Indiana Basic Business Taxes
Indiana's Inventory Tax was eliminated as of 2007.
Corporate Income Tax:
The Corporate Adjusted Gross Income Tax is calculated at a flat 8.5 percent of adjusted gross income, with a phased-in reduction of .5 percent per year beginning July 1, 2012, resulting in a rate of 6.5 percent as of July 1, 2016. Adjusted gross income is a company's federal adjusted gross income with certain adjustments. This method of determination simplifies tax calculations for corporations and does not apply to S-corporations and not-for-profit organizations.
Indiana uses a single-sales factor for apportioning corporate income tax. The single-sales factor will calculate the Indiana portion based solely on the portion of a company's sales in Indiana.
Sales and Use Tax:
The tax is calculated at a rate of 7 percent. In manufacturing, the following are exempt from the sales tax: raw materials, equipment, power, electricity, and utilities. Wholesale sales, items used directly in production, and sales made in interstate commerce are exempt. In addition, the purchase of research and development equipment is exempt from the tax.
Real and personal property tax is assessed at 100 percent of market value. Tax rates and exemptions vary among local jurisdictions. Property tax bills are capped at 3 percent of assessed value for commercial property.
Economic Development for a Growing Economy (EDGE) Tax Credits:
The Economic Development for a Growing Economy (EDGE) is a refundable tax credit program that helps incentivize job creation that contributes to the growth of Indiana's economy. EDGE credits are calculated as a percentage of payroll tax withholding for net new Indiana jobs. The company must commit to maintaining operations in Indiana for at least two years beyond the term of the company's EDGE award. If EDGE is used to retain jobs, the wages for those jobs must be above the industry average. Only full-time, permanent, Indiana resident-employees qualify, and employees being shifted from one line of work to another or one Indiana location to another cannot be counted for purposes of the credit.
Headquarters Relocation Tax Credit:
Indiana provides a tax credit to corporations that relocate their headquarters, divisional headquarters, or research and development center to Indiana. The credit is up to half the moving costs and is assessed against the corporation's state tax liability.
The corporation must have annual worldwide revenue of at least $50 million in the taxable year immediately prior to the year in which application is made for the credit. After relocation, the corporation must have 75 employees in Indiana.
Hoosier Business Investment Tax Credit (HBI):
The Hoosier Business Investment Tax Credit (HBITC) program encourages capital investment in Indiana by providing a credit against a company's Indiana tax liability. The credit amount may be up to 10 percent of the company's qualified capital investment and may be carried forward for nine years. The qualified capital investment must be maintained at the project location and certain employment and payroll requirements must be met. Jobs moved from one Indiana site to another do not qualify for this purpose.
Industrial Recovery Tax Credit:
The Industrial Recovery tax credit provides an incentive for companies to invest in facilities requiring significant rehabilitation or remodeling expense. Companies or developers may be eligible for a tax credit calculated as a percentage of 15 to 25% of qualified rehabilitation expense. This credit is open to occupants of or investors in industrial recovery sites consisting of a building or complex of buildings in service at least 15 and up to 40 years.
Research and Development Tax Credit:
This credit (also known as the Research Expense Tax Credit) is based on the increase in Indiana R&D during the prior three-year base. In the base year, research expenses must have been at least half of the research expenses in the current year. The credit amounts to 15 percent of qualified research expenses on the first $1 million of investment. The credit is applied against income tax liability and may be carried forward for 10 years. There is no carry back, and the credit is nonrefundable. This program operates under the Department of Revenue and uses the definition of "qualified research expense" from the Internal Revenue Code (which includes the costs of wages and supplies).
Venture Capital Investment (VCI) Tax Credit:
The Venture Capital Investment Tax Credit was established to improve access to capital to fast growing Indiana companies by providing individual and corporate investors an additional incentive to invest in early stage firms. Investors who provide qualified debt or equity capital to a qualified Indiana business receive a credit against their Indiana income tax liability. A taxpayer wishing to obtain a credit for investing in a qualified Indiana business must apply to the IEDC for a certification that the proposed investment plan would qualify for a credit. Once the plan is approved and there is sufficient documentation to show the investment occurred after approval, the taxpayer is certified a credit equal to 20 percent of the amount of the taxpayer's qualified investment capital provided to a qualified Indiana business during a taxable year to a maximum of $1,000,000.
Economic Revitalization Areas:
Taxpayers located in designated economic revitalization areas may qualify for property tax abatement.
Foreign Trade Zones:
Warehoused goods pending shipment out of state, goods in transit, and tangible property in transit through a foreign-trade zone are exempt from property taxes.
Certified Technology Parks (CTP):
Certified Technology Parks (CTP) encourages the location of high-technology businesses within areas identified by local redevelopment commissions. After the Indiana Economic Development Corporation designates an area as a Certified Technology Park, the redevelopment commission may provide property tax credits, or bonds for purposes of providing public facilities associated with the Certified Technology Park. Designation as a Certified Tech Park allows for the local recapture of certain state and local tax revenue that can be invested in the development of the park.
Grants and Incentives
21st Century Research and Technology Fund:
Indiana's 21st Century Research and Technology Fund (21 Fund) focuses on entrepreneurial ventures that have demonstrated a market potential for commercialization of innovative technologies. The 21 Fund provides financial support to highly innovative Indiana-based companies, thereby helping these firms make the transitional leap from general research and development to product development while also creating high-wage, high-skill, high-tech Indiana jobs and diversifying the state's economy. The 21 Fund encourages an environment of innovation and cooperation among Indiana universities and businesses to promote research activity through collaborative partnerships.
Industrial Development Grant Fund:
The Industrial Development Grant Fund provides financial support for infrastructure improvements in conjunction with projects creating jobs and generating capital investment in Indiana. This grant provides money to local governments for off-site infrastructure projects associated with an expansion of an existing Indiana company or the location of a new facility in Indiana.
Patent Income Exemption:
Taxpayers are exempt from certain income derived from qualified utility and plant patents. Qualified taxpayers are eligible for an exemption of 50 percent of patent income for each of the first five years. The exemption percentage decreases during the next five years to 10 percent in the 10th year. The total amount of exemptions claimed by a taxpayer may not exceed $5 million per year. This benefit is available only to companies with 500 or fewer employees.
Skills Enhancement Fund (SEF):
The Skills Enhancement Fund (SEF) provides financial assistance to businesses committed to training its existing or expanding workforce. Trainees must be permanent, full-time, Indiana residents. SEF reimburses eligible training expenses during a two-year term. IEDC does not provide reimbursement for training for: (1) new employee orientation, (2) compensation of trainee wages during the training, and (3) OSHA or other legally required safety training. Companies can receive reimbursement of up to 50% of eligible training expenses. Businesses receiving SEF training assistance must commit to continuing their operations and maintain certain employment levels at the location where the SEF training assistance is provided for at least five years after the 2-year training grant term is completed.
Shovel Ready Program:
Indiana's Shovel Ready program improves the ability of Indiana communities to attract new economic development and jobs while reducing the site selection and facility construction time for business. The Shovel Ready program lowers the cost of site development and improves efficiency of the state and local permitting process by certifying sites as "ready for development." The program strives to reduce up to 30 percent of the total permit time at the state level for businesses that choose to move into a Shovel Ready site.
The Indiana Economic Development Corporation's regulatory ombudsman assists in the process of obtaining the permits and approvals necessary for a business operation. The ombudsman serves as a liaison between companies, communities, local economic development organizations and regulatory agencies.
Indiana State Contact:
Indiana Economic Development Corporation
One North Capitol, Suite 700
Indianapolis, IN 46204
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.