Indiana Incentives and Workforce Development Guide
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Corporate Tax Rate: In an effort to improve upon Indiana’s existing business climate and bring it more in line with other states, a bill was passed that has reduced the previous rate of 8.5% down to 6.5% through July 1, 2015. A new bill has been passed to phase in additional reductions, lowering it every year through 2022, when the rate reaches 4.9%.
Economic Development For A Growing Economy (EDGE): Created to reward companies creating new jobs and contributing to the growth of Hoosier income. Credits are calculated as a percentage of payroll tax withholding for net new Indiana jobs and may be awarded for a term of up to 10 years. EDGE is a refundable tax credit that can be offered in situations where Indiana is competing against another state or country for a company’s site location investment. The company must commit to maintaining operations in Indiana for at least two years beyond the term of its EDGE award.
Venture Capital Investment (VCI) Tax Credit: The VCI tax credit program improves access to capital for fast growing Indiana companies by providing individual and corporate investors and additional incentive in invest in early stage firms. Investors who provide qualified debt or equity capital to Indiana companies receive a credit against their Indiana tax liability. The VCI tax credit cap per qualifying business is $1 million. The VCI tax credit is non-refundable; if the amount of credit exceeds the taxpayer’s state tax liability for that taxable year, the taxpayer may carry over the excess credit for a period not to exceed the taxpayer’s following 5 taxable years.
Industrial Recovery Tax Credit (also known as “DINO”): DINO provides an incentive for companies to invest in former industrial facilities requiring significant rehabilitation or remodeling expenses. The General Assembly reduced the statutory thresholds in order to allow more vacant buildings in the state to be eligible for this program. The minimum in-service period for building was reduced from 20 to 15 years. The minimum vacancy period was reduced from one year to zero. The minimum square footage for building requirement was reduced from 250,000 square feet (50,000 square feet from 2011 to 2014 and 100,000 square feet starting in 2015). These changes may help bring more vacant facilities back into service.
Hoosier Business Investment Tax Credit (HBITC): HBITC provides incentive to businesses to support jobs creation, capital investment and to improve the standard of living for Indiana residents. The nonrefundable corporate income tax credits are calculated as a percentage (up to 10%) of the eligible capital investment over a period of two full calendar years to support the project. The tax credit is applied against income tax liability and may be carried forward 9 years. There is no carry back, and the credit is nonrefundable. Eligible capital investment includes new machinery and building costs.
Headquarters Relocation Tax Credit: When a business relocates its corporate headquarters, divisional headquarters or R&D facility to Indiana, it is entitled to a credit against its state tax liability equal to half of the costs incurred in relocating the headquarters. The company must also have worldwide annual revenue of at least $50 million to qualify and after relocation; the corporation must have 75 employees in Indiana. The tax credit is applied against income tax liability and may be carried forward 9 years. There is no carry back, and the credit is nonrefundable.
Research and Development (R&D) Tax Credit: Authorized by IC 6-3.1-4-1 and administered by the Indiana Department of Revenue, it provides a credit against state tax liability for qualified company research expenses and is based on the increase in Indiana R&D over the prior three-year base. In the base year, research expenses must have been at least half of the research expenses in the current year. The credit equals 15% of qualified research expenses on the first $1 million of investment. The tax credit is applied against income tax liability and may be carried forward 10 years. There is no carry back, and the credit is nonrefundable.
Research and Development (R&D) Sales Tax Exemption: Authorized by IC 6-2.5-5-40, it provides a 100% sales tax exemption for qualified R&D equipment and property at the time of purchase. Taxpayers may file a claim for the refund for sales tax paid on retail transactions if the sales tax was not exempted at the time of the actual transaction.
Skills Enhancement Fund (SEF): A tool to encourage companies to invest in their existing workforce and train new employees. It provides fifty percent (50%) reimbursement for eligible training expenses over a two-year term. The following are ineligible expenses: training expenses incurred before the commencement date or after the expiration date of the Agreement, OSHA or other federally mandated training, and onboard orientation training as it relates to new hires.
Other Incentives and Business Initiatives
Certified Technology Park Program: Created as a tool to support the attraction and growth of high-technology business in Indiana and promote technology transfer opportunities. Designation as a Certified Tech Park allows for the local recapture of certain state and local tax revenue that can be invested in the development of the park.
Indiana Shovel Ready Program: Reduces potential costs of site development for businesses and enhances the marketability of certified sites. The goals of the program are to:
- Certify sites and existing buildings to expedite the location and permitting processes for business development
- Help local communities identify and prepare sites and existing buildings for economic development
- Identify and fast track the state and local permits necessary for a specific site (dependent on the end user)