.