Bill Text: IN HB1354 | 2013 | Regular Session | Introduced
Bill Title: Enterprise zones.
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2013-01-31 - Representative Klinker added as coauthor [HB1354 Detail]
Download: Indiana-2013-HB1354-Introduced.html
Citations Affected: IC 6-2.5; IC 6-3-2-8.5; IC 6-3.1-34.
Synopsis: Enterprise zones. Provides a credit against state sales and
use tax liability for certain purchases made: (1) by or on behalf of a
taxpayer that owns real property in an enterprise zone; (2) from a
person whose place of business is within an enterprise zone or a city in
which an enterprise zone is located; and (3) for the purpose of the
redevelopment or rehabilitation of a business or residence in an
enterprise zone. Provides retail merchants located in an enterprise zone
with an additional allowance equal to 1% of the retail merchant's sales
tax liability. Provides that an individual is entitled to an adjusted gross
income tax deduction equal to the amount of qualified increased
enterprise zone adjusted gross income received by the individual
during the taxable year (including the individual's distributive share of
a pass through entity's qualified increased enterprise zone adjusted
gross income). Provides a credit against state tax liability for jobs
created at locations within an enterprise zone.
Effective: July 1, 2013; January 1, 2014.
January 22, 2013, read first time and referred to Committee on Ways and Means.
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A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Chapter 5.5. Credit for Certain Qualified Purchases
Sec. 1. As used in this chapter, "building materials" means any items that are or may be permanently affixed to real property.
Sec. 2. As used in this chapter, "enterprise zone" means a zone established under IC 5-28-15.
Sec. 3. As used in this chapter, "pass through entity" means a:
(1) corporation that is exempt from the adjusted gross income tax under IC 6-3-2-2.8(2);
(2) partnership;
(3) limited liability company; or
(4) limited liability partnership.
Sec. 4. As used in this chapter, "qualified purchase" means a purchase of building materials that is made:
(1) by or on behalf of a taxpayer that owns real property in an
enterprise zone;
(2) from a person whose place of business is within:
(A) an enterprise zone; or
(B) a city in which an enterprise zone is located; and
(3) for the purpose of the redevelopment or rehabilitation of
a business or residence in an enterprise zone.
Sec. 5. As used in this chapter, "state sales and use tax liability"
means a taxpayer's total tax liability incurred under this article
before the application of any credit to which the taxpayer is
entitled under this chapter.
Sec. 6. As used in this chapter, "taxpayer" means an individual,
a corporation, or a pass through entity that makes a qualified
purchase.
Sec. 7. (a) A taxpayer that makes a qualified purchase during a
calendar year is entitled to a credit against the taxpayer's state
sales and use tax liability for that calendar year.
(b) The amount of the credit to which a taxpayer is entitled
equals the sum of the following:
(1) One hundred percent (100%) of the state sales and use tax
paid by the taxpayer during the calendar year for a qualified
purchase from a person whose place of business is within an
enterprise zone.
(2) Fifty percent (50%) of the state sales and use tax paid by
the taxpayer during the calendar year for a qualified
purchase from a person whose place of business is not within
an enterprise zone but is within a city in which an enterprise
zone is located.
(c) The credit under this chapter must be claimed on a quarterly
basis in the form of a claim for a refund prescribed by the
department.
Sec. 8. The department may adopt rules under IC 4-22-2 to
carry out this chapter.
(b) The allowance equals a percentage of the retail merchant's state
gross retail and use tax liability accrued during a calendar year,
specified as follows:
(1) Seventy-three hundredths percent (0.73%), if the retail
merchant's state gross retail and use tax liability accrued during
the state fiscal year ending on June 30 of the immediately
preceding calendar year did not exceed sixty thousand dollars
($60,000).
(2) Fifty-three hundredths percent (0.53%), if the retail merchant's
state gross retail and use tax liability accrued during the state
fiscal year ending on June 30 of the immediately preceding
calendar year:
(A) was greater than sixty thousand dollars ($60,000); and
(B) did not exceed six hundred thousand dollars ($600,000).
(3) Twenty-six hundredths percent (0.26%), if the retail
merchant's state gross retail and use tax liability accrued during
the state fiscal year ending on June 30 of the immediately
preceding calendar year was greater than six hundred thousand
dollars ($600,000).
