2016 Legislative Update

July 7, 2016

With the 2016 Indiana General Assembly concluded, it’s time to take a look at the legislation passed and consider how it will affect Hoosier taxpayers. The following pages highlight some of the key changes to Indiana’s tax laws, listed by tax type.

Changes Affecting Individual Income Taxes

  • Effective July 1, 2016, taxpayers may donate all or part of their tax refund to the military family relief fund.
  • Effective Jan. 1, 2017, the $1,500 deduction for dependent children is expanded to include certain individuals for whom the taxpayer is the legal guardian, but not the parent.
  • Effective Jan. 1, 2017, the credit for contributions to the 21st Century Scholars Program is eliminated.

Changes Affecting Corporate Income Taxes

  • Effective Jan. 1, 2010 (retroactive), contractors are required to collect sales tax when the contractor: 1) transfers construction material pursuant to a time and material contract; or 2) converts construction material into real property pursuant to a time and material contract.
  • Effective Jan. 1, 2010 (retroactive), with limited exceptions, contractors are required to pay use tax on the contractor’s conversion of construction material into real property if that construction material was purchased by the contractor.
  • Effective Jan. 1, 2016 (retroactive), references to the Internal Revenue Code are updated to that in effect on Jan. 1, 2016, instead of Jan. 1, 2015.
  • Effective July 1, 2016, the sale, lease, or rental of storage for bullion or currency are exempt in certain circumstances from the state gross retail tax.
  • Effective July 1, 2016, the property tax credit to which a hospital is entitled for the taxable year may be carried forward to a succeeding tax year indefinitely. Any unused credit for a taxable year still may not be carried back to a preceding tax year.
  • Effective Jan. 1, 2017, the “cutting of steel bars into billets” is no longer eligible for the sales tax exemption for manufacturing machinery, tools, and equipment acquired for direct use in direct production.
  • Effective Jan. 1, 2017, a taxpayer must enter into an agreement with and apply to the Indiana Economic Development Corporation in order to claim the industrial recovery tax credit.

Changes Affecting Special Taxes

  • Effective July 1, 2016, the distributor discount for taxpayers who purchase cigarette tax stamps between June 30, 2016 and June 30, 2017 increases from $0.012 to $0.013 per individual package of cigarettes.
  • Effective July 1, 2016, the distributor collection allowance for taxpayers who collect cigarette tax between June 30, 2016 and June 30, 2017 increases from $0.006 to $0.007 of the amount due.

A complete listing of all the legislation affecting 2016 tax filings can be found on the department’s website. Go to www.in.gov/dor/3656.htm and click the link for 2016.