What is Replace Don't Erase?
Replace Don’t Erase is an effort to preserve local government funding at a level allowing municipal government in Indiana to continue providing Hoosiers with the quality of life they expect and deserve. Currently, the Indiana General Assembly is moving towards eliminating the business personal property tax, a move that will eliminate more than $1 Billion dollars from local governments and devastate their ability to provide services, infrastructure and improvements. Growing Indiana’s economy is about more than a checklist of business taxes.
November 12, 2014
Earlier today the legislature’s Commission on Business Personal Property and Business Taxation concluded their work. As you know, the Commission was established by SEA 1 – 2014 as part of last session’s debate on the elimination of Indiana’s business personal property tax. Incoming IACT President and Terre Haute Mayor Duke Bennett represented city and town leaders well on the Commission. We are grateful for his time and dedication to the complex, important work of the Commission over the last three months.
The Commission concluded by approving a report that contained numerous recommendations for the legislature to consider during the upcoming session, most of which can be found here on the Commission’s web page. Several of the Commission’s recommendations are cause for optimism among Indiana’s city and town leaders.
Relative to local option income taxes (LOIT), the Commission suggests the legislature consolidate existing LOIT rates into a single rate for three uses: certified shares, property tax credits and special rates for debt services and special projects. They also recommend removing the link between the public safety LOIT and the LOIT for property tax relief, something IACT has consistently supported.
Two additional Commission recommendations were added after the draft report had been circulated to its members.
- Create new, collaborative economic development partnerships with our metropolitan regions to drive economic growth through quality of place initiatives.
- Continue discussions to ensure local units are not adversely impacted by these recommendations and seek ways to mitigate any lost revenues realized by local units.
The Governor supports these significant recommendations and we applaud the Commission for including them in the report.
Our experience with the Commission and their work has been positive, yet there are some items of concern contained in their recommendations. Specifically, the Commission suggests the legislature adjust the minimum assessment floor from 30% to 25% for business personal property pool 3 assets and to 15% for business personal property pool 4 assets. And, they recommend a mandate of the small business exemption for equipment with acquisition costs of $20,000 or less that is currently a county-by-county option in SEA 1 – 2014.
The fiscal impact of these two provisions is certainly less than cities and towns would see with total elimination. However, without any provisions for revenue replacement and concerns over the adoption mechanism still unaddressed, IACT cannot support these specific recommendations.
Another Commission recommendation we’ll need to dig into, which is not included in the final written report, is the addition to continue studying TIF and its impact on the assessed value of other local units. This was added verbally during the group’s final meeting.
Commission Chair Senator Brandt Hershman was clear to say that all of the Commission’s recommendations represent a starting point for legislative debate. He invited continued dialogue from all impacted parties and we look forward to working with Senator Hershman, Governor Pence and all Hoosier lawmakers in the months ahead
In addition to their final report, you can find all of the Commission’s deliberative documents and a video archive of all meetings on the Commission’s web page. Please contact me or any member of the IACT legislative team with any questions or concerns.
October 31, 2014
Blue Ribbon Panel on Business Personal Property and Other Matters Concludes Testimony Phase – Report Due in November
Earlier this year city and town leaders worked with legislators to prevent the elimination of Indiana’s business personal property tax without full replacement revenue – a move that could have meant a nearly $1 Billion loss to local units of government. The result of this hard work was Senate Enrolled Act 1 – 2014 (SEA 1), which included a very limited phase-out of the tax via COIT Council elimination process. While IACT has concerns about a lack of adequate representation of all municipalities and other taxing units in the COIT Council process, when compared to full elimination without full replacement revenue, SEA 1 is a more preferred outcome. We thank the members of the Indiana General Assembly for their deliberation on this issue and for their consideration of how this would have impacted cities and towns.
SEA 1 also created the Commission on Business Personal Property and Business Taxation (Commission). This expanded interim study committee - often referred to as the Blue Ribbon Commission - was established, among other things, to look at the issues of eliminating Indiana’s business personal property tax, the impact of property tax caps and the use of tax increment financing. Membership of the Commission includes legislators as well as representatives other branches of government and the private sector. Incoming IACT President and Terre Haute Mayor Duke Bennett represents IACT on the Commission. A full listing of members can be found on the Commission’s webpage.