(c) A retail merchant described in IC 6-2.5-4-5 or IC 6-2.5-4-6 is not
entitled to the allowance provided by this section.
(d) This subsection applies only to a retail merchant located in
an enterprise zone (as defined in IC 6-2.5-5.5-2). In addition to the
allowance provided under subsection (b), a retail merchant located
in an enterprise zone is entitled to an allowance equal to one
percent (1%) of the retail merchant's state gross retail and use tax
liability accrued during a reporting period.
(1) "Adjusted gross income derived from sources within an enterprise zone" means:
(A) adjusted gross income from real property or tangible personal property located in an enterprise zone;
(B) adjusted gross income from doing business in an enterprise zone;
(C) adjusted gross income from a trade or profession conducted in an enterprise zone;
(D) compensation for labor or services rendered within an enterprise zone; and
(E) adjusted gross income from stocks, bonds, notes, bank deposits, patents, copyrights, secret processes and
formulas, good will, trademarks, trade brands, franchises,
and other intangible personal property having a situs in an
enterprise zone.
(2) "Base period adjusted gross income" means the adjusted
gross income of a person that would have been adjusted gross
income derived from sources within an enterprise zone if an
enterprise zone had been in existence during the year that
ends on the last day of the month that immediately precedes
the month in which the enterprise zone is established. If the
person did not engage in an active trade or business during
that year in an area that is later designated as an enterprise
zone, the person's base period adjusted gross income equals
zero (0). If the person engaged in an active trade or business
during only part of that year in an area that is later
designated as an enterprise zone, the department shall
determine the amount of base period adjusted gross income.
(3) "Enterprise zone" means an enterprise zone created under
IC 5-28-15.
(4) "Monthly base period adjusted gross income" means base
period adjusted gross income divided by twelve (12).
(5) "Pass through entity" means a:
(A) corporation that is exempt from the adjusted gross
income tax under IC 6-3-2-2.8(2);
(B) partnership;
(C) limited liability company; or
(D) limited liability partnership.
(6) "Qualified increased enterprise zone adjusted gross
income" means the following:
(A) For a person's taxable year other than the person's
taxable year in which the enterprise zone is established, the
amount by which adjusted gross income derived by the
person from sources within the enterprise zone during the
taxable year exceeds the person's base period adjusted
gross income.
(B) For the person's taxable year in which the enterprise
zone is established, the amount by which adjusted gross
income derived by the person from sources within the
enterprise zone during all of the full calendar months in
the person's taxable year that succeed the date on which
the enterprise zone was established exceeds the person's
monthly base period adjusted gross income multiplied by
that same number of full calendar months.
(b) Each taxable year, an individual is entitled to an adjusted gross income tax deduction equal to the amount of qualified increased enterprise zone adjusted gross income received by the individual during the taxable year.
(c) In the case of a pass through entity that receives qualified increased enterprise zone adjusted gross income, an individual who is a shareholder, partner, or member of the pass through entity is entitled to claim the deduction under this section. The amount the individual may claim as a deduction is equal to:
(1) the amount of the qualified increased enterprise zone adjusted gross income received by the pass through entity during the taxable year; multiplied by
(2) the percentage of the pass through entity's distributive income to which the shareholder, partner, or member is entitled.
(d) In the case of nonbusiness income described in subsection (h), only the amount of the income as is allocated to an enterprise zone under subsections (i) through (l) is considered to be derived from sources within an enterprise zone. In the case of business income, only the amount of the income as is apportioned to an enterprise zone under subsection (e) is considered to be derived from sources within an enterprise zone.
(e) If the business income derived from sources within an enterprise zone cannot be separated from the business income derived from sources outside the enterprise zone, the business income derived from sources within the enterprise zone is determined by multiplying the business income derived from sources both within and outside the enterprise zone by the sales factor, described in subsection (f).
