Indiana ~ Multiple Taxes: Sales and Use and Income Exemptions Enacted/Expanded, Calculation of Income Amended

CCH Tax Day Report

Indiana has enacted legislation creating sales and use tax exemptions, extending certain sporting event exemptions, amending the calculation of the personal and corporate income taxes, and altering the due date of the financial institutions tax return. Also, the legislation requires the Legislative Services Agency to conduct a study concerning the correlation between employment growth and the statutory tax relief realized by C corporations during the period 2011 through 2016

NBA All-Star Exemption

The legislation extends the existing state and local tax exemption for activities relating to an NFL Super Bowl and NCAA Men’s and Women’s Final Fours conducted after December 31, 2011 to activities relating to a NBA All-Star Weekend. All property owned by the NBA and its affiliates, revenue of the NBA and its affiliates, and expenditures and transactions of the NBA and its affiliates in connection with a NBA All-Star Weekend, resulting from holding these events in Indiana or making preparatory advance visits to Indiana in connection with an NBA All-Star Weekend are exempted from all state and local taxes. The exemption does not apply to salaries and wages paid to employees of the NBA and its affiliates that are ordinarily subject to Indiana state and local income taxation.

Sales and Use

The legislation provides a sales tax exemption for agricultural or industrial processing machinery, tools, and equipment, including material handling equipment purchased for the purpose of transporting materials from an onsite location, if the person acquiring the property acquires it for direct use in the direct provision of agricultural or industrial processing services used in the direct production of agricultural commodities or other tangible personal property that is owned by another person. It also exempts tangible personal property acquired by an industrial processor or agricultural service provider for direct consumption as a material to be consumed in (1) an industrial processing service, (2) the direct application of fertilizers, pesticides, fungicides, and seeds, and (3) the direct extraction, harvesting, or processing of agricultural commodities. Finally, pesticides are exempted from sales tax if they are directly used in the direct production of food and food ingredients or commodities for sale.

Further, the components of a drainage water management system, including drainage tubing, drainage tiles, water flowgates, and control valves, designed to facilitate controlled water drainage on agricultural land used for crop production are exempted from sales tax. Finally, a sales tax exemption for prosthetic devices, including artificial limbs, orthopedic devices, dental prosthetic devices, eyeglasses, and contact lenses that are acquired by a patient without a prescription or drug order if they are fitted or dispensed by a person licensed or registered for that purpose, is enacted.

Income Tax

A deduction for personal income taxpayer for amounts described in Section 1341(a)(2) (claim of right) of the Internal Revenue Code, is added. Specifically, if a taxpayer received income in one year but had to repay it in another year, the taxpayer may claim the deduction in the year the amount was repaid. The deduction equals the repayment amount that was previously included in their AGI in a prior year. Further, in determining an Indiana net operating loss deduction for resident individuals, corporations and nonresident persons certain modifications (standard deductions and personal exemptions) to adjusted gross income will not to be applied.

Effective January 1, 2018, for local income tax purposes “adjusted gross income” includes compensation for services rendered in the county as a professional sports team member or race team member. Further, a “local taxpayer” is an individual who has income apportioned to Indiana as a team member or race team member for services rendered in the county.

Financial Institutions Tax

Lastly, a financial institutions tax return is due the 15th day of the month after the taxpayer’s federal tax return is due.

S.B. 515, Laws 2017, effective July 1, 2017

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CCHTaxGroup

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