2010 Indiana Code
TITLE 6. TAXATION
ARTICLE 3. OTHER STATE INCOME TAXES
CHAPTER 2. IMPOSITION OF TAX AND DEDUCTIONS
IC 6-3-2
Chapter 2. Imposition of Tax and Deductions
IC 6-3-2-1
Tax rate
Sec. 1. (a) Each taxable year, a tax at the rate of three and
four-tenths percent (3.4%) of adjusted gross income is imposed upon
the adjusted gross income of every resident person, and on that part
of the adjusted gross income derived from sources within Indiana of
every nonresident person.
(b) Except as provided in section 1.5 of this chapter, each taxable
year, a tax at the rate of eight and five-tenths percent (8.5%) of
adjusted gross income is imposed on that part of the adjusted gross
income derived from sources within Indiana of every corporation.
(Formerly: Acts 1963(ss), c.32, s.201; Acts 1973, P.L.50, SEC.1.) As
amended by Acts 1979, P.L.68, SEC.1; Acts 1981, P.L.77, SEC.8;
P.L.2-1982(ss), SEC.8; P.L.47-1984, SEC.4; P.L.390-1987(ss),
SEC.37; P.L.192-2002(ss), SEC.70; P.L.81-2004, SEC.20.
IC 6-3-2-1.5
"Qualified area" defined; tax rate in qualified area
Sec. 1.5. (a) As used in this section, "qualified area" means:
(1) a military base (as defined in IC 36-7-30-1(c));
(2) a military base reuse area established under IC 36-7-30;
(3) the part of an economic development area established under
IC 36-7-14.5-12.5 that is or formerly was a military base (as
defined in IC 36-7-30-1(c));
(4) a military base recovery site designated under IC 6-3.1-11.5;
or
(5) a qualified military base enhancement area established
under IC 36-7-34.
(b) Except as provided in subsection (e), a tax at the rate of five
percent (5%) of adjusted gross income is imposed on that part of the
adjusted gross income of a corporation that is derived from sources
within a qualified area if the corporation locates all or part of its
operations in a qualified area during the taxable year, as determined
under subsection (g). The tax rate under this section applies to the
taxable year in which the corporation locates its operations in the
qualified area and to the next succeeding four (4) taxable years.
(c) In the case of a corporation that locates all or part of its
operations in a qualified military base enhancement area established
under IC 36-7-34-4(1), the tax rate imposed under this section applies
to the corporation only if the corporation meets at least one (1) of the
following criteria:
(1) The corporation is a participant in the technology transfer
program conducted by the qualified military base (as defined in
IC 36-7-34-3).
(2) The corporation is a United States Department of Defense
contractor.
(3) The corporation and the qualified military base have a
mutually beneficial relationship evidenced by a memorandum
of understanding between the corporation and the United States
Department of Defense.
(d) In the case of a business that uses the services or commodities
in a qualified military base enhancement area established under
IC 36-7-34-4(2), the business must satisfy at least one (1) of the
following criteria:
(1) The business is a participant in the technology transfer
program conducted by the qualified military base (as defined in
IC 36-7-34-3).
(2) The business and the qualified military base have a mutually
beneficial relationship evidenced by a memorandum of
understanding between the business and the qualified military
base (as defined in IC 36-7-34-3).
(e) A taxpayer is not entitled to the tax rate described in
subsection (b) to the extent that the taxpayer substantially reduces or
ceases its operations at another location in Indiana in order to
relocate its operations within the qualified area, unless:
(1) the taxpayer had existing operations in the qualified area;
and
(2) the operations relocated to the qualified area are an
expansion of the taxpayer's operations in the qualified area.
(f) A determination under subsection (e) that a taxpayer is not
entitled to the tax rate provided by this section as a result of a
substantial reduction or cessation of operations applies to the taxable
year in which the substantial reduction or cessation occurs and in all
subsequent years. Determinations under this section shall be made by
the department of state revenue.
(g) The department of state revenue:
(1) shall adopt rules under IC 4-22-2 to establish a procedure
for determining the part of a corporation's adjusted gross
income that was derived from sources within a qualified area;
and
(2) may adopt other rules that the department considers
necessary for the implementation of this chapter.
As added by P.L.81-2004, SEC.21. Amended by P.L.190-2005,
SEC.2; P.L.203-2005, SEC.4; P.L.180-2006, SEC.4.
IC 6-3-2-2
"Adjusted gross income derived from sources within Indiana"
defined; apportionment; payroll factor; sales factor; property
factor; pass through entities
Sec. 2. (a) With regard to corporations and nonresident persons,
"adjusted gross income derived from sources within Indiana", for the
purposes of this article, shall mean and include:
(1) income from real or tangible personal property located in
this state;
(2) income from doing business in this state;
(3) income from a trade or profession conducted in this state;
(4) compensation for labor or services rendered within this
state; and
(5) income from stocks, bonds, notes, bank deposits, patents,
copyrights, secret processes and formulas, good will,
trademarks, trade brands, franchises, and other intangible
personal property if the receipt from the intangible is
attributable to Indiana under section 2.2 of this chapter.
Income from a pass through entity shall be characterized in a manner
consistent with the income's characterization for federal income tax
purposes and shall be considered Indiana source income as if the
person, corporation, or pass through entity that received the income
had directly engaged in the income producing activity. Income that
is derived from one (1) pass through entity and is considered to pass
through to another pass through entity does not change these
characteristics or attribution provisions. In the case of nonbusiness
income described in subsection (g), only so much of such income as
is allocated to this state under the provisions of subsections (h)
through (k) shall be deemed to be derived from sources within
Indiana. In the case of business income, only so much of such income
as is apportioned to this state under the provision of subsection (b)
shall be deemed to be derived from sources within the state of
Indiana. In the case of compensation of a team member (as defined
in section 2.7 of this chapter), only the portion of income determined
to be Indiana income under section 2.7 of this chapter is considered
derived from sources within Indiana. In the case of a corporation that
is a life insurance company (as defined in Section 816(a) of the
Internal Revenue Code) or an insurance company that is subject to
tax under Section 831 of the Internal Revenue Code, only so much
of the income as is apportioned to Indiana under subsection (r) is
considered derived from sources within Indiana.
(b) Except as provided in subsection (l), if business income of a
corporation or a nonresident person is derived from sources within
the state of Indiana and from sources without the state of Indiana, the
business income derived from sources within this state shall be
determined by multiplying the business income derived from sources
both within and without the state of Indiana by the following:
(1) For all taxable years that begin after December 31, 2006,
and before January 1, 2008, a fraction. The:
(A) numerator of the fraction is the sum of the property
factor plus the payroll factor plus the product of the sales
factor multiplied by three (3); and
(B) denominator of the fraction is five (5).
(2) For all taxable years that begin after December 31, 2007,
and before January 1, 2009, a fraction. The:
(A) numerator of the fraction is the property factor plus the
payroll factor plus the product of the sales factor multiplied
by four and sixty-seven hundredths (4.67); and
(B) denominator of the fraction is six and sixty-seven
hundredths (6.67).
(3) For all taxable years beginning after December 31, 2008,
and before January 1, 2010, a fraction. The:
(A) numerator of the fraction is the property factor plus the
payroll factor plus the product of the sales factor multiplied
by eight (8); and
(B) denominator of the fraction is ten (10).
(4) For all taxable years beginning after December 31, 2009,
and before January 1, 2011, a fraction. The:
(A) numerator of the fraction is the property factor plus the
payroll factor plus the product of the sales factor multiplied
by eighteen (18); and
(B) denominator of the fraction is twenty (20).
(5) For all taxable years beginning after December 31, 2010, the
sales factor.
(c) The property factor is a fraction, the numerator of which is the
average value of the taxpayer's real and tangible personal property
owned or rented and used in this state during the taxable year and the
denominator of which is the average value of all the taxpayer's real
and tangible personal property owned or rented and used during the
taxable year. However, with respect to a foreign corporation, the
denominator does not include the average value of real or tangible
personal property owned or rented and used in a place that is outside
the United States. Property owned by the taxpayer is valued at its
original cost. Property rented by the taxpayer is valued at eight (8)
times the net annual rental rate. Net annual rental rate is the annual
rental rate paid by the taxpayer less any annual rental rate received
by the taxpayer from subrentals. The average of property shall be
determined by averaging the values at the beginning and ending of
the taxable year, but the department may require the averaging of
monthly values during the taxable year if reasonably required to
reflect properly the average value of the taxpayer's property.
(d) The payroll factor is a fraction, the numerator of which is the
total amount paid in this state during the taxable year by the taxpayer
for compensation, and the denominator of which is the total
compensation paid everywhere during the taxable year. However,
with respect to a foreign corporation, the denominator does not
include compensation paid in a place that is outside the United
States. Compensation is paid in this state if:
(1) the individual's service is performed entirely within the
state;
(2) the individual's service is performed both within and without
this state, but the service performed without this state is
incidental to the individual's service within this state; or
(3) some of the service is performed in this state and:
(A) the base of operations or, if there is no base of
operations, the place from which the service is directed or
controlled is in this state; or
(B) the base of operations or the place from which the
service is directed or controlled is not in any state in which
some part of the service is performed, but the individual is
a resident of this state.
