February 24, 2023
The Big Issues
- Last year, an Indiana Tax Court case threw into question long-standing definitions of what constitutes a homestead for the purposes of property taxation, property tax caps, and homestead deductions. Long-standing precedent defined homesteads as one house, one garage, and within one acre. The Tax Court decision could expand this definition to include all of any parcel containing a homestead.
- SB 325 seeks to clarify this definition. As introduced, it would have codified the long-standing definition of a homestead. As amended, it includes any non-commercial structure in a one-acre area. Aim is concerned about the possible property tax shifts and property tax losses that could occur by changing the definition of homestead property significantly and will continue to work on this bill to ensure that these concerns are taken into account.
- SB 325, authored by Sen. Brian Buchanan (R-Lebanon), passed the Senate Tax and Fiscal Policy committee on Tuesday with a vote of 12-1.
TAX INCREMENT FINANCING
- HB 1085 would change the makeup of municipal RDCs to consist of two members appointed by the council and two members appointed by the executive. It would also require spending throughout the year to only be in accordance with a plan adopted at the beginning of the year and this spending could only occur inside the allocation area unless the spending is approved by the council. It also requires revenue in excess of 200% of the debt service obligations of the RDC to be immediately spent, saved for a specific infrastructure project, or passed back to the underlying units.
- This week the bill was amended yet again to remove the automatic passthrough to schools on the front end and remove the appointment of a member of a local school board to the RDC. Aim continues to oppose this bill because it would still significantly restrict the flexibility of TIF and its ability to effectively finance large economic development projects. It would also make it harder for RDCs to get work done with an even number of votes on the board.
- HB 1085, authored by Rep. Bob Cherry (R-Greenfield), will need to be voted on by the entire House on Monday to meet the House’s third reading deadline.
RESIDENTIAL PROPERTY TAXES
- HB 1499 currently provides additional property tax limits in most aspects of the property tax system for the next two years starting in 2024 including: lowering the 1% homestead property tax cap to 0.95%, capping levy growth at 3% per year, increasing the supplemental homestead deduction, and causing any project that pushed debt service levies over 0.4% into the controlled projects statute that triggers referendum to approve the project. It also allows counties to voluntarily provide property tax credits or rebates in 2023.
- As this bill moves to the Senate, Aim will work with fiscal leadership to ensure that any proposed property tax relief is targeted to the most affected homeowners and is limited in scope to dealing with only the exceptional period of AV growth in question. As it stands, HB 1499 affects all homeowners and all local units and Aim remains concerned that it is too broad a reform to be a response to these unusual circumstances.
- HB 1499, authored by Rep. Jeff Thompson (R-Lizton), passed the House with a vote of 94-1.
FOOD AND BEVERAGE TAXES
- Previously, SB 37 passed through the Senate with some concerning language requiring onerous reporting for Food and Beverage taxes and sunsetting all existing Food and Beverage taxes. However, this is not a signal that the Senate is opposed to Food and Beverage taxes altogether. SB 388 and SB 428 authorize new Food and Beverage taxes in Columbia City, Merrillville, and Jasper. These communities all made their requests with broad local support and specific projects in mind.
- Aim continues to support the use of local Food and Beverage taxes as revenue sources for quality of place projects. We are encouraged to see the expansion of this tool move.
- SB 388, authored by Senator Travis Holdman (R-Markle), passed the Senate with a vote of 47-1. SB 428, authored by Senator Mark Messmer (R-Jasper), will be up for a final vote in the Senate next week.
PUBLICATION OF LOCAL NOTICES
- HB 1438, as introduced, would have allowed local units to publish local notices online in lieu of publishing via local newspaper. It was amended in committee this week to recommend a study committee on the topic of electronic publication of local notices.
- Modernizing the public notice system and providing cost relief to municipal members has been a long-standing Aim legislative priority on which we have made some progress in recent years. Aim will continue to support efforts to do so and hopefully concrete improvements will come out of any study that is conducted.
- HB 1438, authored by Rep. Doug Miller (R-Elkhart), passed the House Government and Regulatory Reform Committee with a vote of 10-0.
AIM LEGISLATIVE MOMENT
“Municipalities are home to more than 70% of Indiana’s population, and thus are the engines of Indiana’s economy. They cannot afford to have tunnel vision. Their focus, and therefore Aim’s focus, must be broad; we must consider the impact each individual piece of legislation will have on municipalities and the collective impact of all bills once each session ends.”
– Aim CEO Matt Greller in the Indiana Capital Chronicle
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