Though Gov. Mike Pence signed it into law last week, much remains unsettled about a package of business tax breaks.
The legislation, Senate Bill 1, is a compromise between state lawmakers and Pence.
At the start of the 2014 legislative session, which ended mid-March, Pence announced that he sought to phase out the personal property tax that businesses pay on equipment and machinery — and that local governments rely on.
Property taxes are the largest source of revenue for local governments like cities and towns. In Grant County, business personal property taxes comprise 16 percent of all property tax revenue.
Pence’s proposal was intended to make Indiana more competitive with neighboring states, where the tax does not exist or has a lower rate.
Instead, the bill Pence signed into law reduces the corporate income tax rate from 6.5 percent to 4.9 percent by 2021 and offers local governments the option of granting certain breaks to local businesses. For example, a county can adopt an ordinance to exempt new business equipment from property taxes.
Such options require the approval of a county’s tax council, though. Here, Grant County Auditor Roger Bainbridge said that means at least 50.01 percent of the membership of the Grant County Tax Council would have to adopt the ordinance.
Currently, because Marion’s population constitutes the largest percentage of Grant County’s population, the Marion City Council comprises the largest percentage of the countywide tax council — 42.75 percent, Bainbridge said. The Grant County Council (30.74 percent) and Gas City Council (8.51 percent) follow.
For Bainbridge and others, this means they’re not worried about such optional tax breaks yet.
“Until one of these municipalities actually takes up the matter themselves, it’s just a what-if,” Bainbridge said.
Jim McWhirt, president of the Grant County Council, said he’s not heard from any businesses about the law and council members have not collectively talked about it and currently have no plans to address it.
McWhirt, the former business manager for Marion Community Schools, said the county would have to do something to make up for the loss if officials did opt to reduce taxes.
“I can’t see us letting it go,” he said.
Some optional tax breaks counties could adopt under the new law could have other drawbacks. For example, a county tax council can adopt an ordinance to exempt a company from filing a personal property tax return if the company’s equipment totals less than $20,000.
Grant County Economic Growth Council Executive Director Tim Eckerle said offering such a break could prove counterproductive for business if a company seeking to expand decides against it because adding equipment would mean paying taxes on it.
Marion-Grant County Chamber of Commerce President/CEO Charlie Wallace said he views the new law as he did Pence’s original proposition.
“It’s a double-edged sword,” he said.
While tax breaks would be an advantage for business, Wallace agrees they would have to be made up elsewhere so local governments are not at a disadvantage.
Wallace also pointed out that breaks like the one for businesses with less than $20,000 in equipment aren’t available till the end of next year, which he said, along with the legislative session being shorter this year, is part of why the Chamber of Commerce’s official position on the legislation was to request a summer study.
“There kind of seemed to be this rush to judgment,” said Alan Miller, chair of the chamber’s legislative affairs committee. “I was a little surprised.”
Further, Eckerle said he sees parts of the new law as subject to interpretation.
“We have to figure out exactly what all this means,” he said. “It’s a puzzle with a lot of moving pieces.”