(e) The sales factor is a fraction, the numerator of which is the
total sales of the taxpayer in this state during the taxable year, and
the denominator of which is the total sales of the taxpayer
everywhere during the taxable year. Sales include receipts from
intangible property and receipts from the sale or exchange of
intangible property. However, with respect to a foreign corporation,
the denominator does not include sales made in a place that is outside
the United States. Receipts from intangible personal property are
derived from sources within Indiana if the receipts from the
intangible personal property are attributable to Indiana under section
2.2 of this chapter. Regardless of the f.o.b. point or other conditions
of the sale, sales of tangible personal property are in this state if:
(1) the property is delivered or shipped to a purchaser that is
within Indiana, other than the United States government; or
(2) the property is shipped from an office, a store, a warehouse,
a factory, or other place of storage in this state and:
(A) the purchaser is the United States government; or
(B) the taxpayer is not taxable in the state of the purchaser.
Gross receipts derived from commercial printing as described in
IC 6-2.5-1-10 shall be treated as sales of tangible personal property
for purposes of this chapter.
(f) Sales, other than receipts from intangible property covered by
subsection (e) and sales of tangible personal property, are in this
state if:
(1) the income-producing activity is performed in this state; or
(2) the income-producing activity is performed both within and
without this state and a greater proportion of the
income-producing activity is performed in this state than in any
other state, based on costs of performance.
(g) Rents and royalties from real or tangible personal property,
capital gains, interest, dividends, or patent or copyright royalties, to
the extent that they constitute nonbusiness income, shall be allocated
as provided in subsections (h) through (k).
(h)(1) Net rents and royalties from real property located in this
state are allocable to this state.
(2) Net rents and royalties from tangible personal property are
allocated to this state:
(i) if and to the extent that the property is utilized in this state;
or
(ii) in their entirety if the taxpayer's commercial domicile is in
this state and the taxpayer is not organized under the laws of or
taxable in the state in which the property is utilized.
(3) The extent of utilization of tangible personal property in a
state is determined by multiplying the rents and royalties by a
fraction, the numerator of which is the number of days of physical
location of the property in the state during the rental or royalty period
in the taxable year, and the denominator of which is the number of
days of physical location of the property everywhere during all rental
or royalty periods in the taxable year. If the physical location of the
property during the rental or royalty period is unknown or
unascertainable by the taxpayer, tangible personal property is utilized
in the state in which the property was located at the time the rental
or royalty payer obtained possession.
(i)(1) Capital gains and losses from sales of real property located
in this state are allocable to this state.
(2) Capital gains and losses from sales of tangible personal
property are allocable to this state if:
(i) the property had a situs in this state at the time of the sale; or
(ii) the taxpayer's commercial domicile is in this state and the
taxpayer is not taxable in the state in which the property had a
situs.
(3) Capital gains and losses from sales of intangible personal
property are allocable to this state if the taxpayer's commercial
domicile is in this state.
(j) Interest and dividends are allocable to this state if the
taxpayer's commercial domicile is in this state.
(k)(1) Patent and copyright royalties are allocable to this state:
(i) if and to the extent that the patent or copyright is utilized by
the taxpayer in this state; or
(ii) if and to the extent that the patent or copyright is utilized by
the taxpayer in a state in which the taxpayer is not taxable and
the taxpayer's commercial domicile is in this state.
(2) A patent is utilized in a state to the extent that it is employed
in production, fabrication, manufacturing, or other processing
in the state or to the extent that a patented product is produced
in the state. If the basis of receipts from patent royalties does
not permit allocation to states or if the accounting procedures
do not reflect states of utilization, the patent is utilized in the
state in which the taxpayer's commercial domicile is located.
(3) A copyright is utilized in a state to the extent that printing
or other publication originates in the state. If the basis of
receipts from copyright royalties does not permit allocation to
states or if the accounting procedures do not reflect states of
utilization, the copyright is utilized in the state in which the
taxpayer's commercial domicile is located.
(l) If the allocation and apportionment provisions of this article do
not fairly represent the taxpayer's income derived from sources
within the state of Indiana, the taxpayer may petition for or the
department may require, in respect to all or any part of the taxpayer's
business activity, if reasonable:
(1) separate accounting;
(2) for a taxable year beginning before January 1, 2011, the
exclusion of any one (1) or more of the factors, except the sales
factor;
(3) the inclusion of one (1) or more additional factors which
will fairly represent the taxpayer's income derived from sources
within the state of Indiana; or
(4) the employment of any other method to effectuate an
equitable allocation and apportionment of the taxpayer's
income.
(m) In the case of two (2) or more organizations, trades, or
businesses owned or controlled directly or indirectly by the same
interests, the department shall distribute, apportion, or allocate the
income derived from sources within the state of Indiana between and
among those organizations, trades, or businesses in order to fairly
reflect and report the income derived from sources within the state
of Indiana by various taxpayers.
(n) For purposes of allocation and apportionment of income under
this article, a taxpayer is taxable in another state if:
(1) in that state the taxpayer is subject to a net income tax, a
franchise tax measured by net income, a franchise tax for the
privilege of doing business, or a corporate stock tax; or
(2) that state has jurisdiction to subject the taxpayer to a net
income tax regardless of whether, in fact, the state does or does
not.
(o) Notwithstanding subsections (l) and (m), the department may
not, under any circumstances, require that income, deductions, and
credits attributable to a taxpayer and another entity be reported in a
combined income tax return for any taxable year, if the other entity
is:
(1) a foreign corporation; or
(2) a corporation that is classified as a foreign operating
corporation for the taxable year by section 2.4 of this chapter.
(p) Notwithstanding subsections (l) and (m), the department may
not require that income, deductions, and credits attributable to a
taxpayer and another entity not described in subsection (o)(1) or
(o)(2) be reported in a combined income tax return for any taxable
year, unless the department is unable to fairly reflect the taxpayer's
adjusted gross income for the taxable year through use of other
powers granted to the department by subsections (l) and (m).
(q) Notwithstanding subsections (o) and (p), one (1) or more
taxpayers may petition the department under subsection (l) for
permission to file a combined income tax return for a taxable year.
The petition to file a combined income tax return must be completed
and filed with the department not more than thirty (30) days after the
end of the taxpayer's taxable year. A taxpayer filing a combined
income tax return must petition the department within thirty (30)
days after the end of the taxpayer's taxable year to discontinue filing
a combined income tax return.
(r) This subsection applies to a corporation that is a life insurance
company (as defined in Section 816(a) of the Internal Revenue Code)
or an insurance company that is subject to tax under Section 831 of
the Internal Revenue Code. The corporation's adjusted gross income
that is derived from sources within Indiana is determined by
multiplying the corporation's adjusted gross income by a fraction:
(1) the numerator of which is the direct premiums and annuity
considerations received during the taxable year for insurance
upon property or risks in the state; and
(2) the denominator of which is the direct premiums and
annuity considerations received during the taxable year for
insurance upon property or risks everywhere.
The term "direct premiums and annuity considerations" means the
gross premiums received from direct business as reported in the
corporation's annual statement filed with the department of
insurance.
(Formerly: Acts 1963(ss), c.32, s.204; Acts 1965, c.233, s.13; Acts
1971, P.L.64, SEC.4.) As amended by P.L.82-1983, SEC.4;
P.L.16-1984, SEC.4; P.L.75-1985, SEC.4; P.L.78-1989, SEC.8;
P.L.347-1989(ss), SEC.6; P.L.65-1991, SEC.1; P.L.71-1993,
SEC.13; P.L.63-1997, SEC.1; P.L.192-2002(ss), SEC.71;
P.L.162-2006, SEC.25; P.L.182-2009(ss), SEC.191.
IC 6-3-2-2.2
Interest income, discounts, and receipts attributable to state
Sec. 2.2. (a) Interest income and other receipts from assets in the
nature of loans or installment sales contracts that are primarily
secured by or deal with real or tangible personal property are
attributable to this state if the security or sale property is located in
Indiana.
(b) Interest income and other receipts from consumer loans not
secured by real or tangible personal property are attributable to this
state if the loan is made to a resident of Indiana, whether at a place
of business, by a traveling loan officer, by mail, by telephone, or by
other electronic means.
(c) Interest income and other receipts from commercial loans and
installment obligations not secured by real or tangible personal
property are attributable to this state if the proceeds of the loan are
to be applied in Indiana. If it cannot be determined where the funds
are to be applied, the income and receipts are attributable to the state
in which the business applied for the loan. As used in this section,
"applied for" means initial inquiry (including customer assistance in
preparing the loan application) or submission of a completed loan
application, whichever occurs first.
(d) Interest income, merchant discount, and other receipts
including service charges from financial institution credit card and
travel and entertainment credit card receivables and credit card
holders' fees are attributable to the state to which the card charges
and fees are regularly billed.
(e) Receipts from the performance of fiduciary and other services
are attributable to the state in which the benefits of the services are
consumed. If the benefits are consumed in more than one (1) state,
the receipts from those benefits are attributable to this state on a pro
rata basis according to the portion of the benefits consumed in
Indiana.
