Indiana has enacted corporate and personal income tax Internal Revenue Code (IRC) conformity legislation. The bill was not substantially changed from the version introduced and reported on yesterday. The legislation makes further changes not covered in the previous story.
Corporate Income Taxpayers
REIT. For a real estate investment trust (REIT), the IRC Sec. 965(c) deduction must be added back to the extent the taxpayer:
- included IRC Sec. 965 income in its federal income; or
- is required to add back dividends paid to shareholder of a captive REIT.
IRC Sec. 965
When a taxpayer adds back IRC Sec. 965 amounts, certain rules will apply when determining “adjusted gross income derived from sources within Indiana”after December 25, 2016. If a taxpayer:
- cannot claim an Indiana foreign source dividend deduction, the IRC Sec. 965 amounts will not be considered receipts in any tax year;
- can claim the deduction, the amounts will be considered receipts in the year the taxpayer reports them as gross income, to a limited extent.
IRC Sec. 951A
The definition of Indiana “foreign source dividends” is expanded to include IRC Sec. 951A income and IRC Sec. 965 amounts the taxpayer has added back.
If a taxpayer has federal income because of IRC Sec. 951A, certain rules will apply when determining “adjusted gross income derived from sources within Indiana.” If a taxpayer:
- cannot claim an Indiana foreign source dividend deduction, the IRC Sec. 951A income is not included; and
- can claim the deduction, IRC Sec. 951A income, is included.
Personal Income Taxpayers
The tax credit for contributions to a college 529 plan is amended. For amounts used to pay qualified K-12 expenses, the 2018 credit is the sum of 20% multiplied by total taxpayer contributions to the plan during the tax year, plus the lesser of:
- $500; or
- 10% multiplied by the amount of the contributions that will be used to pay for qualified K-12 education expenses.
In 2019 the credit for qualified K-12 expenses is:
- 20% multiplied by total taxpayer contributions to the plan during the tax year; plus
- 20% multiplied by the taxpayer contributions to the plan during the tax year, designated to pay for qualified K-12 education expenses.
Income Tax Credits
A taxpayer, pass through entity, shareholder, partner, or member of a pass through entity can elect to carry forward some economic development credits earned for 2017. The credits can be carried forward to 2018. The credits that can be carried forward include:
- enterprise zone investment cost credit;
- industrial recovery tax credit;
- community revitalization enhancement district tax credit;
- venture capital investment tax credit;
- Hoosier business investment tax credit; and
- Hoosier alternative fuel vehicle manufacturer tax credit.
H.B. 1316a, Laws 2018, effective May 14, 2018 and as noted