Introduced Version
SENATE BILL No. 138
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3-4-8; IC 6-3.5.
Synopsis: Income tax withholding. Provides that in computing an
employee's income tax withholding, an employer may make an
allowance for a withholding exemption claimed by an employee only
if the employee furnishes the employer with the Social Security number
of the individual for whom the employee is claiming the withholding
exemption. Provides that an employer shall file a report annually with
the department of state revenue (department) that lists the Social
Security numbers of individuals for whom the employer's employees
claimed withholding exemptions. Provides that the amount of county
adjusted gross income tax (CAGIT) revenue, county option income tax
(COIT) revenue, or county economic development income (CEDIT)
revenue eligible for distribution to a county is based on the amount of
the CAGIT revenue, COIT revenue, or CEDIT revenue collected by the
department. (Current law provides that the amount of CAGIT revenue,
COIT revenue, or CEDIT revenue eligible for distribution to a county
is based on the amount of revenue: (1) collected by the department; and
(2) reported on an annual or amended return processed by the
department.)
Effective: July 1, 2008.
Riegsecker
January 8, 2008, read first time and referred to Committee on Tax and Fiscal Policy.
Introduced
Second Regular Session 115th General Assembly (2008)
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SENATE BILL No. 138
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 6-3-4-8; (08)IN0138.1.1. -->
SECTION 1. IC 6-3-4-8 IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2008]: Sec. 8. (a) Except as provided in
subsection (d) or (l), every employer making payments of wages
subject to tax under this article, regardless of the place where such
payment is made, who is required under the provisions of the Internal
Revenue Code to withhold, collect, and pay over income tax on wages
paid by such employer to such employee, shall, at the time of payment
of such wages, deduct and retain therefrom the amount prescribed in
withholding instructions issued by the department. The department
shall base its withholding instructions on the adjusted gross income tax
rate for persons, on the total rates of any income taxes that the taxpayer
is subject to under IC 6-3.5, and on the total amount of exclusions the
taxpayer is entitled to under IC 6-3-1-3.5(a)(3) and IC 6-3-1-3.5(a)(4).
Such employer making payments of any wages:
(1) shall be liable to the state of Indiana for the payment of the tax
required to be deducted and withheld under this section and shall
not be liable to any individual for the amount deducted from the
individual's wages and paid over in compliance or intended
compliance with this section; and
(2) shall make return of and payment to the department monthly
of the amount of tax which under this article and IC 6-3.5 the
employer is required to withhold.
(b) An employer shall pay taxes withheld under subsection (a)
during a particular month to the department no later than thirty (30)
days after the end of that month. However, in place of monthly
reporting periods, the department may permit an employer to report and
pay the tax for:
(1) a calendar year reporting period, if the average monthly
amount of all tax required to be withheld by the employer in the
previous calendar year does not exceed ten dollars ($10);
(2) a six (6) month reporting period, if the average monthly
amount of all tax required to be withheld by the employer in the
previous calendar year does not exceed twenty-five dollars ($25);
or
(3) a three (3) month reporting period, if the average monthly
amount of all tax required to be withheld by the employer in the
previous calendar year does not exceed seventy-five dollars ($75).
An employer using a reporting period (other than a monthly reporting
period) must file the employer's return and pay the tax for a reporting
period no later than the last day of the month immediately following
the close of the reporting period. If an employer files a combined sales
and withholding tax report, the reporting period for the combined
report is the shortest period required under this section, section 8.1 of
this chapter, or IC 6-2.5-6-1.
(c) For purposes of determining whether an employee is subject to
taxation under IC 6-3.5, an employer is entitled to rely on the statement
of an employee as to the employee's county of residence as represented
by the statement of address in forms claiming exemptions for purposes
of withholding, regardless of when the employee supplied the forms.
Every employee shall notify the employee's employer within five (5)
days after any change in the employee's county of residence.
(d) A county that makes payments of wages subject to tax under this
article:
(1) to a precinct election officer (as defined in IC 3-5-2-40.1); and
(2) for the performance of the duties of the precinct election
officer imposed by IC 3 that are performed on election day;
is not required, at the time of payment of the wages, to deduct and
retain from the wages the amount prescribed in withholding
instructions issued by the department.
(e) Every employer shall, at the time of each payment made by the
employer to the department, deliver to the department a return upon the
form prescribed by the department showing:
(1) the total amount of wages paid to the employer's employees;
(2) the amount deducted therefrom in accordance with the
provisions of the Internal Revenue Code;
(3) the amount of adjusted gross income tax deducted therefrom
in accordance with the provisions of this section;
(4) the amount of income tax, if any, imposed under IC 6-3.5 and
deducted therefrom in accordance with this section; and
(5) any other information the department may require.