(f) Receipts from the issuance of traveler's checks, money orders,
or United States savings bonds are attributable to the state in which
the traveler's checks, money orders, or bonds are purchased.
(g) Receipts in the form of dividends from investments are
attributable to this state if the taxpayer's commercial domicile is in
Indiana.
As added by P.L.347-1989(ss), SEC.7.
IC 6-3-2-2.3
In-state commercial printing for out-of-state customer
Sec. 2.3. Notwithstanding any other provision of this article, with
respect to a person, corporation, or partnership that has contracted
with a commercial printer for printing:
(1) the ownership or leasing by that entity of tangible or
intangible property located at the Indiana premises of the
commercial printer;
(2) the sale by that entity of property of any kind produced at
and shipped or distributed from the Indiana premises of the
commercial printer;
(3) the activities of any kind performed by or on behalf of that
entity at the Indiana premises of the commercial printer; and
(4) the activities performed by the commercial printer in
Indiana for or on behalf of that entity;
shall not cause that entity to have adjusted gross income derived
from sources within Indiana for purposes of the taxes imposed by
this chapter, unless that entity engages in other activities in Indiana
away from the premises of the commercial printer that exceed the
protection of 15 U.S.C. 381.
As added by P.L.70-1993, SEC.6. Amended by P.L.192-2002(ss),
SEC.72.
IC 6-3-2-2.4
Foreign operating corporations; determination of percentage of
business activity outside United States
Sec. 2.4. (a) For purposes of section 2(o) of this chapter, a
corporation is a foreign operating corporation for a particular taxable
year if it has eighty percent (80%) or more of its total business
activity occurring outside the United States during the taxable year.
(b) For purposes of determining the amount of a corporation's
business activity that occurs within the United States, the department
shall determine the sum of that corporation's United States property
factor and its United States payroll factor and divide that sum by two
(2). If the quotient exceeds two-tenths (0.2), then less than eighty
percent (80%) of the corporation's business shall be considered to
have occurred outside the United States. If the quotient equals or is
less than two-tenths (0.2), then eighty percent (80%) or more of the
corporation's business shall be considered to have occurred outside
the United States. If a corporation's United States property factor or
its United States payroll factor has a denominator of zero (0), then
the sum of the two (2) factors shall be divided by one (1) and not by
two (2).
(c) The United States property factor of a corporation is a
fraction. The numerator of the fraction is the average value of the
corporation's real and tangible personal property owned or rented and
used in the United States during the taxable year, and the
denominator of the fraction is the average value of all the
corporation's real and tangible personal property owned or rented and
used anywhere in the world during the taxable year. Property owned
by the corporation shall be valued at its original cost. Property rented
by the corporation shall be valued at eight (8) times the net annual
rental rate. The corporation's net annual rental rate is the annual
rental rate paid by the corporation less any annual rental rate
received by the corporation from subrentals. The average value of
property shall be determined by averaging the values at the beginning
and ending of the taxable year, but the department may require the
averaging of monthly values during the taxable year if reasonably
required to reflect properly the average value of the corporation's
property.
(d) The United States payroll factor of a corporation is a fraction.
The numerator of the fraction is the total compensation to individuals
paid in the United States during the taxable year by the corporation,
and the denominator of the fraction is the total compensation to
individuals paid anywhere in the world during the taxable year by the
corporation. Compensation to an individual is paid in the United
States if:
(1) the individual's service is performed entirely within the
United States;
(2) the individual's service is performed both within and outside
the United States, but the service performed outside the United
States is incidental to the individual's service within the United
States; or
(3) the individual is a resident of the United States, some of the
service is performed in the United States, and:
(A) the base of operations or, if there is no base of
operations, the place from which the service is directed or
controlled is in the United States; or
(B) the base of operations or, if there is no base of
operations, the place from which the service is directed or
controlled is not in a jurisdiction that is outside the United
States and that is where some part of the service is
performed.
As added by P.L.75-1985, SEC.5.
IC 6-3-2-2.5
Resident persons; net operating loss; adjusted gross income
Sec. 2.5. (a) This section applies to a resident person.
(b) Resident persons are entitled to a net operating loss deduction.
The amount of the deduction taken in a taxable year may not exceed
the taxpayer's unused Indiana net operating losses carried back or
carried over to that year.
(c) An Indiana net operating loss equals the taxpayer's federal net
operating loss for a taxable year as calculated under Section 172 of
the Internal Revenue Code, adjusted for the modifications required
by IC 6-3-1-3.5.
(d) The following provisions apply for purposes of subsection (c):
(1) The modifications that are to be applied are those
modifications required under IC 6-3-1-3.5 for the same taxable
year in which each net operating loss was incurred.
(2) An Indiana net operating loss includes a net operating loss
that arises when the modifications required by IC 6-3-1-3.5
exceed the taxpayer's federal adjusted gross income (as defined
in Section 62 of the Internal Revenue Code) for the taxable year
in which the Indiana net operating loss is determined.
(e) Subject to the limitations contained in subsection (g), an
Indiana net operating loss carryback or carryover shall be available
as a deduction from the taxpayer's adjusted gross income (as defined
in IC 6-3-1-3.5) in the carryback or carryover year provided in
subsection (f).
(f) Carrybacks and carryovers shall be determined under this
subsection as follows:
(1) An Indiana net operating loss shall be an Indiana net
operating loss carryback to each of the carryback years
preceding the taxable year of the loss.
(2) An Indiana net operating loss shall be an Indiana net
operating loss carryover to each of the carryover years
following the taxable year of the loss.
(3) Carryback years shall be determined by reference to the
number of years allowed for carrying back a net operating loss
under Section 172(b) of the Internal Revenue Code. However,
with respect to the carryback period for a net operating loss:
(A) for which a taxpayer made an election to use five (5)
years instead of two (2) years under Section 172(b)(1)(H) of
the Internal Revenue Code, two (2) years shall be used
instead of five (5) years; or
(B) that is a qualified disaster loss for which the taxpayer
elected to have the net operating loss carryback period with
respect to the loss year determined without regard to Section
172(b)(1)(J) of the Internal Revenue Code, five (5) years
shall be used.
(4) Carryover years shall be determined by reference to the
number of years allowed for carrying over net operating losses
under Section 172(b) of the Internal Revenue Code.
(5) A taxpayer who makes an election under Section 172(b)(3)
of the Internal Revenue Code to relinquish the carryback period
with respect to a net operating loss for any taxable year shall be
considered to have also relinquished the carryback of the
Indiana net operating loss for purposes of this section.
(g) The entire amount of the Indiana net operating loss for any
taxable year shall be carried to the earliest of the taxable years to
which (as determined under subsection (f)) the loss may be carried.
The amount of the Indiana net operating loss remaining after the
deduction is taken under this section in a taxable year may be carried
back or carried over as provided in subsection (f). The amount of the
Indiana net operating loss carried back or carried over from year to
year shall be reduced to the extent that the Indiana net operating loss
carryback or carryover is used by the taxpayer to obtain a deduction
in a taxable year until the occurrence of the earlier of the following:
(1) The entire amount of the Indiana net operating loss has been
used as a deduction.
(2) The Indiana net operating loss has been carried over to each
of the carryover years provided by subsection (f).
As added by P.L.91-1987, SEC.3. Amended by P.L.81-2004, SEC.10;
P.L.182-2009(ss), SEC.192; P.L.113-2010, SEC.55.
IC 6-3-2-2.6
Corporations and nonresident persons; net operating losses
Sec. 2.6. (a) This section applies to a corporation or a nonresident
person.
(b) Corporations and nonresident persons are entitled to a net
operating loss deduction. The amount of the deduction taken in a
taxable year may not exceed the taxpayer's unused Indiana net
operating losses carried back or carried over to that year.
(c) An Indiana net operating loss equals the taxpayer's federal net
operating loss for a taxable year as calculated under Section 172 of
the Internal Revenue Code, derived from sources within Indiana and
adjusted for the modifications required by IC 6-3-1-3.5.
(d) The following provisions apply for purposes of subsection (c):
(1) The modifications that are to be applied are those
modifications required under IC 6-3-1-3.5 for the same taxable
year in which each net operating loss was incurred.
(2) The amount of the taxpayer's net operating loss that is
derived from sources within Indiana shall be determined in the
same manner that the amount of the taxpayer's adjusted income
derived from sources within Indiana is determined under section
2 of this chapter for the same taxable year during which each
loss was incurred.
(3) An Indiana net operating loss includes a net operating loss
that arises when the modifications required by IC 6-3-1-3.5
exceed the taxpayer's federal taxable income (as defined in
Section 63 of the Internal Revenue Code), if the taxpayer is a
corporation, or when the modifications required by IC 6-3-1-3.5
exceed the taxpayer's federal adjusted gross income (as defined
by Section 62 of the Internal Revenue Code), if the taxpayer is
a nonresident person, for the taxable year in which the Indiana
net operating loss is determined.
(e) Subject to the limitations contained in subsection (g), an
Indiana net operating loss carryback or carryover shall be available
as a deduction from the taxpayer's adjusted gross income derived
from sources within Indiana (as defined in section 2 of this chapter)
in the carryback or carryover year provided in subsection (f).
