America's Property Tax Advisor

Indiana BPP Tax Reexamined

BY JOHN O'NEIL, CHICAGO, DECEMBER 2021

Indiana businesses paid $1.4 billion in business personal property (BPP) taxes last year. With the current state budget surplus, there’s a movement underway to eliminate, or at least lessen the tax.

 

Legislative Focus

 

In unveiling its legislative priorities for the coming year, the Indiana Chamber of Commerce is focusing on the BPP tax. Specifically, it’s asking the General Assembly to phase out the tax’s 30% depreciation floor.

 

The floor requires businesses to pay tax on at least 30% of the original purchase price of their machinery and equipment every year, even when the M&E is several years old and not worth 30% of the original cost.

 

The chamber’s proposal is to allow new machinery and equipment to be exempt from the tax, meaning that new machines could continue to depreciate year-after-year.

 

“House and Senate staffers and the governor’s staff have indicated they’re willing to support a bill that will do this. Some of the state surplus may be used to compensate counties for lost tax revenue,” Bill Waltz, Vice President for Taxation and Public Finance for the Indiana Chamber of Commerce said.

 

Wide Ranging Impact

 

About 300,000 Indiana businesses pay BPP tax. The tax rates vary by county and according to the kind of machinery or equipment. Therefore, a depreciation floor phase out would benefit many companies.

 

“Manufacturers get hit the hardest because they have such huge investments in expensive equipment.” Waltz explained.

 

The Indiana Fiscal Policy Institute reported in a 2014 analysis that the top 100 companies in the state pay more than 30% of the total non-utility share of the tax. They included Eli Lilly and Co., BP, Chrysler, U.S. Steel, and Toyota Motor North America.

 

Most neighboring states, including Michigan, Ohio, and Illinois do not assess BPP tax. Of the states that surround Indiana, only Kentucky has it.