2015 Legislative Update

June 24, 2015

En Español

With the conclusion of the 2015 Indiana General Assembly, let’s take a look at the legislation that was passed and consider how it will affect Indiana taxpayers.

Changes Affecting Individual Income Tax

The following changes affect individual income tax:

  • Effective Jan. 1, 2016, several addbacks are eliminated: capital gain portion of a lump sum distribution, unemployment compensation excluded from federal gross income, qualified disaster assistance property, qualified refinery property, loss from the sale or exchange of preferred stock in the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation, an election under Section 179C of the IRC, and wages, reimbursements, or other payments made for services if the person was prohibited from being hired as an employee because the person was an unauthorized alien.
  • Effective Jan. 1, 2016, three deductions are repealed: insulation, solar-powered roof vents and fans, and the first $1,200 of lottery winnings.
  • Effective Jan. 1, 2015, an individual employed as a teacher is entitled to a credit for purchases of classroom supplies. The credit is equal to the lesser of $100 or the total amount expended for classroom supplies during a taxable year.

Changes Affecting Corporate Income Tax
The following changes affect Indiana’s corporate adjusted gross income tax:

  • Effective Jan. 1, 2016, several addbacks are eliminated: capital gain portion of a lump sum distribution, unemployment compensation excluded from federal gross income, qualified disaster assistance property, qualified refinery property, loss from the sale or exchange of preferred stock in the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation, an election under Section 179C of the IRC, and wages, reimbursements, or other payments made for services if the person was prohibited from being hired as an employee because the person was an unauthorized alien.
  • Effective Jan. 1, 2016, a for-profit hospital subject to the AGI tax and meets certain requirements is eligible for a credit for 10% of the property taxes paid in Indiana for the taxable year the property was used as a hospital.
  • Effective Jan. 1, 2015, a pass-through entity is not required to withhold tax or file a composite return for a nonresident member if the entity is a publicly traded partnership; meets the IRC Section 7704(c) exception; and agrees to file an annual information return reporting the name, address, and TID number for each member.
  • Effective Jan. 1, 2015, if an S corporation is given an extension of time to file its annual return, it is automatically given an extension to file its withholding return for nonresident shareholders.
  • Effective Jan. 1, 2015, a trust or an estate is required to file a composite return on behalf of all nonresident beneficiaries.
  • Effective July 1, 2015, the recycling exemption is amended to exclude any collection of recycling materials from the definition of “recycling,” not limited to collection by licensed motor vehicles. “Occupationally engaged in recycling” is defined to engage in recycling with the intention of doing so at a profit. “Recycling cart” is defined to be a manually propelled container with a capacity of not more than 100 gallons. The double direct test for property acquired to be used in recycling is eliminated.
  • Effective Jan. 1, 2016, the sales tax exemption for agricultural machinery, tools, and equipment is expanded to include material-handling equipment purchased for transporting materials into such activities from an onsite location.
  • Effective Jan. 1, 2016, the “throwback rule” is eliminated for apportioning income to Indiana if the taxpayer is not taxable in the state of the purchaser.

Changes Affecting Special Taxes
The following changes affect Indiana’s special taxes:

  • Effective Jan. 1, 2016, the annual registration date for aircraft is the last day of December instead of the last day of February.
  • Effective July 1, 2015, an aircraft that has a total time in service exceeding 50 hours is no longer considered in inventory and is subject to registration and all applicable taxes.

In addition to these changes, the legislature changed the structure of the local option income tax. This new structure will take effect Jan. 1, 2017. The department is working with the Department of Local Government Finance to determine the impact of the changes.
A complete listing of all the legislation affecting 2015 tax filings can be found on the department’s website. Go to www.in.gov/dor/3656.htm and click the link for 2015.