(f) Carrybacks and carryovers shall be determined under this
subsection as follows:
(1) An Indiana net operating loss shall be an Indiana net
operating loss carryback to each of the carryback years
preceding the taxable year of the loss.
(2) An Indiana net operating loss shall be an Indiana net
operating loss carryover to each of the carryover years
following the taxable year of the loss.
(3) Carryback years shall be determined by reference to the
number of years allowed for carrying back a net operating loss
under Section 172(b) of the Internal Revenue Code. However,
with respect to the carryback period for a net operating loss:
(A) for which a taxpayer made an election to use five (5)
years instead of two (2) years under Section 172(b)(1)(H) of
the Internal Revenue Code, two (2) years shall be used
instead of five (5) years; or
(B) that is a qualified disaster loss for which the taxpayer
elected to have the net operating loss carryback period with
respect to the loss year determined without regard to Section
172(b)(1)(J) of the Internal Revenue Code, five (5) years
shall be used.
(4) Carryover years shall be determined by reference to the
number of years allowed for carrying over net operating losses
under Section 172(b) of the Internal Revenue Code.
(5) A taxpayer who makes an election under Section 172(b)(3)
of the Internal Revenue Code to relinquish the carryback period
with respect to a net operating loss for any taxable year shall be
considered to have also relinquished the carryback of the
Indiana net operating loss for purposes of this section.
(g) The entire amount of the Indiana net operating loss for any
taxable year shall be carried to the earliest of the taxable years to
which (as determined under subsection (f)) the loss may be carried.
The amount of the Indiana net operating loss remaining after the
deduction is taken under this section in a taxable year may be carried
back or carried over as provided in subsection (f). The amount of the
Indiana net operating loss carried back or carried over from year to
year shall be reduced to the extent that the Indiana net operating loss
carryback or carryover is used by the taxpayer to obtain a deduction
in a taxable year until the occurrence of the earlier of the following:
(1) The entire amount of the Indiana net operating loss has been
used as a deduction.
(2) The Indiana net operating loss has been carried over to each
of the carryover years provided by subsection (f).
(h) An Indiana net operating loss deduction determined under this
section shall be allowed notwithstanding the fact that in the year the
taxpayer incurred the net operating loss the taxpayer was not subject
to the tax imposed under section 1 of this chapter because the
taxpayer was:
(1) a life insurance company (as defined in Section 816(a) of
the Internal Revenue Code); or
(2) an insurance company subject to tax under Section 831 of
the Internal Revenue Code.
(i) In the case of a life insurance company that claims an
operations loss deduction under Section 810 of the Internal Revenue
Code, this section shall be applied by:
(1) substituting the corresponding provisions of Section 810 of
the Internal Revenue Code in place of references to Section 172
of the Internal Revenue Code; and
(2) substituting life insurance company taxable income (as
defined in Section 801 the Internal Revenue Code) in place of
references to taxable income (as defined in Section 63 of the
Internal Revenue Code).
(j) For purposes of an amended return filed to carry back an
Indiana net operating loss:
(1) the term "due date of the return", as used in
IC 6-8.1-9-1(a)(1), means the due date of the return for the
taxable year in which the net operating loss was incurred; and
(2) the term "date the payment was due", as used in
IC 6-8.1-9-2(c), means the due date of the return for the taxable
year in which the net operating loss was incurred.
As added by P.L.91-1987, SEC.4. Amended by P.L.192-2002(ss),
SEC.73; P.L.81-2004, SEC.11; P.L.2-2005, SEC.21;
P.L.182-2009(ss), SEC.193; P.L.113-2010, SEC.56.
IC 6-3-2-2.7
Team members; Indiana income; rules
Sec. 2.7. (a) As used in this section:
(1) "Bonus for services rendered as a team member" includes:
(A) a bonus earned as a result of play during the season,
such as a performance bonus, including a bonus paid for a
championship, playoff, or bowl game played by a team, or
for selection to an all-star league or other honorary position;
and
(B) a bonus paid for signing a contract, unless all of the
following conditions are met:
(i) The payment of the signing bonus is not conditional
upon the signee playing any games for the team,
performing any subsequent services for the team, or
making the team.
(ii) The signing bonus is payable separately from the
salary and any other compensation.
(iii) The signing bonus is nonrefundable.
(2) "Indiana duty days" means the number of total duty days
spent by a team member within Indiana rendering a service for
the team in any manner during the taxable year, except:
(A) travel days spent in Indiana that do not involve either a
game, practice, team meeting, promotional caravan, or other
similar team event; and
(B) those days spent in Indiana for which a team member is
on the disabled list.
(3) "Team" includes a professional baseball, basketball,
football, hockey, or soccer team that played games in Indiana or
that had services rendered in Indiana by a team member.
(4) "Team member" includes employees who are active players,
players on the disabled list, and any other individuals required
to travel and who do travel with and perform services on behalf
of a team on a regular basis. The term includes coaches,
managers, and trainers.
(5) "Total duty days" means all days during the taxable year
that a team member renders a service for the team, beginning
with the team's official preseason training period through the
last game in which the team competes or is scheduled to
compete. The term includes days on which a team member
renders a service for the team on a date that does not fall within
this period. The term includes:
(A) game days, practice days, days spent at team meetings,
days spent with a promotional caravan and at preseason
training camps, and days served with the team through all
postseason games in which the team competes or is
scheduled to compete;
(B) days spent conducting training and rehabilitation
activities, but only if the service is conducted at the facilities
of the team;
(C) travel days that do not involve either a game, practice,
team meeting, promotional caravan, or other similar team
event;
(D) days spent participating in instructional leagues and
all-star or pro bowl games; and
(E) days for which a team member is on the disabled list.
Total duty days for an individual who joins a team during the
season begin on the day the individual joins the team, and, for
an individual who leaves a team, end on the day the individual
leaves the team. When an individual changes teams during a
taxable year, a separate duty day calculation must be made for
the period the individual was with each team. Total duty days
do not include those days for which a team member is not
compensated and is not rendering a service for the team in any
manner, including days when the team member has been
suspended without pay and prohibited from performing any
services for the team.
(6) "Total income" means the total compensation received
during the taxable year for services rendered:
(A) from the beginning of the official preseason training
period through the last game in which the team competes or
is scheduled to compete during that taxable year; and
(B) on a date during the taxable year that does not fall within
the period described in clause (A), such as participation in
instructional leagues, an all-star or pro bowl game, or with
a promotional caravan.
The term includes salaries, wages, bonuses, and any other type
of compensation paid during the taxable year to a team member
for services rendered in that year. The term does not include
strike benefits, severance pay, termination pay, contract or
option year buy-out payments, expansion or relocation
payments, or any other payments not related to services
rendered to the team.
(b) For purposes of IC 6-3, Indiana income is the individual's total
income during the taxable year multiplied by the following fraction:
(1) The numerator of the fraction is the individual's Indiana
duty days for the taxable year.
(2) The denominator of the fraction is the individual's total duty
days for the taxable year.
(c) It is presumed that this section results in a fair and equitable
apportionment of the team member's compensation. However, if the
department demonstrates that the method provided under this section
does not fairly and equitably apportion a team member's
compensation, the department may require the team member to
apportion the team member's compensation under another method
that the department prescribes. The prescribed method must result in
a fair and equitable apportionment. A team member may submit a
proposal for an alternative method to apportion the team member's
compensation if the team member demonstrates that the method
provided under this section does not fairly and equitably apportion
the team member's compensation. If approved by the department, the
proposed method must be fully explained in the team member's
nonresident personal income tax return.
(d) The department may adopt rules under IC 4-22-2 to establish
either of the following methods of simplifying return filing for team
members of a team, if the team is not based in Indiana:
(1) A withholding system requiring a team to withhold adjusted
gross income tax for each team member and to remit the
withheld taxes to Indiana on an annual basis. The department
may require each team to submit information for each team
member regarding total income, Indiana income subject to tax
under this section, and the amount of tax withheld. Remittance
of the withholding and submission of the required information
satisfies the team member's tax liability and return filing
responsibilities under this article. A team that is required to
withhold and remit shall provide all participating team members
with a Form W-2 evidencing the amount of tax withheld and
remitted to Indiana. Even though a team is required to withhold
and remit, a team member may file an individual income tax
return to claim a refund if the amount remitted exceeds the
amount otherwise owed using the methodology under this
section. However, if the team member files an individual
income tax return to claim such a refund, the team member is
required to notify the team member's state of residence of the
filing.
(2) A composite return method that permits the filing of a
composite tax return by the team on behalf of each team
member. Other department rules concerning composite returns
apply to the extent these rules are not inconsistent with this
subsection. The team must obtain approval from the department
before filing a composite return. The team must obtain written
authorization each taxable year from each team member who
elects to participate in the composite return. The participating
team members must acknowledge through their elections that
the composite return constitutes an irrevocable filing and that
they may not file an individual income tax return in Indiana.
