Rules leave questions unanswered

For decades, Indiana has competed with other states by offering incentives to attract new industry.
Now, thanks to recent changes by the Indiana General Assembly, communities within the state could soon find themselves in similar competition with one another over tax incentives.
Gov. Mike Pence had made elimination of the business personal property tax one of his goals for the recent legislative session, and while the legislature made elimination of the tax possible, it shifted the burden for that decision to the local level. And it still hasn’t come up with a way to make up those lost tax revenues.
“For the economic development community, we’ve felt that doing away with the business personal property tax is a good idea,” Bill Bradley, executive director of Jay County Development Corporation, said Friday. He noted that a number of competing Midwest states have already taken that step or will do so soon.
“However,” he added, “all of us felt very strongly that we need some sort of advice from state government about how to replace that revenue.”
Under legislation passed in this session, counties will have the option to eliminate the business personal property tax on new machinery and equipment beginning in July 2015.
For years, counties and individual cities have approved abatement of property taxes on new buildings and new equipment for business and industry. Those abatements phase in property taxes, usually over a 10-year period.
Under the new legislation, it would be possible to exempt new equipment completely from the business personal property tax if that’s what a county council chose to do.
“It’s a question we’re (at JCDC) going to have to study and make some recommendations on,” said Bradley.
The issue of how local government might be able to replace the lost tax revenues has been punted to a blue ribbon commission.
“We’re good in Indiana at blue ribbon commissions,” said Bradley.
The commission is expected to come up with recommendations for revenue replacement in advance of the July 2015 date.
Meanwhile, the legislature made no changes in the rules on so-called “super abatement” of business personal property taxes.
Under super abatement rules, communities can phase in property taxes for industry and business over 20 years rather than 10.
And while the legislature had weighed establishing a minimum financial investment threshold of $3 million, there currently is no threshold at all.
“I don’t think at this point (super abatements) are good public policy,” Bradley said. “The only community I know of in the area doing those is Berne.”
With counties and communities offering different incentives for economic development, a patchwork of rules is taking shape across the state.
“Theoretically we’re already in competition,” said Bradley.
JCDC’s recommendation — which was adopted by the county — is that super abatements only be considered when there is the potential of 400 new jobs and an investment of $70 million is involved.
“There isn’t a great appetite for (super abatements),” he said. “For years we’ve lived by the 10-year standard.”[[In-content Ad]]