Indiana Basic Business Taxes 2011
economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include Economic Development for a Growing Economy (EDGE) Tax Credits, Headquarters Relocation Tax Credits, and Hoosier Business Investment Tax Credits (HBI).
Area Development Research Desk (March 2011)
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. 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. Indiana had determined its share of an interstate or international corporation's taxable income by weighing the Indiana portion of a company's property and the proportion of its employees in Indiana. 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.
Economic Development for a Growing Economy (EDGE) Tax Credits:
The Economic Development for a Growing Economy (EDGE) is a refundable tax credit program that rewards companies creating jobs and contributing to the growth of Indiana's economy. EDGE credits are calculated as a percentage of payroll tax withholding for net new Indiana jobs. EDGE may be awarded for up to 100 percent of the projected withholdings attributable to the company's Indiana project and may be awarded for up to 10 years. 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 average. Only full-time 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 to Indiana. The credit equals half the moving costs and is assessed against the corporation's state tax liability.
The corporation must have annual worldwide revenue of at least $100 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 is based on a company's qualified capital investment with the final credit amount determined by the Indiana Economic Development Corporation (IEDC), based on an analysis of the economic benefits of the proposed investment. A company's credit award may be up to 10 percent of the qualified capital investment and may be carried forward for nine years. The IEDC determines the applicable credit percentage and carry forward term on a case-by-case basis. 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. After a building has been designated as an industrial recovery site, companies may be eligible for a tax credit calculated as a percentage 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 20 years, with at least 250,000 interior square feet that has been at least 75 percent vacant for two years or more.
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 10 percent of qualified research expenses on the first $1 million of investment. Beginning in 2008, the credit increases to 15 percent. The credit is applied against income tax liability and may be carried forward for 15 years before 2008 and 10 years beginning in 2008. 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 Indiana companies receive a credit against their Indiana income tax liability. This credit is available to any taxpayer who is an individual or entity that has any state tax liability. Pass through entities whose shareholders have Indiana income tax liabilities are also eligible for the credit. 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. The taxpayer's VCI Tax Credit equals 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 $500,000.
Economic Revitalization Areas:
Taxpayers located in designated economic revitalization areas may qualify for property tax abatement.