December 5, 2025

Welcome to this unprecedented issue of Aim Legislative Summary, a solid five weeks ahead of schedule. In this issue, we’ll explain why the legislature started the 2026 Legislative Session ahead of schedule, where Aim will be focusing significant proactive energy, and most importantly, how Aim is working to address some of the realities facing cities and towns as a result of SEA 1-2025. Join us each Friday the General Assembly is in session for a weekly spotlight on five bills, a brief legislative podcast offering vital Aim insights, and a complete bill tracking list containing all bills that could impact municipal government.

SESSION LOGISTICS

  • This November, Governor Mike Braun called the Indiana General Assembly into special session to consider redrawing the congressional district maps and evaluating the Indiana tax code for compliance with the federal income tax changes.
  • In lieu of entering special session in November, the leadership in the General Assembly chose to start the 2026 regular session early, beginning on December 1st. While other bills are being filed, attention is hyper-focused on HB 1032, the bill laying out proposed, mid-cycle congressional maps.
  • HB 1032 passed the House with a vote of 57-41.
  • A few other bills were filed and heard in the first week, though bill filing will continue until the beginning of January when session typically begins. The legislative leadership intends for the regular session to finish by the end of February due to the early start giving two extra weeks of committee discussion. As the session gets into a normal cadence, we’ll update Aim members again on the session calendar.

AIM OPERATIONAL INITIATIVES

  • Following the passage of SEA 1, Aim convened two working groups to respond to the impacts and suggest changes to make the bill workable and find cost savings for municipalities and taxpayers. These efforts will form the basis for Aim’s most important legislative initiatives this session.
  • SEA 1 Technical Corrections and LIT Reform: Aim has suggested several important ways to make the property tax reforms workable inside of the property tax system and maintain functionality for economic development. Aim is also working on several fixes to the local income tax system set to phase in during 2028. The most immediately impactful of these would be:
    • Eliminating Annual Adoption: The new LIT system requires rates to be readopted during each budget or the revenue goes to zero for the ensuing year. This has created both revenue and financing uncertainty for municipalities and should be changed to allow for rates to carry over from year to year.
    • Adjusting the Maximum LIT Rates: Around half of the cities and towns eligible to adopt their own LIT rate under the new LIT system do not have sufficient capacity to recoup their existing LIT allocations under the new system. Reallocating 0.5% of the rate cap to municipalities would solve the problem for the majority of those affected.
    • Adjusting the Population Thresholds: Increasing the number of units that have the option to opt into a county-wide rate or choose only a rate on only their citizens would provide more flexibility and revenue options, especially for the units most disadvantaged by the current LIT reform.
  • Government Modernization: Aim plans to work alongside the ongoing efforts in the General Assembly aimed at reforming different units of government, including township consolidation or reorganization, as well as looking at ways to cut wasteful mandatory administrative burden for municipalities and give them more flexibility to use alternative revenue options to reduce reliance on income and property taxes.
  • Food Trucks: Last year, HEA 1577 consolidated health and safety licensing for food trucks to the State Department of Health and created a single, statewide license for food trucks. Some language in the bill inadvertently calls into question municipal authority to regulate siting, density, and business regulation of food trucks. Aim would like to clarify the language in HEA 1577 to resolve the confusion and specify the new requirements on licenses only apply to health department licenses and not other local licenses required by municipalities.
  • UTV/ATVS: Current law contains apparent conflicts between the DNR code and municipal codes on the authority to regulate UTVs and ATVs. Aim is working to clarify the conflicts in code to protect municipal authority to regulate UTV and ATV use on municipal roads and streets.
  • Public Notices: Under current law, cities must publish newspaper notices in two newspapers with circulation of at least 200. This can be expensive for local units and papers cannot always deliver notices in a timely manner that can be easily accessed by constituents. Aim will continue to work towards modernizing public notice requirements by allowing more options for publishing notices electronically.
  • Zoning Recodification: The current statute on zoning is often cumbersome to use and difficult for attorneys to understand. Rep. Zimmerman has expressed interest in recodifying the zoning statute to make it more user-friendly. Aim plans to ensure that if zoning recodification occurs, current municipal authority is protected and the recodification proves to be a benefit to Aim members.

What do municipal officials need to know and do as we enter the 2026 Legislative Session?

The Aim Legislative Dinner is on February 18. This is a no-cost event for Aim municipal members to foster engagement with lawmakers and create greater understanding of how state policy choices impact Indiana’s cities and towns.

To enter the legislative session prepared to make meaningful progress resolving some of the biggest challenges with implementing SEA 1, Aim created the Aim Balanced Solutions Initiative. The page contains Aim’s SEA 1 recommendations, as well as news clips and op eds covering a wide range of consequences and concerns about Indiana’s new local government funding system.

MARKET STREET TO MAIN STREET LEGISLATIVE PODCAST

Listen to more about this week on the first episode of the 2026 Market Street to Main Street Podcast Series, Aim’s legislative episodes of the Hometown Innovations Podcast and a supplement to this e-newsletter. In this episode, Jennifer sits down with Matt to discuss the early start to the 2026 Legislative Session and what the team is working on in the coming months.

To listen to Market Street to Main Street, please visit The Terminal post and click the “play button” on the audio player. Or you can subscribe to Aim Hometown Innovations Podcast on Podbean, Apple Podcasts, and Spotify.

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