The team must maintain a power of attorney from each
participating team member that authorizes the team to represent
them in a protest or other appeal. The team and participating
team members must agree that the team is responsible for any
deficiencies, including penalties. The team shall withhold tax
from each participating team member's compensation and remit
it to the state of Indiana. The return must contain information
for each participating team member regarding total income,
Indiana income subject to tax using the methodology under this
section, and the amount of tax due. Filing of the return and
remittance of the tax satisfy the participating team member's tax
liability and return filing responsibilities under IC 6-3-4-1.
If the method under subdivision (1) or the method under subdivision
(2) is required, a team member's Indiana adjusted gross income may
not be reduced by using a deduction, an exemption, or an exclusion.
For a team member to participate in either method, a team member's
compensation from the team must be the only source of income
attributable to Indiana. If a team member leaves the team during a
taxable year, the team remains responsible for remitting the
appropriate tax and may either collect the tax paid from the team
member or absorb the cost itself.
As added by P.L.63-1997, SEC.2.
IC 6-3-2-2.8
Exemption; nonprofit entities; Subchapter S corporations;
financial institutions; insurance companies; international banking
facilities
Sec. 2.8. Notwithstanding any provision of IC 6-3-1 through
IC 6-3-7, there shall be no tax on the adjusted gross income of the
following:
(1) Any organization described in Section 501(a) of the Internal
Revenue Code, except that any income of such organization
which is subject to income tax under the Internal Revenue Code
shall be subject to the tax under IC 6-3-1 through IC 6-3-7.
(2) Any corporation which is exempt from income tax under
Section 1363 of the Internal Revenue Code and which complies
with the requirements of IC 6-3-4-13. However, income of a
corporation described under this subdivision that is subject to
income tax under the Internal Revenue Code is subject to the
tax under IC 6-3-1 through IC 6-3-7. A corporation will not lose
its exemption under this section because it fails to comply with
IC 6-3-4-13 but it will be subject to the penalties provided by
IC 6-8.1-10.
(3) Banks and trust companies, national banking associations,
savings banks, building and loan associations, and savings and
loan associations.
(4) Insurance companies subject to tax under IC 27-1-18-2,
including a domestic insurance company that elects to be taxed
under IC 27-1-18-2.
(5) International banking facilities (as defined in Regulation D
of the Board of Governors of the Federal Reserve System (12
CFR 204)).
As added by P.L.47-1984, SEC.5. Amended by P.L.42-1993, SEC.3;
P.L.18-1994, SEC.8; P.L.192-2002(ss), SEC.74.
IC 6-3-2-2.9
Repealed
(Repealed by P.L.47-1984, SEC.7(c).)
IC 6-3-2-3
Repealed
(Repealed, as amended by P.L.79-1983, SEC.2, and as amended
by P.L.82-1983, SEC.5, by P.L.47-1984, SEC.7(b).)
IC 6-3-2-3.1
Taxation; nonprofit entities; unrelated business income
Sec. 3.1. (a) Except as otherwise provided in subsection (b),
income is not exempt from the adjusted gross income tax under
section 2.8(1) of this chapter if the income is derived by the exempt
organization from an unrelated trade or business, as defined in
Section 513 of the Internal Revenue Code.
(b) This section does not apply to:
(1) the United States government;
(2) an agency or instrumentality of the United States
government;
(3) this state;
(4) a state agency, as defined in IC 34-6-2-141;
(5) a political subdivision, as defined in IC 34-6-2-110; or
(6) a county solid waste management district or a joint solid
waste management district established under IC 13-21 or
IC 13-9.5-2 (before its repeal).
As added by Acts 1978, P.L.32, SEC.3. Amended by P.L.25-1991,
SEC.4; P.L.1-1994, SEC.28; P.L.1-1996, SEC.46; P.L.1-1998,
SEC.78; P.L.192-2002(ss), SEC.75.
IC 6-3-2-3.5
Exemption; fares for public transportation services
Sec. 3.5. (a) For purposes of this section, "public transportation
services" means the transportation of individuals for hire.
(b) All fares collected for public transportation services are
exempt from the income taxes imposed by this article if the fares are
received by a:
(1) public transportation corporation established under
IC 36-9-4;
(2) public transit department established by ordinance under
IC 36; or
(3) lessee common carrier that provides public transportation
services under IC 36.
(c) Fares collected for public transportation services by a private
corporation are exempt from income taxes imposed by this article if
during the tax year at least eighty percent (80%) of the corporation's
total regularly scheduled bus passenger vehicle route miles are within
the corporation's designated regional service area. A private
corporation's designated regional service area may not be greater
than:
(1) the county that the private corporation designates as its
principal place of business; and
(2) all counties contiguous to the county designated by the
private corporation as its principal place of business.
A private corporation may choose a smaller area as its regional
service area.
(Formerly: Acts 1975, P.L.58, SEC.3.) As amended by P.L.19-1986,
SEC.14; P.L.192-2002(ss), SEC.76.
IC 6-3-2-3.7
Remainder of federal civil service annuity minus certain
retirement benefits; deduction
Sec. 3.7. Each taxable year, an individual is entitled to an adjusted
gross income tax deduction equal to the remainder of:
(1) the first two thousand dollars ($2,000) which is received by
the individual during the taxable year from a federal civil
service annuity, and which is included in adjusted gross income
under Section 62 of the Internal Revenue Code; minus
(2) the total amount of social security benefits and railroad
retirement benefits received by the individual during the taxable
year.
However, the individual is only entitled to the deduction provided by
this section if the individual is at least sixty-two (62) years of age
before the end of the taxable year.
As added by Acts 1977, P.L.79, SEC.1. Amended by Acts 1980,
P.L.54, SEC.2; P.L.76-1985, SEC.1.
IC 6-3-2-4
Military service deduction; retirement income or survivor's
benefits; age limit of 60
Sec. 4. (a) Each taxable year, an individual, or the individual's
surviving spouse, is entitled to an adjusted gross income tax
deduction for the first five thousand dollars ($5,000) of income,
including retirement or survivor's benefits, received during the
taxable year by the individual, or the individual's surviving spouse,
for the individual's service in an active or reserve component of the
armed forces of the United States, including the army, navy, air
force, coast guard, marine corps, merchant marine, Indiana army
national guard, or Indiana air national guard. However, a person who
is less than sixty (60) years of age on the last day of the person's
taxable year, is not, for that taxable year, entitled to a deduction
under this section for retirement or survivor's benefits.
(b) An individual whose qualified military income is subtracted
from the individual's federal adjusted gross income under
IC 6-3-1-3.5(a)(23) for Indiana individual income tax purposes is not,
for that taxable year, entitled to a deduction under this section for the
individual's qualified military income.
As added by Acts 1977, P.L.78, SEC.3. Amended by P.L.76-1985,
SEC.2; P.L.144-2007, SEC.5.
IC 6-3-2-5
Insulation; installation; deduction; amount; filing of proof
Sec. 5. (a) For purposes of this section, "insulation" means any
material, commonly used in the building industry, which is installed
for the sole purpose of retarding the passage of heat energy into or
out of a building.
(b) A resident individual taxpayer is entitled to a deduction from
his adjusted gross income for a particular taxable year if, during that
taxable year, he installs in his residence new, but not replacement,
insulation, weather stripping, double pane windows, storm doors, or
storm windows. However, a taxpayer does not qualify for this
deduction unless the part of his residence in which he makes the
installation was constructed at least three (3) years before the taxable
year for which the deduction is claimed.
(c) The amount of the deduction to which a taxpayer is entitled in
a particular taxable year is the lesser of:
(1) the amount the taxpayer pays for labor and materials for the
installation that is made during the taxable year; or
(2) one thousand dollars ($1,000).
(d) To obtain the deduction provided by this section, the taxpayer
must file with the department proof of his costs for the installation
and a list of the persons or corporations who supplied labor or
materials for the installation.
As added by Acts 1978, P.L.37, SEC.2.
IC 6-3-2-5.3
Deduction for solar powered roof vents or fans
Sec. 5.3. (a) This section applies to taxable years beginning after
December 31, 2008.
(b) As used in this section, "solar powered roof vent or fan"
means a roof vent or fan that is powered by solar energy and used to
release heat from a building.
(c) A resident individual taxpayer is entitled to a deduction from
the taxpayer's adjusted gross income for a particular taxable year if,
during that taxable year, the taxpayer installs a solar powered roof
vent or fan on a building owned or leased by the taxpayer.
(d) The amount of the deduction to which a taxpayer is entitled in
a particular taxable year is the lesser of:
(1) one-half (1/2) of the amount the taxpayer pays for labor and
materials for the installation of a solar powered roof vent or fan
that is installed during the taxable year; or
(2) one thousand dollars ($1,000).
(e) To obtain the deduction provided by this section, a taxpayer
must file with the department proof of the taxpayer's costs for the
installation of a solar powered roof vent or fan and a list of the
persons or corporation that supplied labor or materials for the
installation of the solar powered roof vent or fan.
As added by P.L.182-2009(ss), SEC.195.
IC 6-3-2-5.5
Repealed
(Repealed by Acts 1980, P.L.54, SEC.9.)
IC 6-3-2-6
Deduction; rent payments
Sec. 6. (a) Each taxable year, an individual who rents a dwelling
for use as the individual's principal place of residence may deduct
from the individual's adjusted gross income (as defined in
IC 6-3-1-3.5(a)), the lesser of:
(1) the amount of rent paid by the individual with respect to the
dwelling during the taxable year; or
(2) three thousand dollars ($3,000).
