State lawmakers again considering change to business property tax exemption

Indiana lawmakers are again considering a change in the how the state determines when companies are exempt from paying taxes on business equipment.

Senate Bill 336, authored by Sen. Aaron Freeman, R-Indianapolis, would base the exemption on the assessed value of equipment—called personal property—rather than on the value at the time the company acquired it.

The Senate Tax and Fiscal Policy Committee on Tuesday discussed the bill and voted 11-3 to advance it to the Senate floor.

Freeman’s proposal comes two years after the GOP-controlled Indiana General Assembly doubled the threshold to qualify for the exemption from $20,000 to $40,000. The change meant that starting this year, property acquired for less than $40,000 is not subject to the personal property tax.

The exemptions are meant to address the fact that small companies sometimes pay accountants more to calculate and file the paperwork for personal property taxes than the firms actually pay in taxes.

Freeman said changing what the exemption is based on makes sense because a piece of equipment purchased years ago does not have the same value as it does today, so it’s unfair to tax it as if the value hasn’t depreciated.

He proposed the same legislation in 2020, and it passed the Senate, but died in the House.

“Our businesses are struggling and we need to help them,” Freeman said.

The calculation change would result in approximately 52,000 additional business property tax returns being exempt from the tax starting in 2023, according to an analysis by the Legislative Services Agency. It would save businesses an estimated $28 million starting that year.

But the move would shift some of the tax burden to others, including homeowners. According to LSA, residential property taxes would go up by $5.2 million.

Several lawmakers said even though they want to help small businesses, they don’t want to increase taxes for potentially struggling homeowners.

“I understand what you’re trying to do here, but there is a shift here of the burden to other taxpayers,” Sen. Tim Lanane, D-Anderson, said.

Association of Indiana Counties Executive Director David Bottorff shared the same concern.

“It does create a shift, and we’re concerned about that,” Bottorff said. “Homeowners are picking up a higher percentage of the total tax liability.”

But business groups, including the Indiana Manufacturers Association, the National Federation of Independent Businesses and the Indiana Chamber of Commerce, support the idea.

“It just makes sense to have it based on the assessed value,” said Barbara Quandt, NFIB state director for Indiana.

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One thought on “State lawmakers again considering change to business property tax exemption

  1. Sen. Freeman is wrong to assert that “equipment purchased years ago does not have the same value that it does today.” The value of the equipment to the company is determined by its ability to perform the intended functions as well as it did “years ago.” If it does, it clearly has the same value and should be assessed and taxed accordingly.

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