On July 14th, the IRS held a public hearing for the debt-equity rule (section 385 of the IRS code) that the Treasury Department proposed last April. The hearing, which had as many as 16 speakers from various industries,...
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- Indiana House Unanimously Approves Incentive Study Commis...
Indiana House Unanimously Approves Incentive Study Commission
The Indiana House voted yesterday 93-0 to pass H.B. 1020, which would require Indiana’s standing bicameral Commission on State Tax and Financing Policy to review all state and local tax incentives over a five-year period. I testified before the commission last December as they examined some of the credits in their corporate code. This bill expands the scope of the commission to review not just credits, but all types of incentives.
These sorts of review programs from states help legislators to better understand the trade-offs associated with building tax privileges into the code—privileges that are not subject to scrutiny as often as you might think. From State Tax Notes:
Josh Goodman, senior researcher with the Pew Charitable Trusts' state Economic Development Tax Incentives Project, told Tax Analysts that his group knows of 13 states with plans for specific, multiyear reviews of tax incentives. Some of those plans are codified into law while others are not, he said.
The review [set forth by H.B. 1020] would cover exemptions, deductions, credits, preferential tax rates, and any other benefit that would result in a tax reduction or refund in excess of tax otherwise due. It also would apply to areas to which localities dedicate revenue to provide improvements or retire bonds to pay for improvements.
The bill also would specifically require a review of property tax abatements. It would direct the state's Department of Local Government Finance to conduct an annual audit of 1 percent of the statements of benefits submitted by taxpayers that receive a property tax abatement.
The findings from the most recent tax credit review of the Commission on State Tax and Financing Policy in part spurred Sen. Hershman to file S.B. 1, which includes a corporate tax reduction that is partially offset by a reduction in the generosity of the state’s research and development credit. This move would continue Indiana’s march upward in our State Business Tax Climate Index from 10th to 8th.
I’ll be curious to see what kind of base-broadening and rate-lowering might come out of this even more thorough review of tax incentives. In the meantime, big kudos for a bipartisan piece of legislation.
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