The Commission has convened three times for substantive discussions and presentations with a fourth meeting coming up on November 12th. This final meeting is for consideration of their final report. A brief summary of the Commission’s activities follows, minutes and copies of all presentations from the first two meetings are also available on the Commission’s webpage.
During their first meeting the Commission heard from witnesses representing Legislative Services Agency, Council on State Taxation and The Tax Foundation, who reported on things such as the make-up Indiana’s state and local revenue sources, various analyses of the tax burden on businesses in Indiana and throughout the Midwest. Purdue economist Dr. Larry DeBoer offered an analysis of Indiana’s business tax climate, while Jamie Palmer of the IU Public Policy Institute reviewed a 2012 report whereby the Institute and the legislature’s State and Local Tax Policy Commission recommended the state continue efforts to reduce reliance on the business personal property tax.
Representing the Indiana Manufacturers Association, Pat Kiely, who is also a Commission member, proposed six policy options for the Commission to consider. Among the options were a repeal of personal property taxes on production machinery and equipment and repealing the 30% depreciation floor on personal property assessments. Similarly, the Indiana Chamber of Commerce’s Bill Waltz suggested that the bottom 100,000 taxpayers pay a combined $2,500,000 in personal property taxes last year. Therefore, the Chamber supports a de minimus exemption for business personal property taxes that they note would assist these taxpayers without a huge fiscal impact.
The last presenter on this day was John Sampson representing the Northeast Indiana Regional Partnership. Mr. Sampson wisely cautioned the Commission to keep in mind the importance of regional economic development and the need to replace lost local revenues should business personal property taxes be eliminated.
The majority of day one was spent reviewing Indiana’s National rankings as a state that is good for business and what additional business tax or policy changes could be made to create an even friendly atmosphere for the business community.
During their second meeting, the Commission members heard results of several studies and from multiple groups with established concerns about eliminating any portion of Indiana’s business personal property tax without designated replacement revenue.
Department of Revenue Commissioner Mike Alley reviewed the Governor’s Tax Simplification and Competitiveness Conference outcomes and reviewed several recommended changes to Indiana’s tax policy. Legislative Services Agency’s Bob Sigelow also reviewed eight different items his agency researched for the Committee. The reduction of the 30% assessment floor was specifically referenced by Mr. Sigelow – clearly a move the Commission is seriously considering. Several reports of interest to cities and towns are included in Sigelow’s Exhibit’s 2-9.
Representatives of Policy Analytics, led by Bill Sheldrake, offered a review of Indiana’s recent tax reform history and offered two different analyses – one being review of circuit breaker credits and the other being a look at the inner-dependency of local government units. All circuit breaker information from Policy Analytics can be found in Exhibit 1.
A proponent for eliminating Indiana’s personal property tax system entirely was Dr. Justin Ross of IU. Dr. Ross argued for a land-only taxation system, which he described as an economic driver that is less piecemeal and environmentally friendly.
Representatives of IACT, Association of Indiana Counties, Indiana Association of School Business Officials, Indiana Small and Rural Schools Association and Dekalb Eastern all discussed our concerns about eliminating all or portions of the business personal property tax without designated replacement revenues.
IACT President and Angola Mayor Richard Hickman testified about the impact of the tax caps coupled with other changes to local government finance have created challenging environments for local units to provide the kind of quality of life we need to grow our cities and towns. Umbaugh’s Gary Malone walked through a detailed report that highlighted the potential impact of eliminating the personal property tax, the need for more local tools to allow locals to have a hand in solving their own fiscal challenges and the few options that currently exist for municipalities. View the Umbaugh report.
Last week, the final substantive meeting of the Commission heard about varying aspects of local government finance and economic development.
Eric Doden and Eric Shields of the Indiana Economic Development Corporation presented preliminary findings of their Regional Cities Research Initiative. The report stresses bi-partisan cooperation, private sector involvement and the importance quality of life places in attracting talent and businesses to Indiana. Shortly after the Commission meeting the full report was released and can be found here.