Every employer making a declaration of withholding as provided in this
section shall furnish the employer's employees annually, but not later
than thirty (30) days after the end of the calendar year, a record of the
total amount of adjusted gross income tax and the amount of each
income tax, if any, imposed under IC 6-3.5, withheld from the
employees, on the forms prescribed by the department.
(f) All money deducted and withheld by an employer shall
immediately upon such deduction be the money of the state, and every
employer who deducts and retains any amount of money under the
provisions of this article shall hold the same in trust for the state of
Indiana and for payment thereof to the department in the manner and
at the times provided in this article. Any employer may be required to
post a surety bond in the sum the department determines to be
appropriate to protect the state with respect to money withheld pursuant
to this section.
(g) The provisions of IC 6-8.1 relating to additions to tax in case of
delinquency and penalties shall apply to employers subject to the
provisions of this section, and for these purposes any amount deducted
or required to be deducted and remitted to the department under this
section shall be considered to be the tax of the employer, and with
respect to such amount the employer shall be considered the taxpayer.
In the case of a corporate or partnership employer, every officer,
employee, or member of such employer, who, as such officer,
employee, or member is under a duty to deduct and remit such taxes
shall be personally liable for such taxes, penalties, and interest.
(h) Amounts deducted from wages of an employee during any
calendar year in accordance with the provisions of this section shall be
considered to be in part payment of the tax imposed on such employee
for the employee's taxable year which begins in such calendar year, and
a return made by the employer under subsection (b) shall be accepted
by the department as evidence in favor of the employee of the amount
so deducted from the employee's wages. Where the total amount so
deducted exceeds the amount of tax on the employee as computed
under this article and IC 6-3.5, the department shall, after examining
the return or returns filed by the employee in accordance with this
article and IC 6-3.5, refund the amount of the excess deduction.
However, under rules promulgated by the department, the excess or any
part thereof may be applied to any taxes or other claim due from the
taxpayer to the state of Indiana or any subdivision thereof. No refund
shall be made to an employee who fails to file the employee's return or
returns as required under this article and IC 6-3.5 within two (2) years
from the due date of the return or returns. In the event that the excess
tax deducted is less than one dollar ($1), no refund shall be made.
(i) This section shall in no way relieve any taxpayer from the
taxpayer's obligation of filing a return or returns at the time required
under this article and IC 6-3.5, and, should the amount withheld under
the provisions of this section be insufficient to pay the total tax of such
taxpayer, such unpaid tax shall be paid at the time prescribed by
section 5 of this chapter.
(j) Notwithstanding subsection (b), an employer of a domestic
service employee that enters into an agreement with the domestic
service employee to withhold federal income tax under Section 3402
of the Internal Revenue Code may withhold Indiana income tax on the
domestic service employee's wages on the employer's Indiana
individual income tax return in the same manner as allowed by Section
3510 of the Internal Revenue Code.
(k) To the extent allowed by Section 1137 of the Social Security
Act, an employer of a domestic service employee may report and remit
state unemployment insurance contributions on the employee's wages
on the employer's Indiana individual income tax return in the same
manner as allowed by Section 3510 of the Internal Revenue Code.
(l) The department shall adopt rules under IC 4-22-2 to exempt an
employer from the duty to deduct and remit from the wages of an
employee adjusted gross income tax withholding that would otherwise
be required under this section whenever:
(1) an employee has at least one (1) qualifying child, as
determined under Section 32 of the Internal Revenue Code;
(2) the employee is eligible for an earned income tax credit under
IC 6-3.1-21;
(3) the employee elects to receive advance payments of the earned
income tax credit under IC 6-3.1-21 from money that would
otherwise be withheld from the employee's wages for adjusted
gross income taxes; and
(4) the amount that is not deducted and remitted is distributed to
the employee, in accordance with the procedures prescribed by
the department, as an advance payment of the earned income tax
credit for which the employee is eligible under IC 6-3.1-21.
The rules must establish the procedures and reports required to carry
out this subsection.
(m) A person who knowingly fails to remit trust fund money as set
forth in this section commits a Class D felony.
