Indiana Basic Business Taxes 2010
Indiana's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include no inventory tax, single sales factor tax, and Economic Development for a Growing Economy (EDGE) Tax Credits.
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 is phasing in the 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. This change is being phased in and will be complete by 2011.
Sales and Use Tax:
Indiana's Sales and Use Tax is one of the lowest in the Midwest. The tax is calculated at a rate of 6 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.
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.
Technology Development Grant Fund:
The Technology Development Grant Fund program was created as a tool to support the attraction and growth of high-technology business in Indiana and promote technology transfer opportunities.
This tax credit program supports Indiana's advanced agricultural industry and encourages the development of renewable energy.
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. State funding through the IDGF program must be matched by a combination of local government and company financial support.
International Trade Show Assistance Program:
The Trade Show Assistance Program (TSAP) provides financial assistance for small Indiana businesses to participate in international trade shows. TSAP is designed to promote Indiana exports by encouraging companies to explore overseas markets.
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.
SBIR/STTR Matching Program:
Indiana's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program provides matching grants of up to $100,000 to recipients of Phase I awards from the federal SBIR and STTR programs. The federal SBIR/STTR programs are grant programs that provide early stage research and development capital to technology-driven small businesses. Indiana's SBIR and STTR matching grants can provide the means to transform cutting edge ideas or technologies into commercial ventures, eventually leading to new technology and jobs.
Skills Enhancement Fund (SEF):
The Skills Enhancement Fund (SEF) provides financial assistance to businesses committed to training their workforce. Trainees must be Indiana residents. SEF reimburses eligible training expenses during a two-year term. Companies may reapply for additional SEF funds after their initial two-year term. IEDC typically does not provide reimbursement for training that is required by law. Companies can receive reimbursement - up to $200,000 - for retraining existing workers. Supplemental grant awards may be available for training new employees. Businesses receiving SEF training assistance must commit to continuing their operations at the location where the SEF training assistance is provided for at least five years after the training grant is completed and closed.
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.
Advanced Energy Technologies Program:
The Advanced Energy Technologies Program awards grants to projects that involve advanced manufacturing processes and/or the manufacturing of advanced energy-efficient products. The program is designed to increase the number of advanced-technology manufacturing facilities and jobs in Indiana, while improving the energy efficiency of Indiana's manufacturing sector. Grants of up to $250,000 are offered with a minimum of 50 percent grantee cost sharing.
Alternative Power and Energy Grant Program:
This program enables businesses and institutions to install and study alternative and renewable energy system applications in such areas as process heating, HVAC, and waste-to-energy. Eligible projects include solar, wind, geothermal, hydropower, alcohol fuels, and biomass technologies. Grants of up to $100,000 are available with a minimum of 70 percent grantee cost sharing.
Biofuels Grant Program:
Businesses, nonprofit institutions, and units of local government may apply for grants of up to $50,000 for the purchase of E85 and B20 refueling infrastructure and the buy down of the incremental cost of purchasing B20 fuel for use in large transportation fleets. The Indiana Department of Agriculture administers this program.
Distributed Generation Grant Program:
This program provides grants of up to $100,000 to Indiana businesses and organizations implementing cleaner and more efficient alternatives to central power plant electricity generation. The program supports projects that use such innovative technologies as fuel cells, combined heat and power, micro turbines, and renewable energy resources. A minimum 70 percent grantee cost share is required.
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.