Lawmakers consider change to business personal property tax

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Indiana lawmakers are considering making another change to the state’s business personal property tax — a move that could affect tens of thousands of small businesses.

Senate Bill 385, authored by Sen. Aaron Freeman, R-Indianapolis, would change the way the tax is calculated, from being based on the cost of the property when a business acquired it to being based on the current cash value of the property.

According to an analysis by the Legislative Services Agency, that could exempt an additional 66,500 businesses from having to pay the tax.

The move comes one year after the Indiana General Assembly doubled the exemption threshold from $20,000 to $40,000 so businesses that acquired property that cost less than $40,000 were not subject to the tax starting in 2021.

That exemption and the original $20,000 exemption were designed to help small businesses that were forced to pay small amounts of personal property taxes that sometimes were less than what it cost for those business owners to hire accountants to file the necessary paperwork.

Freeman said he thinks the state should change the law to base the tax on the current cash value instead of the acquisition cost, because if a business keeps a piece of equipment it purchased for years, the value would depreciate, making it more sensible to base it on the current value.

According to the LSA, the switch would reduce local tax revenues by an estimated $18 million statewide, and cities and towns and school corporations would be hit the hardest.

Advocates for the legislation, including the Indiana Chamber of Commerce, the Indiana chapter of the National Federation of Independent Businesses and the Indiana Manufacturers Association, say it would significantly help small businesses.

But opponents of the bill, including the Association of Indiana Counties and Accelerating Indiana Municipalities, say the impact could be even more significant than LSA predicts. They contend the change could lead to more tax appeals because the current value of something can be debated while the acquisition cost is usually straightforward.

The Senate Tax and Fiscal Policy Committee approved the bill 10-2 on Tuesday, but several senators who supported it said they have concerns and would like to see changes before a final Senate vote.

The deadline for bills to pass the Senate is Tuesday.

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