(n) As used in this subsection and subsection (o), "withholding
exemption" means a reduction in income tax withholding by an
employer for an exclusion provided under IC 6-3-1-3.5(a)(3) or
IC 6-3-1-3.5(a)(4) that is made in accordance with the withholding
instructions issued by the department. An employer who is
required to withhold income tax under subsection (a) may make an
allowance for a withholding exemption claimed by an employee
only if the employee furnishes the employer with the Social
Security number of the individual for whom the employee wishes
to claim the withholding exemption.
(o) An employer who is required to withhold income tax under
subsection (a) shall file a report annually with the department that
lists the Social Security numbers of the individuals for whom an
employee has claimed a withholding exemption for the calendar
year. An employer shall file the report required by this subsection
on forms prescribed by the department on or before the last day of
the February that follows the calendar year for which the report
is made.
SOURCE: IC 6-3.5-1.1-9; (08)IN0138.1.2. -->
SECTION 2. IC 6-3.5-1.1-9, AS AMENDED BY P.L.224-2007,
SECTION 61, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2008]: Sec. 9. (a) Revenue derived from the imposition of the
county adjusted gross income tax shall, in the manner prescribed by
this section, be distributed to the county that imposed it. The amount
to be distributed to a county during an ensuing calendar year equals the
amount of county adjusted gross income tax revenue that the
department, after reviewing the recommendation of the budget agency,
determines has been
(1) received from that county for a taxable year ending before the
calendar year in which the determination is made,
and
(2) reported on an annual return or amended return processed by
the department in the state fiscal year ending before July 1 of the
calendar year in which the determination is made;
as adjusted (as determined after review of the recommendation of the
budget agency) for refunds of county adjusted gross income tax made
in before July 1state fiscal calendar year in which the
determination is made.
(b) Before August 2 of each calendar year, the department, after
reviewing the recommendation of the budget agency, shall certify to the
county auditor of each adopting county the amount determined under
subsection (a) plus the amount of interest in the county's account that
has accrued and has not been included in a certification made in a
preceding year. The amount certified is the county's "certified
distribution" for the immediately succeeding calendar year. The amount
certified shall be adjusted under subsections (c), (d), (e), (f), (g), and
(h). The department shall provide with the certification an informative
summary of the calculations used to determine the certified
distribution. The department shall also certify information concerning
the part of the certified distribution that is attributable to a tax rate
under section 24, 25, or 26 of this chapter. This information must be
certified to the county auditor and to the department of local
government finance not later than September 1 of each calendar year.
The part of the certified distribution that is attributable to a tax rate
under section 24, 25, or 26 of this chapter may be used only as
specified in those provisions.
(c) The department shall certify an amount less than the amount
determined under subsection (b) if the department, after reviewing the
recommendation of the budget agency, determines that the reduced
distribution is necessary to offset overpayments made in a calendar
year before the calendar year of the distribution. The department, after
reviewing the recommendation of the budget agency, may reduce the
amount of the certified distribution over several calendar years so that
any overpayments are offset over several years rather than in one (1)
lump sum.
(d) The department, after reviewing the recommendation of the
budget agency, shall adjust the certified distribution of a county to
correct for any clerical or mathematical errors made in any previous
certification under this section. The department, after reviewing the
recommendation of the budget agency, may reduce the amount of the
certified distribution over several calendar years so that any adjustment
under this subsection is offset over several years rather than in one (1)
lump sum.
(e) The department, after reviewing the recommendation of the
budget agency, shall adjust the certified distribution of a county to
provide the county with the distribution required under section 10(b)
of this chapter.
(f) This subsection applies to a county that:
(1) initially imposes the county adjusted gross income tax; or
(2) increases the county adjusted income tax rate;
under this chapter in the same calendar year in which the department
makes a certification under this section. The department, after
reviewing the recommendation of the budget agency, shall adjust the
certified distribution of a county to provide for a distribution in the
immediately following calendar year and in each calendar year
thereafter. The department shall provide for a full transition to
certification of distributions as provided in subsection
(a)(1) through
(a)(2) (a) in the manner provided in subsection (c).
(g) The department, after reviewing the recommendation of the
budget agency, shall adjust the certified distribution of a county to
provide the county with the distribution required under section 3.3 of
this chapter beginning not later than the tenth month after the month in
which additional revenue from the tax authorized under section 3.3 of
this chapter is initially collected.
(h) This subsection applies in the year in which a county initially
imposes a tax rate under section 24 of this chapter. Notwithstanding
any other provision, the department shall adjust the part of the county's
certified distribution that is attributable to the tax rate under section 24
of this chapter to provide for a distribution in the immediately
following calendar year equal to the result of:
(1) the sum of the amounts determined under STEP ONE through
STEP FOUR of IC 6-3.5-1.5-1(a) in the year in which the county
initially imposes a tax rate under section 24 of this chapter;
multiplied by
(2) two (2).