Local Option Income Taxes (LOIT) were another topic of discussion. Representatives Thompson and Karickhoff spoke briefly about a bill they will file in the upcoming session that they say will simplify local income taxes and uncouple the requirement to adopt a property tax relief LOIT before a Public Safety LOIT can be adopted. This bill is in keeping with one of our legislative initiatives and we’ll be following this bill closely and support their efforts to make the adoption of a Public Safety LOIT easier.
Micah Vincent of the Office of Management reported that the Governor’s office will also be looking at simplifying LOIT. The Governor’s initiatives will be announced in early December. IACT will be meeting with the Governor’s office in November to learn more.
TIF was discussed at length by the Commission. IEDC President Eric Doden commented that “TIF is a powerful and important tool for economic development and one of the most often used tools locals use when we are working with them.”
DLGF Commissioner Courtney Schaafsma gave a high level overview of the 1,600 page TIF report the DLGF has compiled. One item from the report she highlighted was 20% of those with TIFs have released some kind of pass through revenues to other entities. She also said that the DLGF is interested in legislation that would consolidate some of the TIF reporting. Also in line with an IACT legislative initiative, we will be working with the DLGF on this effort.
There was citizen testimony raising concerns regarding the degradation of the base by TIF for other taxing units. Micah Vincent acknowledged that although this was a problem in the past, in 2013 the General Assembly passed the “TIF neutralization” bill that keeps revenue neutral for other taxing units, regardless of how the TIF performs.
To conclude the TIF discussion, Chairman Hershman said that everyone seems to agree TIF is important and should not go away. While he didn’t offer any details, he said he wants to encourage locals to use TIF “appropriately.”
There were additional presentations offered at the October 23rd meeting. Drew Klacik of the IU Public Policy Institute unveiled a report on metropolitan Indianapolis population trends conducted on behalf of the Indy Chamber of Commerce and a summary of redevelopment commission filing requirements and deadlines was offered by Rhonda Cook. Several other exhibits from this meeting can be found here.
The Commission will finish their work on November 12th, when a final report will be discussed.
In the weeks since the Commission first met, there has been much speculation regarding the future of Indiana’s personal property tax. Some say the House is finished with personal property taxes until the dust settles on SEA 1 – 2014. Other reports indicate the Senate is ready to push for more business tax breaks in 2015, including more business personal property tax reductions. Reflecting upon the work of the Commission we don’t expect the issue of personal property tax elimination to sunset.
Once it’s released, IACT will review the Commission’s report and keep you informed as we approach the 2015 legislative session.
July 23, 2014
Replace Don’t Erase Coalition Members were joined by individuals from units who stand to be impacted by legislative proposals to eliminate Indiana’s personal property tax for the Mid-Summer Workshop: Personal Property Tax Elimination Efforts and the Information You Need to Know. To view the presentation on working with lawmakers, local media and others to communicate your concerns click here
. For additional information regarding SEA 1-2014 and other legislative proposals, click here
March 14, 2014
The 23 statewide organizations who joined together in an effort to preserve the quality of life and viability of Indiana's communities have mixed feelings about the conclusions reached this legislative session. While some strides were made, it is clear that the work of this group must continue.
“This legislation begins to offer relief to Indiana businesses and is a good initial step toward totally eliminating personal property tax in the future.” - Kevin Brinegar, Indiana Chamber of Commerce President and CEO.
For a copy of Senate Enrolled Act 1 - 2014, click here
March 6, 2014
IACT issued a statement regarding the current proposals being debated in the House and Senate. For more information, click here
Both the House and Senate have advanced bills to begin phasing out Indiana’s personal property tax. SB 1 and HB 1001 are headed into conference committee where intense negotiations will take place over the coming days. For a summary of key provisions currently in each proposal, click here
The IACT Board of Directors and several Hoosier Mayors held a media event today and expressed great concerns over legislation that eliminates any portion of the personal property tax without full replacement revenue guaranteed by the state.