(f) The sales factor is a fraction. The numerator of the fraction is the total sales of the taxpayer in an enterprise zone during the taxable year. The denominator of the fraction is the total sales of the taxpayer everywhere during the taxable year. Sales of tangible personal property are in an enterprise zone if:
(1) the property is delivered or shipped to a purchaser, other than the United States government, within the enterprise zone, regardless of the f.o.b. point or other conditions of the sale; or
(2) the property is shipped from an office, a store, a warehouse, a factory, or other place of storage in the enterprise zone and either the purchaser is the United States government or the taxpayer is not taxable in the state of the
purchaser.
(g) Sales, other than sales of tangible personal property, are in
an enterprise zone if:
(1) the income producing activity is performed in the
enterprise zone; or
(2) the income producing activity is performed both within
and outside the enterprise zone and a greater proportion of
the income producing activity is performed within the
enterprise zone than outside the enterprise zone, based on
costs of performance.
(h) Rents and royalties from real or tangible personal property,
capital gains, interest, dividends, or patent or copyright royalties,
to the extent that they constitute nonbusiness income, shall be
allocated as provided in subsections (i) through (l).
(i) Net rents and royalties from:
(1) real property located in an enterprise zone are allocable to
the enterprise zone; and
(2) tangible personal property are allocable to an enterprise
zone to the extent that the property is used in the enterprise
zone.
The extent of use of tangible personal property in an enterprise
zone is determined by multiplying the rents and royalties by a
fraction. The numerator of the fraction is the number of days of
physical location of the property in the enterprise zone during the
rental or royalty period in the taxable year. The denominator of
the fraction is the number of days of physical location of the
property everywhere during all rental or royalty periods in the
taxable year. If the physical location of the property during the
rental or royalty period is unknown or unascertainable by the
taxpayer, tangible personal property is used where the royalty
payer obtained possession of the property.
(j) Capital gains and losses from sales of:
(1) real property located in an enterprise zone are allocable to
the enterprise zone;
(2) tangible personal property are allocable to an enterprise
zone if the property had a situs in the enterprise zone at the
time of the sale; and
(3) intangible personal property are allocable to an enterprise
zone if the taxpayer's commercial domicile is in the enterprise
zone.
(k) Interest and dividends are allocable to an enterprise zone if
the taxpayer's commercial domicile is in the enterprise zone.
(l) Patent and copyright royalties are allocable to an enterprise zone to the extent that the patent or copyright is used by the taxpayer in the enterprise zone. A patent is used in an enterprise zone to the extent that it is employed in production, fabrication, manufacturing, or other processing in the enterprise zone or to the extent that a patented product is produced in the enterprise zone. If the basis of receipts from patent royalties does not permit allocation to enterprise zones or if the accounting procedures do not reflect location of use, the patent is used at the location of the taxpayer's commercial domicile. A copyright is used in an enterprise zone to the extent that printing or other publication originates in the enterprise zone. If the basis of receipts from copyright royalties does not permit allocation to enterprise zones or if the accounting procedures do not reflect location of use, the copyright is used at the location of the taxpayer's commercial domicile.
(m) If the allocation and apportionment provisions of this section do not fairly represent the taxpayer's adjusted gross income derived from sources within an enterprise zone, the taxpayer may petition for or the department may require, in respect to all or any part of the taxpayer's business activity:
(1) a separate accounting;
(2) the exclusion of any one (1) or more of the factors listed in this section;
(3) the inclusion of one (1) or more additional factors that will fairly represent the taxpayer's income derived from sources within the enterprise zone; or
(4) the employment of any other method to effect an equitable allocation and apportionment of the taxpayer's income.
(n) In the case of two (2) or more organizations, trades, or businesses owned or controlled directly or indirectly by the same interests, the department shall distribute, apportion, or allocate the income derived from sources within an enterprise zone among those organizations, trades, or businesses in order to reflect fairly and report the income derived from sources within the enterprise zone by various taxpayers.
(o) A taxpayer that:
(1) does not own, rent, or lease real property outside an enterprise zone that is an integral part of its trade or business; and
(2) is not owned or controlled directly or indirectly by a taxpayer that owns, rents, or leases real property outside an
enterprise zone;
is exempt from the allocation and apportionment provisions of this
section.