(b) Notwithstanding subsection (a), a husband and wife filing a
joint adjusted gross income tax return for a particular taxable year
may not claim a deduction under this section of more than three
thousand dollars ($3,000).
(c) The deduction provided by this section does not apply to an
individual who rents a dwelling that is exempt from Indiana property
tax.
(d) For purposes of this section, a "dwelling" includes a single
family dwelling and unit of a multi-family dwelling.
As added by Acts 1979, P.L.70, SEC.1. Amended by P.L.14-1999,
SEC.1; P.L.192-2002(ss), SEC.77; P.L.146-2008, SEC.318.
IC 6-3-2-7
Repealed
(Repealed by P.L.9-1986, SEC.10.)
IC 6-3-2-8
Enterprise zone employers; exemption from deduction
Sec. 8. (a) For purposes of this section, "qualified employee"
means an individual who is employed by a taxpayer, a pass through
entity, an employer exempt from adjusted gross income tax (IC 6-3-1
through IC 6-3-7) under IC 6-3-2-2.8(3), IC 6-3-2-2.8(4), or
IC 6-3-2-2.8(5), a nonprofit entity, the state, a political subdivision
of the state, or the United States government and who:
(1) has the employee's principal place of residence in the
enterprise zone in which the employee is employed;
(2) performs services for the taxpayer, the employer, the
nonprofit entity, the state, the political subdivision, or the
United States government, ninety percent (90%) of which are
directly related to:
(A) the conduct of the taxpayer's or employer's trade or
business; or
(B) the activities of the nonprofit entity, the state, the
political subdivision, or the United States government;
that is located in an enterprise zone; and
(3) performs at least fifty percent (50%) of the employee's
service for the taxpayer or employer during the taxable year in
the enterprise zone.
(b) Except as provided in subsection (c), a qualified employee is
entitled to a deduction from the employee's adjusted gross income in
each taxable year in the amount of the lesser of:
(1) one-half (1/2) of the employee's adjusted gross income for
the taxable year that the employee earns as a qualified
employee; or
(2) seven thousand five hundred dollars ($7,500).
(c) No qualified employee is entitled to a deduction under this
section for a taxable year that begins after the termination of the
enterprise zone in which the employee resides.
As added by P.L.23-1983, SEC.11. Amended by P.L.9-1986, SEC.5;
P.L.289-2001, SEC.12; P.L.269-2003, SEC.4; P.L.182-2009(ss),
SEC.194.
IC 6-3-2-9
Disability retirement; deduction; amount
Sec. 9. (a) An individual who:
(1) retired on disability before the end of the taxable year; and
(2) had a permanent and total disability, as determined under
subsection (c), at the time of retirement;
is entitled to a deduction from the individual's adjusted gross income
for that taxable year in the amount determined under subsection (b).
(b) The deduction provided by subsection (a) is the amount
determined using the following STEPS:
STEP ONE: Determine the amount received by the individual
during the taxable year through an accident and health plan for
personal injuries or sickness to the extent that:
(A) these amounts are attributable to contributions by the
individual's employer that were not includable in the
individual's gross income or are paid by the employer; and
(B) these amounts constitute wages or payments in lieu of
wages for a period during which the employee is absent from
work because of permanent and total disability.
STEP TWO: Determine for each week of the taxable year the
amount by which each weekly payment referred to in STEP
ONE exceeds one hundred dollars ($100), then add these
amounts.
STEP THREE: Determine the amount by which the individual's
federal adjusted gross income for the taxable year, as defined by
Section 62 of the Internal Revenue Code, exceeds fifteen
thousand dollars ($15,000).
STEP FOUR: Subtract from the amount determined in STEP
ONE the amount determined in STEP TWO and the amount
determined in STEP THREE.
(c) For purposes of this section, an individual has a permanent and
total disability if the individual is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less
than twelve (12) months. An individual may not be considered to
have a permanent and total disability unless the individual furnishes
proof of the existence of the disability as the department of revenue
may require.
As added by P.L.76-1985, SEC.3. Amended by P.L.47-2001, SEC.1;
P.L.99-2007, SEC.26.
IC 6-3-2-10
Unemployment compensation; deduction
Sec. 10. (a) An individual who received unemployment
compensation, as defined in subsection (c), during the taxable year
is entitled to a deduction from the individual's adjusted gross income
for that taxable year in the amount determined using the following
formula:
STEP ONE: Determine the greater of zero (0) or the difference
between:
(A) the sum of:
(i) the federal adjusted gross income of the individual (or
the individual and the individual's spouse, in the case of a
joint return), as defined in Section 62 of the Internal
Revenue Code; plus
(ii) the amount of unemployment compensation excluded
from federal gross income, as defined in Section 61 of the
Internal Revenue Code, under Section 85(c) of the Internal
Revenue Code; minus
(B) the base amount as defined in subsection (b).
STEP TWO: Determine the greater of zero (0) or the difference
between:
(A) the individual's unemployment compensation for the
taxable year; minus
(B) one-half (1/2) of the amount determined under STEP
ONE.
(b) As used in this section, "base amount" means:
(1) twelve thousand dollars ($12,000) in all cases not covered
by subdivision (2) or (3);
(2) eighteen thousand dollars ($18,000) in the case of an
individual who files a joint return for the taxable year; or
(3) zero (0), in the case of an individual who:
(A) is married at the close of the taxable year, as determined
under Section 143 of the Internal Revenue Code;
(B) does not file a joint return for the taxable year; and
(C) does not live apart from the individual's spouse at all
times during the taxable year.
(c) As used in this section, "unemployment compensation" means
the amount of unemployment compensation that is included in the
individual's federal gross income under Section 85 of the Internal
Revenue Code.
As added by P.L.2-1987, SEC.19. Amended by P.L.5-1988, SEC.46;
P.L.182-2009(ss), SEC.196.
IC 6-3-2-11
Deductions from adjusted gross income; federal employee paid
leave
Sec. 11. (a) An individual is entitled to a deduction from the
individual's adjusted gross income for the taxable year if the
individual:
(1) is an employee of the federal government during the taxable
year and the year preceding the taxable year;
(2) has used paid leave from employment as an employee of the
federal government during the year preceding the taxable year;
and
(3) is entitled to an itemized deduction under the Internal
Revenue Code for the taxable year because the individual
bought back the leave used by the individual during the year
preceding the taxable year.
(b) The amount of the deduction for a taxable year may not
exceed the lesser of:
(1) the individual's itemized deduction that is allowed under the
Internal Revenue Code for the taxable year; or
(2) the individual's adjusted gross income for the taxable year.
As added by P.L.91-1987, SEC.5.
IC 6-3-2-12
Foreign source dividends; deduction; computation
Sec. 12. (a) As used in this section, the term "foreign source
dividend" means a dividend from a foreign corporation. The term
includes any amount that a taxpayer is required to include in its gross
income for a taxable year under Section 951 of the Internal Revenue
Code, but the term does not include any amount that is treated as a
dividend under Section 78 of the Internal Revenue Code.
(b) A corporation that includes any foreign source dividend in its
adjusted gross income for a taxable year is entitled to a deduction
from that adjusted gross income. The amount of the deduction equals
the product of:
(1) the amount of the foreign source dividend included in the
corporation's adjusted gross income for the taxable year;
multiplied by
(2) the percentage prescribed in subsection (c), (d), or (e), as the
case may be.
(c) The percentage referred to in subsection (b)(2) is one hundred
percent (100%) if the corporation that includes the foreign source
dividend in its adjusted gross income owns stock possessing at least
eighty percent (80%) of the total combined voting power of all
classes of stock of the foreign corporation from which the dividend
is derived.
(d) The percentage referred to in subsection (b)(2) is eighty-five
percent (85%) if the corporation that includes the foreign source
dividend in its adjusted gross income owns stock possessing at least
fifty percent (50%) but less than eighty percent (80%) of the total
combined voting power of all classes of stock of the foreign
corporation from which the dividend is derived.
(e) The percentage referred to in subsection (b)(2) is fifty percent
(50%) if the corporation that includes the foreign source dividend in
its adjusted gross income owns stock possessing less than fifty
percent (50%) of the total combined voting power of all classes of
stock of the foreign corporation from which the dividend is derived.
As added by P.L.383-1987(ss), SEC.4.
IC 6-3-2-13
Export income; maritime opportunity districts
Sec. 13. (a) As used in this section, "export income" means the
gross receipts from the sale, transfer, or exchange of tangible
personal property destined for international markets that is:
(1) manufactured at a plant located within a maritime
opportunity district established under IC 6-1.1-40; and
(2) shipped through a port operated by the state.
(b) As used in this section, "export sales ratio" means the quotient
of:
(1) the taxpayer's export income; divided by
(2) the taxpayer's gross receipts from the sale, transfer, or
exchange of tangible personal property, regardless of its
destination.
(c) As used in this section, "taxpayer" means a person or
corporation that has export income.