SOURCE: IC 6-3.5-6-17; (08)IN0138.1.3. -->
SECTION 3. IC 6-3.5-6-17, AS AMENDED BY P.L.224-2007,
SECTION 78, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2008]: Sec. 17. (a) Revenue derived from the imposition of
the county option income tax shall, in the manner prescribed by this
section, be distributed to the county that imposed it. The amount that
is to be distributed to a county during an ensuing calendar year equals
the amount of county option income tax revenue that the department,
after reviewing the recommendation of the budget agency, determines
has been
(1) received from that county for a taxable year ending in a
calendar year preceding the calendar year in which the
determination is made, and
(2) reported on an annual return or amended return processed by
the department in the state fiscal year ending before July 1 of the
calendar year in which the determination is made;
as adjusted (as determined after review of the recommendation of the
budget agency) for refunds of county option income tax made in before
July 1state fiscal calendar year in which the determination is
made.
(b) Before August 2 of each calendar year, the department, after
reviewing the recommendation of the budget agency, shall certify to the
county auditor of each adopting county the amount determined under
subsection (a) plus the amount of interest in the county's account that
has accrued and has not been included in a certification made in a
preceding year. The amount certified is the county's "certified
distribution" for the immediately succeeding calendar year. The amount
certified shall be adjusted, as necessary, under subsections (c), (d), (e),
and (f). The department shall provide with the certification an
informative summary of the calculations used to determine the certified
distribution. The department shall also certify information concerning
the part of the certified distribution that is attributable to a tax rate
under section 30, 31, or 32 of this chapter. This information must be
certified to the county auditor and to the department of local
government finance not later than September 1 of each calendar year.
The part of the certified distribution that is attributable to a tax rate
under section 30, 31, or 32 of this chapter may be used only as
specified in those provisions.
(c) The department shall certify an amount less than the amount
determined under subsection (b) if the department, after reviewing the
recommendation of the budget agency, determines that the reduced
distribution is necessary to offset overpayments made in a calendar
year before the calendar year of the distribution. The department, after
reviewing the recommendation of the budget agency, may reduce the
amount of the certified distribution over several calendar years so that
any overpayments are offset over several years rather than in one (1)
lump sum.
(d) The department, after reviewing the recommendation of the
budget agency, shall adjust the certified distribution of a county to
correct for any clerical or mathematical errors made in any previous
certification under this section. The department, after reviewing the
recommendation of the budget agency, may reduce the amount of the
certified distribution over several calendar years so that any adjustment
under this subsection is offset over several years rather than in one (1)
lump sum.
(e) This subsection applies to a county that:
(1) initially imposed the county option income tax; or
(2) increases the county option income tax rate;
under this chapter in the same calendar year in which the department
makes a certification under this section. The department, after
reviewing the recommendation of the budget agency, shall adjust the
certified distribution of a county to provide for a distribution in the
immediately following calendar year and in each calendar year
thereafter. The department shall provide for a full transition to
certification of distributions as provided in subsection (a)(1) through
(a)(2) (a) in the manner provided in subsection (c).
(f) This subsection applies in the year a county initially imposes a
tax rate under section 30 of this chapter. Notwithstanding any other
provision, the department shall adjust the part of the county's certified
distribution that is attributable to the tax rate under section 30 of this
chapter to provide for a distribution in the immediately following
calendar year equal to the result of:
(1) the sum of the amounts determined under STEP ONE through
STEP FOUR of IC 6-3.5-1.5-1(a) in the year in which the county
initially imposes a tax rate under section 30 of this chapter;
multiplied by
(2) the following:
(A) In a county containing a consolidated city, one and
five-tenths (1.5).
(B) In a county other than a county containing a consolidated
city, two (2).
(g) One-twelfth (1/12) of each adopting county's certified
distribution for a calendar year shall be distributed from its account
established under section 16 of this chapter to the appropriate county
treasurer on the first day of each month of that calendar year.
(h) Upon receipt, each monthly payment of a county's certified
distribution shall be allocated among, distributed to, and used by the
civil taxing units of the county as provided in sections 18 and 19 of this
chapter.
(i) All distributions from an account established under section 16 of
this chapter shall be made by warrants issued by the auditor of state to
the treasurer of state ordering the appropriate payments.