Chapter 34. Enterprise Zone Job Creation Credit
Sec. 1. As used in this chapter, "base taxable year" means either:
(1) in the case of a taxpayer that has not previously claimed a tax credit under this chapter, the taxpayer's taxable year that immediately precedes the taxable year for which the taxpayer is first claiming a credit under this chapter; or
(2) in the case of a taxpayer that has previously claimed a tax credit under this chapter, the most recent taxable year for which the taxpayer claimed a credit under this chapter.
Sec. 2. As used in this chapter, "corporation" refers to the Indiana economic development corporation established by IC 5-28-3-1.
Sec. 3. As used in this chapter, "department" refers to the department of state revenue or the department of insurance, whichever is obligated to administer the tax against which a tax credit is applied.
Sec. 4. As used in this chapter, "employer" has the meaning set forth in IC 6-3-1-5.
Sec. 5. As used in this chapter, "enterprise zone" means an enterprise zone created under IC 5-28-15.
Sec. 6. As used in this chapter, "full-time employee" means an individual who is employed for consideration for at least thirty-five (35) hours each week or who renders any other standard of service generally accepted by custom or specified by contract as full-time employment.
Sec. 7. (a) As used in this chapter, "new employee" means a full-time employee first employed by a taxpayer at the employer's enterprise zone location and who is employed after December 31 of the employer's previous taxable year.
(b) The term "new employee" does not include:
(1) an employee of the taxpayer who performs a job that was previously performed by another employee, if that job existed for at least six (6) months before hiring the new employee;
(2) an employee of the taxpayer who was previously employed in Indiana by a related member of the taxpayer and whose
employment was shifted to the taxpayer after the taxpayer
entered into the tax credit agreement; or
(3) a child, grandchild, parent, or spouse, other than a spouse
who is legally separated from the individual, of any individual
who is an employee of the taxpayer and who has a direct or an
indirect ownership interest of at least five percent (5%) in the
profits, capital, or value of the taxpayer. For purposes of this
chapter, an ownership interest shall be determined in
accordance with Section 1563 of the Internal Revenue Code
and regulations prescribed under that Section.
(c) Notwithstanding subsection (b)(1), if a new employee
performs a job that was previously performed by an employee who
was:
(1) treated under the agreement as a new employee; and
(2) promoted by the taxpayer to another job;
the employee may be considered a new employee under the
agreement.
Sec. 8. As used in this chapter, "pass through entity" means:
(1) a corporation that is exempt from the adjusted gross
income tax under IC 6-3-2-2.8(2);
(2) a partnership;
(3) a limited liability company; or
(4) a limited liability partnership.
Sec. 9. As used in this chapter, "related member" means a
person that, with respect to the taxpayer during all or any part of
the taxable year, is any one (1) of the following:
(1) An individual stockholder or a member of the
stockholder's family enumerated in Section 318 of the
Internal Revenue Code, if the stockholder and the member of
the stockholder's family own directly, indirectly, beneficially,
or constructively, in total, at least fifty percent (50%) of the
value of the taxpayer's outstanding stock.
(2) A stockholder or a stockholder's partnership, estate, trust,
or corporation, if the stockholder and the stockholder's
partnership, estate, trust, or corporation own directly,
indirectly, beneficially, or constructively, in total, at least fifty
percent (50%) of the value of the taxpayer's outstanding
stock.
(3) A corporation or a party related to the corporation in a
manner that would require an attribution of stock from the
corporation to the party or from the party to the corporation
under the attribution rules of Section 318 of the Internal
Revenue Code, if the taxpayer owns directly, indirectly,
beneficially, or constructively at least fifty percent (50%) of
the value of the corporation's outstanding stock.
(4) A component member (as defined in Section 1563(b) of the
Internal Revenue Code).
(5) A person to or from whom there is attribution of stock
ownership in accordance with Section 1563(e) of the Internal
Revenue Code. However, for purposes of determining
whether a person is a related member under this subdivision,
twenty percent (20%) shall be substituted for five percent
(5%) wherever five percent (5%) appears in Section 1563(e)
of the Internal Revenue Code.
Sec. 10. As used in this chapter, "state tax liability" means a
taxpayer's total tax liability that is incurred under:
(1) IC 6-3-1 through IC 6-3-7 (adjusted gross income tax);
(2) IC 6-5.5 (financial institutions tax); and
(3) IC 27-1-18-2 (insurance premiums tax);
as computed after the application of the credits that under
IC 6-3.1-1-2 are to be applied before the credit provided by this
chapter.