See a copy of the press release here.
Indianapolis Star: Business tax cut would hit local governments
An Indianapolis Star article takes a look at the Indiana Fiscal Policy Institute report that was released yesterday. The report finds that past tax reforms will make it difficult to cut Indiana's tax on business equipment without causing big revenue losses for local governments and shifting a significant amount of the property tax burden to homeowners.
The report also found that reducing the equipment tax would have only a small effect on business relocation from outside the state, but could pit one Indiana county against another.
Read the full story here
The Indiana Fiscal Policy Institute released a new report today: The Personal Property Tax in Indiana, Its Reduction or Elimination is No Simple Task.
The report highlights many of the pitfalls, difficulties and concerns that arise from the idea of eliminating Indiana’s personal property tax. An excerpt from the report states:
One could argue that local governments should “just tighten their belts” to accommodate a more business-friendly tax climate in Indiana. Many local governments are still in the process of readjusting their budgets and revenue streams to adjust to the revenue losses as a result of the property tax caps/Circuit Breaker. The losses under existing law are estimated to exceed $800 million in 2015 and the elimination of the personal property tax would add an additional $550 million in losses statewide, plus an additional $134 million in reductions to rate controlled funds. Those numbers are significant and, in most jurisdictions, will not easily be accommodated with either increased taxes and users fees or reductions in local services.
for a link to the full report.
This week both the House and Senate passed their respective bills to begin the road to full elimination of the business personal property tax without any replacement revenue. It has been a very disappointing week to see that so many lawmakers are not willing to seriously consider the consequences these actions will have on Indiana’s cities, towns, counties, townships, libraries and schools. We urge you to continue talking with your representatives and senators to explain why HB 1001 is not a true local option and why SB 1 is a slippery slope. Any PPT revenue eliminated must be automatically replaced.
Today, the House Ways and Means committee passed HB 1001 11-8. The bill will advance to the floor of the House early next week. Please call your representative(s) and urge them to vote no in this bill. The COIT Council option will leave counties, cities, towns, schools and other units with little or no voice. Visit the Action Center for suggested talking points.
South Bend Mayor Pete Buttigieg and New Haven Mayor Terry McDonald were on-hand January 21 in the Senate Tax and Fiscal Policy Committee to raise IACT’s concerns regarding SB 1. The Mayors emphasized that while this bill is a more conservative version of the broader proposal to eliminate Indiana’s personal property tax, it is most likely the first wave of eventual complete elimination. Full replacement revenues by the state must be included in any viable plan to eliminate the PPT. The House proposal to phase out the PPT will be voted upon in the Ways and Means Committee as early as Thursday. IACT urges you to continue contacting your lawmakers on both of these bills.
On Friday, Jan. 17 IACT sent out this call to action: Contact Your Legislators about Indiana's Business Personal Property Tax!
HB 1001, the phase out of Indiana’s business personal property tax, was heard on Tuesday, January 14 in the powerful House Ways and Means committee. IACT was very fortunate that Mayors Hickman, Bennett, Winnecke, Buttigieg, and Lewis were able to come to Indianapolis with very little notice and testify at the very lengthy committee hearing. Their testimony was diverse, powerful, thoughtful and well received. The bill is currently slated for a vote in the Committee on Thursday, January 23.
Press Conference Videos
Feb. 11 Press Conference Videos
to view the Feb. 11 press conference videos
Jan. 30 Press Conference Videos
- IACT Executive Director & CEO Matt Greller
- IACT President and Angola Mayor Richard Hickman
- Indianapolis Mayor Greg Ballard
- Kokomo Mayor Greg Goodnight
- Evansville Mayor Lloyd Winnecke
- South Bend Mayor Pete Buttigieg
to view the Jan. 30 press conference videos
- IACT Executive Director & CEO Matt Greller
- Dennis Costerison, Executive Director of Indiana Association of School Business Officials
- Richard Hickman, IACT President and Angola Mayor
- Larry Hesson, Hendricks County Councilman and member of Indiana Association of Counties
- Tony Ciriello, Syracuse, Ind., Police Chief