(d) The ports of Indiana established by IC 8-10-1-3 shall notify
the department when a maritime opportunity district is established
under IC 6-1.1-40. The notice must include:
(1) the resolution passed by the commission to establish the
district; and
(2) a list of all taxpayers located in the district.
(e) The ports of Indiana shall also notify the department of any
subsequent changes in the list of taxpayers located in the district.
(f) A taxpayer is entitled to a deduction from the taxpayer's
adjusted gross income in an amount equal to the lesser of:
(1) the taxpayer's adjusted gross income; or
(2) the product of the export sales ratio multiplied by the
percentage set forth in subsection (g).
(g) The percentage to be used in determining the amount a
taxpayer is entitled to deduct under this section depends upon the
number of years that the taxpayer could have taken a deduction under
this section. The percentage to be used in subsection (f) is as follows:
YEAR OF DEDUCTION PERCENTAGE
1st through 4th 100%
5th 80%
6th 60%
7th 40%
8th 20%
9th and thereafter 0%
(h) The department shall determine, for each taxpayer claiming a
deduction under this section, the taxpayer's export sales ratio for
purposes of IC 6-1.1-40. The department shall certify the amount of
the ratio to the department of local government finance.
As added by P.L.62-1988, SEC.2. Amended by P.L.90-2002,
SEC.288; P.L.98-2008, SEC.8.
IC 6-3-2-14
Repealed
(Repealed by P.L.192-2002(ss), SEC.191.)
IC 6-3-2-14.1
Prize money accruing before July 1, 2002; exemption
Sec. 14.1. Notwithstanding section 14.5 of this chapter and
IC 6-3-4-8.2, a payment made after June 30, 2002, on prize money
received from a winning lottery ticket purchased under IC 4-30 for
a lottery held before July 1, 2002, is exempt from the adjusted gross
income tax and supplemental net income tax (repealed) imposed by
this article.
As added by P.L.269-2003, SEC.5.
IC 6-3-2-14.5
Partial exemption; lottery winnings
Sec. 14.5. The first one thousand two hundred dollars ($1,200) of
prize money received from a winning lottery ticket purchased under
IC 4-30 is exempt from the adjusted gross income tax imposed by
this article. If the amount of prize money received from a winning
lottery ticket exceeds one thousand two hundred dollars ($1,200), the
amount of the excess is subject to the adjusted gross income tax
imposed by this article.
As added by P.L.192-2002(ss), SEC.79.
IC 6-3-2-15
Repealed
(Repealed by P.L.1-1990, SEC.76.)
IC 6-3-2-16
Transactions between taxable entity and unitary taxpayer subject
to IC 6-5.5
Sec. 16. If an entity is subject to taxation under this article and is
a member of a unitary group of which a taxpayer subject to taxation
under IC 6-5.5 is a member, all income and deductions attributable
to transactions between the entity and the unitary taxpayer shall be
eliminated in determining the amount of tax imposed under this
article. This section does not prohibit the elimination of income and
deductions between two (2) or more entities that are not members of
a unitary group.
As added by P.L.1-1990, SEC.77.
IC 6-3-2-17
Rewards for information to assist law enforcement officials;
exemption
Sec. 17. A reward received by an individual is exempt from
taxation under IC 6-3-1 through IC 6-3-7, in an amount not to exceed
one thousand dollars ($1,000), if:
(1) the reward is for information provided to a law enforcement
official or agency, or to a not-for-profit corporation whose
exclusive purpose is to assist law enforcement officials or
agencies;
(2) the information that is provided assists in the arrest,
indictment, or the filing of charges against a person; and
(3) the individual is not:
(A) compensated for investigating crimes or accidents
(including an employee of, or an individual under contract
with, a law enforcement agency);
(B) the person convicted of the crime; or
(C) the victim of the crime.
As added by P.L.1-1990, SEC.78.
IC 6-3-2-18
Employee medical care savings accounts
Sec. 18. (a) As used in this section, "eligible medical expense" has
the meaning set forth in IC 6-8-11-3.
(b) As used in this section, "medical care savings account" has the
meaning set forth in IC 6-8-11-6.
(c) Except as provided in subsection (g), the amount of money
deposited by an employer in a medical care savings account
established for an employee under IC 6-8-11 is exempt from taxation
under IC 6-3-1 through IC 6-3-7 as income of the employee in the
taxable year in which the money is deposited in the account.
(d) Except as provided in subsection (g), the amount of money
that is:
(1) withdrawn from a medical care savings account established
for an employee under IC 6-8-11; and
(2) either:
(A) used by the administrator of the account for a purpose
set forth in IC 6-8-11-13; or
(B) used under IC 6-8-11-13 to reimburse an employee for
eligible medical expenses that the employee has incurred and
paid for medical care for the employee or a dependent of the
employee;
is exempt from taxation under IC 6-3-1 through IC 6-3-7 as income
of the employee.
(e) Except as provided in IC 6-8-11-11, in each taxable year, the
amount of money that is:
(1) withdrawn by an employee from a medical care savings
account established under IC 6-8-11; and
(2) used for a purpose other than the purposes set forth in
IC 6-8-11-13;
is income to the employee that is subject to taxation under IC 6-3-1
through IC 6-3-7.
(f) If an employee withdraws money from the employee's medical
care savings account under the circumstances set forth in
IC 6-8-11-17(c), the interest earned on the balance in the account
during the full tax year in which the withdrawal is made is subject to
taxation under IC 6-3-1 through IC 6-3-7 as income of the employee.
(g) A taxpayer that excluded or deducted an amount deposited
into a medical care savings account from adjusted gross income
under:
(1) section 106 of the Internal Revenue Code;
(2) section 220 of the Internal Revenue Code; or
(3) any other section of the Internal Revenue Code;
is not eligible for an additional exemption from adjusted gross
income under this section.
As added by P.L.92-1995, SEC.1 and P.L.93-1995, SEC.1. Amended
by P.L.60-1997, SEC.3.
IC 6-3-2-19
Distributions for higher education; exemptions
Sec. 19. (a) As used in this section, "account beneficiary" has the
meaning set forth in IC 21-9-2-3.
(b) As used in this section, "account owner" has the meaning set
forth in IC 21-9-2-4.
(c) As used in this section, "individual account" has the meaning
set forth in IC 21-9-2-2.
(d) As used in this section, "qualified higher education expenses"
has the meaning set forth in IC 21-9-2-19.5.
(e) Distributions from an individual account used to pay qualified
higher education expenses are exempt from the adjusted gross
income tax imposed by IC 6-3-1 through IC 6-3-7 as income of an
account beneficiary or an account owner.
As added by P.L.15-2001, SEC.1.
IC 6-3-2-20
Corporations; intangible expenses; directly related intangible
interest expenses
Sec. 20. (a) The following definitions apply throughout this
section:
(1) "Affiliated group" has the meaning provided in Section
1504 of the Internal Revenue Code, except that the ownership
percentage in Section 1504(a)(2) of the Internal Revenue Code
shall be determined using fifty percent (50%) instead of eighty
percent (80%).
(2) "Directly related intangible interest expenses" means
interest expenses that are paid to, or accrued or incurred as a
liability to, a recipient if:
(A) the amounts represent, in the hands of the recipient,
income from making one (1) or more loans; and
(B) the funds loaned were originally received by the
recipient from the payment of intangible expenses by any of
the following:
(i) The taxpayer.
(ii) A member of the same affiliated group as the taxpayer.
(iii) A foreign corporation.
(3) "Foreign corporation" means a corporation that is organized
under the laws of a country other than the United States and
would be a member of the same affiliated group as the taxpayer
if the corporation were organized under the laws of the United
States.
(4) "Intangible expenses" means the following amounts to the
extent these amounts are allowed as deductions in determining
taxable income under Section 63 of the Internal Revenue Code
before the application of any net operating loss deduction and
special deductions for the taxable year:
(A) Expenses, losses, and costs directly for, related to, or in
connection with the acquisition, use, maintenance,
management, ownership, sale, exchange, or any other
disposition of intangible property.
(B) Royalty, patent, technical, and copyright fees.
(C) Licensing fees.
(D) Other substantially similar expenses and costs.
(5) "Intangible property" means patents, patent applications,
trade names, trademarks, service marks, copyrights, trade
secrets, and substantially similar types of intangible assets.
(6) "Interest expenses" means amounts that are allowed as
deductions under Section 163 of the Internal Revenue Code in
determining taxable income under Section 63 of the Internal
Revenue Code before the application of any net operating loss
deductions and special deductions for the taxable year.
(7) "Makes a disclosure" means a taxpayer provides the
following information regarding a transaction with a member of
the same affiliated group or a foreign corporation involving an
intangible expense and any directly related intangible interest
expense with the taxpayer's tax return on the forms prescribed
by the department:
(A) The name of the recipient.
(B) The state or country of domicile of the recipient.
(C) The amount paid to the recipient.
(D) A copy of federal Form 851, Affiliation Schedule, as
filed with the taxpayer's federal consolidated tax return.
(E) The information needed to determine the taxpayer's
status under the exceptions listed in subsection (c).
(8) "Recipient" means:
(A) a member of the same affiliated group as the taxpayer;
or
(B) a foreign corporation;
to which is paid an item of income that corresponds to an
intangible expense or any directly related intangible interest
expense.