Sec. 11. As used in this chapter, "taxpayer" means an
individual, a corporation, or a pass through entity whose primary
operations are conducted in an enterprise zone.
Sec. 12. (a) A taxpayer is entitled to a credit against the
taxpayer's state tax liability for a taxable year equal to the amount
determined under the following STEPS:
STEP ONE: Determine the lesser of:
(A) the number of new employees employed at the
taxpayer's enterprise zone location in the taxable year; or
(B) the result of:
(i) the total number of full-time employees employed by
the taxpayer at the taxpayer's enterprise zone location in
the taxable year; minus
(ii) the total number of full-time employees employed at
the taxpayer's enterprise zone location in the taxpayer's
base taxable year.
STEP TWO: Multiply the amount determined under STEP
ONE by one thousand five hundred dollars ($1,500).
(b) A taxpayer may petition the corporation to adjust the total
number of full-time employees employed at the taxpayer's
enterprise zone location in the taxpayer's base taxable year if the
taxpayer shows that:
(1) a new investment;
(2) a new product line; or
(3) other similar circumstances;
will result in the creation of new full-time jobs at the taxpayer's
enterprise zone location but would not qualify the taxpayer for a
credit under this chapter because employment at the enterprise
zone location would remain below the level established in the
taxpayer's base taxable year.
(c) Upon receiving a written recommendation from the
appropriate local urban enterprise association, the corporation
shall consider a petition submitted under subsection (b). The
corporation may approve a taxpayer's petition if the corporation
determines that adjusting the total number of full-time employees
employed at the taxpayer's enterprise zone location in the
taxpayer's base taxable year is in the best interests of the
enterprise zone in which the taxpayer is located. If the corporation
approves the petition, the corporation shall determine the new
number of full-time employees employed at the taxpayer's
enterprise zone location in the taxpayer's base taxable year that in
the corporation's discretion fairly and reasonably represents the
taxpayer's employment situation under the totality of the
circumstances described in the taxpayer's petition. The
corporation shall certify the new number to be used for purposes
of this chapter to the taxpayer and the department.
Sec. 13. (a) If the amount determined under section 12 of this
chapter for a taxpayer in a taxable year exceeds the taxpayer's
state tax liability for that taxable year, the taxpayer may carry the
excess over to the following taxable years. The amount of the credit
carryover from a taxable year shall be reduced to the extent that
the carryover is used by the taxpayer to obtain a credit under this
chapter for any subsequent taxable year.
(b) A taxpayer is entitled to a carryback or a refund of any
unused credit.
Sec. 14. If a pass through entity does not have state income tax
liability against which the tax credit may be applied, a shareholder
or partner of the pass through entity is entitled to a tax credit equal
to:
(1) the tax credit determined for the pass through entity for
the taxable year; multiplied by
(2) the percentage of the pass through entity's distributive
income to which the shareholder or partner is entitled.
Sec. 15. To receive the credit provided by this chapter, a
taxpayer must claim the credit on the taxpayer's state tax return
in the manner prescribed by the department. The taxpayer must
submit to the department proof of payment of the payroll
expenditures and all information that the department determines
is necessary for the calculation of the credit provided by this
chapter.
(b) IC 6-2.5-6-10, as amended by this act, applies to retail transactions occurring after June 30, 2013.
(c) Except as provided in subsection (d), a retail transaction is considered to have occurred after June 30, 2013, if the property whose transfer constitutes selling at retail is delivered to the purchaser or to the place of delivery designated by the purchaser after June 30, 2013.
(d) Notwithstanding the delivery of the property constituting selling at retail after June 30, 2013, a transaction is considered to have occurred before July 1, 2013, to the extent that:
(1) the agreement of the parties to the transaction is entered into before July 1, 2013; and
(2) payment for the property furnished in the transaction is made before July 1, 2013.
(e) This SECTION expires January 1, 2014.
(b) This SECTION expires January 1, 2016.
(b) This SECTION expires January 1, 2016.