SOURCE: IC 6-3.5-7-11; (08)IN0138.1.4. -->
SECTION 4. IC 6-3.5-7-11, AS AMENDED BY P.L.207-2005,
SECTION 9, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2008]: Sec. 11. (a) Revenue derived from the imposition of
the county economic development income tax shall, in the manner
prescribed by this section, be distributed to the county that imposed it.
(b) Before August 2 of each calendar year, the department, after
reviewing the recommendation of the budget agency, shall certify to the
county auditor of each adopting county the sum of the amount of
county economic development income tax revenue that the department
determines has been
(1) received from that county for a taxable year ending before the
calendar year in which the determination is made, and
(2) reported on an annual return or amended return processed by
the department in the state fiscal year ending before July 1 of the
calendar year in which the determination is made;
as adjusted (as determined after review of the recommendation of the
budget agency) for refunds of county economic development income
tax made in before July 1 of the state fiscal calendar year in which
the determination is made plus the amount of interest in the county's
account that has been accrued and has not been included in a
certification made in a preceding year. The amount certified is the
county's certified distribution, which shall be distributed on the dates
specified in section 16 of this chapter for the following calendar year.
The amount certified shall be adjusted under subsections (c), (d), (e),
(f), and (g). The department shall provide with the certification an
informative summary of the calculations used to determine the certified
distribution.
(c) The department shall certify an amount less than the amount
determined under subsection (b) if the department, after reviewing the
recommendation of the budget agency, determines that the reduced
distribution is necessary to offset overpayments made in a calendar
year before the calendar year of the distribution. The department, after
reviewing the recommendation of the budget agency, may reduce the
amount of the certified distribution over several calendar years so that
any overpayments are offset over several years rather than in one (1)
lump sum.
(d) After reviewing the recommendation of the budget agency, the
department shall adjust the certified distribution of a county to correct
for any clerical or mathematical errors made in any previous
certification under this section. The department, after reviewing the
recommendation of the budget agency, may reduce the amount of the
certified distribution over several calendar years so that any adjustment
under this subsection is offset over several years rather than in one (1)
lump sum.
(e) The department, after reviewing the recommendation of the
budget agency, shall adjust the certified distribution of a county to
provide the county with the distribution required under section 16(b)
of this chapter.
(f) The department, after reviewing the recommendation of the
budget agency, shall adjust the certified distribution of a county to
provide the county with the amount of any tax increase imposed under
section 25 or 26 of this chapter to provide additional homestead credits
as provided in those provisions.
(g) This subsection applies to a county that:
(1) initially imposed the county economic development income
tax; or
(2) increases the county economic development income rate;
under this chapter in the same calendar year in which the department
makes a certification under this section. The department, after
reviewing the recommendation of the budget agency, shall adjust the
certified distribution of a county to provide for a distribution in the
immediately following calendar year and in each calendar year
thereafter. The department shall provide for a full transition to
certification of distributions as provided in subsection (b)(1) through
(b)(2) (b) in the manner provided in subsection (c).
SOURCE: ; (08)IN0138.1.5. -->
SECTION 5. [EFFECTIVE JULY 1, 2008]
(a) IC 6-3.5-1.1-9(a), as
amended by this act, applies to the entire balance of county
adjusted gross income tax revenue accumulated in a special
account established under IC 6-3.5-1.1-8. In particular,
IC 6-3.5-1.1-9(a), as amended by this act, applies to county
adjusted gross income tax revenue that the department of state
revenue, after reviewing the recommendation of the budget agency,
determines:
(1) has been received from a county for any taxable year
ending before January 1, 2007; and
(2) has not been distributed to the county.
(b) IC 6-3.5-6-17(a), as amended by this act, applies to the entire
balance of county option income tax revenue accumulated in a
special account established under IC 6-3.5-6-16. In particular,
IC 6-3.5-6-17(a), as amended by this act, applies to county option
income tax revenue that the department of state revenue, after
reviewing the recommendation of the budget agency, determines:
(1) has been received from a county for any taxable year
ending before January 1, 2007; and
(2) has not been distributed to the county.
(c) IC 6-3.5-7-11(b), as amended by this act, applies to the entire
balance of county economic development income tax revenue
accumulated in a special account established under IC 6-3.5-7-10.
In particular, IC 6-3.5-7-11(b), as amended by this act, applies to
county economic development income tax revenue that the
department of state revenue, after reviewing the recommendation
of the budget agency, determines:
(1) has been received from a county for any taxable year
ending before January 1, 2007; and
(2) has not been distributed to the county.
(d) This SECTION expires January 1, 2009.