(9) "Unrelated party" means a person that, with respect to the
taxpayer, is not a member of the same affiliated group or a
foreign corporation.
(b) Except as provided in subsection (c), in determining its
adjusted gross income under IC 6-3-1-3.5(b), a corporation subject
to the tax imposed by IC 6-3-2-1 shall add to its taxable income
under Section 63 of the Internal Revenue Code:
(1) intangible expenses; and
(2) any directly related intangible interest expenses;
paid, accrued, or incurred with one (1) or more members of the same
affiliated group or with one (1) or more foreign corporations.
(c) The addition of intangible expenses or any directly related
intangible interest expenses otherwise required in a taxable year
under subsection (b) is not required if one (1) or more of the
following apply to the taxable year:
(1) The taxpayer and the recipient are both included in the same
consolidated tax return filed under IC 6-3-4-14 or in the same
combined return filed under IC 6-3-2-2(q) for the taxable year.
(2) The taxpayer makes a disclosure and, at the request of the
department, can establish by a preponderance of the evidence
that:
(A) the item of income corresponding to the intangible
expenses and any directly related intangible interest
expenses was included within the recipient's income that is
subject to tax in:
(i) a state or possession of the United States; or
(ii) a country other than the United States;
that is the recipient's commercial domicile and that imposes
a net income tax, a franchise tax measured, in whole or in
part, by net income, or a value added tax;
(B) the transaction giving rise to the intangible expenses and
any directly related intangible interest expenses between the
taxpayer and the recipient was made at a commercially
reasonable rate and at terms comparable to an arm's length
transaction; and
(C) the transactions giving rise to the intangible expenses
and any directly related intangible interest expenses between
the taxpayer and the recipient did not have Indiana tax
avoidance as a principal purpose.
(3) The taxpayer makes a disclosure and, at the request of the
department, can establish by a preponderance of the evidence
that:
(A) the recipient regularly engages in transactions involving
intangible property with one (1) or more unrelated parties on
terms substantially similar to those of the subject
transaction; and
(B) the transaction giving rise to the intangible expenses and
any directly related intangible interest expenses between the
taxpayer and the recipient did not have Indiana tax
avoidance as a principal purpose.
(4) The taxpayer makes a disclosure and, at the request of the
department, can establish by a preponderance of the evidence
that:
(A) the payment was received from a person or entity that is
an unrelated party, and on behalf of that unrelated party,
paid that amount to the recipient in an arm's length
transaction; and
(B) the transaction giving rise to the intangible expenses and
any directly related intangible interest expenses between the
taxpayer and the recipient did not have Indiana tax
avoidance as a principal purpose.
(5) The taxpayer makes a disclosure and, at the request of the
department, can establish by a preponderance of the evidence
that:
(A) the recipient paid, accrued, or incurred a liability to an
unrelated party during the taxable year for an equal or
greater amount that was directly for, related to, or in
connection with the same intangible property giving rise to
the intangible expenses; and
(B) the transactions giving rise to the intangible expenses
and any directly related intangible interest expenses between
the taxpayer and the recipient did not have Indiana tax
avoidance as a principal purpose.
(6) The taxpayer makes a disclosure and, at the request of the
department, can establish by a preponderance of the evidence
that:
(A) the recipient is engaged in:
(i) substantial business activities from the acquisition, use,
licensing, maintenance, management, ownership, sale,
exchange, or any other disposition of intangible property;
or
(ii) other substantial business activities separate and apart
from the business activities described in item (i);
as evidenced by the maintenance of a permanent office space
and an adequate number of full-time, experienced
employees;
(B) the transactions giving rise to the intangible expenses
and any directly related intangible interest expenses between
the taxpayer and the recipient did not have Indiana tax
avoidance as a principal purpose; and
(C) the transactions were made at a commercially reasonable
rate and at terms comparable to an arm's length transaction.
(7) The taxpayer and the department agree, in writing, to the
application or use of an alternative method of allocation or
apportionment under section 2(l) or 2(m) of this chapter.
(8) Upon request by the taxpayer, the department determines
that the adjustment otherwise required by this section is
unreasonable.
(d) For purposes of this section, intangible expenses or directly
related intangible interest expenses shall be considered to be at a
commercially reasonable rate or at terms comparable to an arm's
length transaction if the intangible expenses or directly related
intangible interest expenses meet the arm's length standards of
United States Treasury Regulation 1.482-1(b).
(e) If intangible expenses or directly related intangible expenses
are determined not to be at a commercially reasonable rate or at
terms comparable to an arm's length transaction for purposes of this
section, the adjustment required by subsection (b) shall be made only
to the extent necessary to cause the intangible expenses or directly
related intangible interest expenses to be at a commercially
reasonable rate and at terms comparable to an arm's length
transaction.
(f) For purposes of this section, transactions giving rise to
intangible expenses and any directly related intangible interest
expenses between the taxpayer and the recipient shall be considered
as having Indiana tax avoidance as the principal purpose if:
(1) there is not one (1) or more valid business purposes that
independently sustain the transaction notwithstanding any tax
benefits associated with the transaction; and
(2) the principal purpose of tax avoidance exceeds any other
valid business purpose.
As added by P.L.162-2006, SEC.26. Amended by P.L.211-2007,
SEC.21.
IC 6-3-2-21.7
Exemption for certain income derived from patents
Sec. 21.7. (a) This section applies to a qualified patent issued to
a taxpayer after December 31, 2007.
(b) As used in this section, "invention" has the meaning set forth
in 35 U.S.C. 100(a).
(c) As used in this section, "qualified patent" means:
(1) a utility patent issued under 35 U.S.C. 101; or
(2) a plant patent issued under 35 U.S.C. 161;
after December 31, 2007, for an invention resulting from a
development process conducted in Indiana. The term does not
include a design patent issued under 35 U.S.C. 171.
(d) As used in this section, "qualified taxpayer" means a taxpayer
that on the effective filing date of the claimed invention:
(1) is either:
(A) an individual or corporation, if the number of employees
of the individual or corporation, including affiliates as
specified in 13 CFR 121.103, does not exceed five hundred
(500) persons; or
(B) a nonprofit organization or nonprofit corporation as
specified in:
(i) 37 CFR 1.27(a)(3)(ii)(A) or 37 CFR 1.27(a)(3)(ii)(B);
or
(ii) IC 23-17; and
(2) is domiciled in Indiana.
(e) Subject to subsections (g) and (h), in determining adjusted
gross income or taxable income under IC 6-3-1-3.5 or IC 6-5.5-1-2,
a qualified taxpayer is entitled to an exemption from taxation under
IC 6-3-1 through IC 6-3-7 for the following:
(1) Licensing fees or other income received for the use of a
qualified patent.
(2) Royalties received for the infringement of a qualified patent.
(3) Receipts from the sale of a qualified patent.
(4) Subject to subsection (f), income from the taxpayer's own
use of the taxpayer's qualified patent to produce the claimed
invention.
(f) The exemption provided by subsection (e)(4) may not exceed
the fair market value of the licensing fees or other income that would
be received by allowing use of the qualified taxpayer's qualified
patent by someone other than the taxpayer. The fair market value
referred to in this subsection must be determined in each taxable year
in which the qualified taxpayer claims an exemption under
subsection (e)(4).
(g) The total amount of exemptions claimed under this section by
a qualified taxpayer in a taxable year may not exceed five million
dollars ($5,000,000).
(h) A taxpayer may not claim an exemption under this section
with respect to a particular qualified patent for more than ten (10)
taxable years. Subject to the provisions of this section, the following
amount of the income, royalties, or receipts described in subsection
(e) from a particular qualified patent is exempt:
(1) Fifty percent (50%) for each of the first five (5) taxable
years in which the exemption is claimed for the qualified patent.
(2) Forty percent (40%) for the sixth taxable year in which the
exemption is claimed for the qualified patent.
(3) Thirty percent (30%) for the seventh taxable year in which
the exemption is claimed for the qualified patent.
(4) Twenty percent (20%) for the eighth taxable year in which
the exemption is claimed for the qualified patent.
(5) Ten percent (10%) each year for the ninth and tenth taxable
year in which the exemption is claimed for the qualified patent.
(6) No exemption under this section for the particular qualified
patent after the eleventh taxable year in which the exemption is
claimed for the qualified patent.
(i) To receive the exemption provided by this section, a qualified
taxpayer must claim the exemption on the qualified taxpayer's annual
state tax return or returns in the manner prescribed by the
department. The qualified taxpayer shall submit to the department all
information that the department determines is necessary for the
determination of the exemption provided by this section.
(j) On or before December 1 of each year, the department shall
provide an evaluation report to the legislative council, the budget
committee, and the Indiana economic development corporation. The
evaluation report must contain the following:
(1) The number of taxpayers claiming an exemption under this
section.
(2) The sum of all the exemptions claimed under this section.
(3) The North American Industry Classification System code
for each taxpayer claiming an exemption under this section.
(4) Any other information the department considers appropriate,
including the number of qualified patents for which an
exemption was claimed under this section.
The report required under this subsection must be in an electronic
format under IC 5-14-6.
As added by P.L.223-2007, SEC.2.
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