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Indiana Counties Don't Exempt BPP

by Morgan Thomas, Chicago, and Randy Davis, Vice President/Director Specialty Services, September 2015

 

A new law allows Indiana counties to exempt the taxes on new business personal property (BPP). However, not one of Indiana's 92 counties has adopted the tax exemption.


Exemption Rather than Elimination

 

Governor Mike Pence pushed for BPP taxes to be phased out statewide during the 2014 session of the General Assembly.

 

Rather than a phase out, legislators choose to eliminate the tax for small business and give counties the option to stop taxing new BPP. Counties can also exempt the levy on existing businesses for up to 20 years.


A Competitive Advantage?


Competition inspired the tax cut idea in the first place. Some of Indiana's neighboring states have eliminated the tax on business equipment - everything from computers to manufacturing machinery.

 

Supporters felt the exemption would allow counties to be more competitive in attracting new businesses. On the other hand, critics believe most counties can't afford to offer the tax exemption. BPP taxes bring in $1 billion across the state for cities, counties, schools, townships, libraries, and fire departments. The legislation provides no solution to the problem of lost income to these tax entities.

 

Analysts point out that any competition between counties offering a BPP tax exemption is not on a level playing field. That's because some counties have numerous factories, which pay the bulk of the equipment tax. Cutting back the tax could cripple these counties, while it might not harm neighboring counties' budgets as seriously.