State & Local Incentives

This Tax Credit provides an incentive to businesses to support jobs creation, capital investment and to improve the standard of living for Indiana residents. The refundable corporate income tax credit is calculated as a percentage (not to exceed 100%) of the expected increased tax withholdings generated from new jobs creation. The credit certification is phased in annually for up to 10 years based upon the employment ramp-up outlined by the business.

Provides incentive to businesses to support jobs creation, capital investment and to improve the standard of living for Indiana residents. The non-refundable corporate income tax credits are calculated as a percentage of the eligible capital investment to support the project. The credit may be certified annually, based on the phase-in of eligible capital investment, over a period of two full calendar years from the commencement of the project.

The state of Indiana offers two tax incentives targeted at encouraging investments in research and development. Taxpayers may receive a credit against their Indiana state income tax liability calculated as a percentage of qualified research expenses. In addition, taxpayers may be refunded sales tax paid on purchases of qualified research and development equipment. The Indiana Department of Revenue oversees these incentive programs. Select from the menu to learn about our Research Expense Credits and our Research and Development Sales Tax Exemption.
The potential value of incentive amount varies based upon the amount of the qualifying transaction. A taxpayer who qualifies for the exemption must claim the exemption in a manner prescribed by the Indiana Department of Revenue.

Provides a tax credit to corporations that relocate their headquarters to Indiana. The credit is assessed against the corporation’s state tax liability. The Headquarters Relocation Tax Credit is established by I.C. 6-3.1-30.

Provides assistance to municipalities and other eligible entities as defined under I.C. 5-28-25-1 with off-site infrastructure improvements needed to serve the proposed project site. Upon review and approval of the Local Recipient’s application, project specific Milestones are established for completing the improvements. IDGF will reimburse a portion of the actual total cost of the infrastructure improvements. The assistance will be paid as each Milestone is achieved, with final payment upon completion of the last Milestone of the infrastructure project.

Provides assistance to businesses to support training and upgrading skills of employees required to support new capital investment. The grant may be provided to reimburse a portion (typically 50%) of eligible training costs over a period of two full calendar years from the commencement of the project.

Also known as the DINO tax credit for older buildings it benefits, provides an incentive for companies to invest in former industrial facilities requiring significant rehabilitation or remodeling expenses. The credit is established by Ind. Code 6-3.1-11.

Certain income derived from qualified patents and earned by a taxpayer are exempt from taxation. The Tax Exemption for Patent-derived Income defines qualified patents to include only utility patents and plant patents. The total amount of exemptions claimed by a taxpayer in a taxable year may not exceed $5 million.

The exemption provides that a taxpayer may not claim an exemption for income derived from a particular patent for more than 10 taxable years. The exemption percentage begins at 50 percent of income derived from a qualified patent for each of the first five taxable years, and decreases over the next five taxable years to 10 percent in the 10th taxable year.

It also specifies that a taxpayer is eligible to claim the exemption only if the taxpayer is domiciled in Indiana and is either an individual or corporation with not more than 500 employees including employees in the individual’s or corporation’s affiliates or is a nonprofit organization or corporation. The Tax Exemption for Patent-Derived Income is established by IC 6-3-2-21.7.

The patent-derived income that is exempt under the bill includes:

• Licensing fees or other income received from the use of a patent

• Royalties received from the infringement of a patent

• Receipts from the sale of a patent

• Certain income from the taxpayer’s own use of the qualified patent to produce the claimed invention

Claiming the Exemption

A taxpayer may claim the exemption for 10 years with respect to a particular patent. The total amount of exemptions for patent-derived income that a taxpayer may claim in a taxable year is $5 million.

The following represents the year the exemption is claimed for a particular patent and the percent of patent-derived Income is exempt:

• Years 1 through 5  = 50%

• Year 6 = 40%

• Year 7 = 30%

• Year 8 = 20%

• Year 9 and 10 = 10%

The state of Indiana offers two tax incentives targeted at encouraging investments in research and development. Taxpayers may receive a credit against their Indiana state income tax liability calculated as a percentage of qualified research expenses. In addition, taxpayers may be refunded sales tax paid on purchases of qualified research and development equipment. The Indiana Department of Revenue oversees these incentive programs. Select from the menu to learn about our Research Expense Credits and our Research and Development Sales Tax Exemption.

The potential value of incentive amount varies based upon the amount of the qualifying transaction. A taxpayer who qualifies for the exemption must claim the exemption in a manner prescribed by the Indiana Department of Revenue. The form used to claim the exemptions is available at www.in.gov/dor.

The Skills Enhancement Fund (SEF) provides assistance to businesses to support training and upgrading skills of employees required to support new capital investment. The grant may be provided to reimburse a portion (typically 50%) of eligible training costs over a period of two full calendar years from the commencement of the project.

The Venture Capital Investment Tax Credit program improves access to capital for fast growing Indiana companies by providing individual and corporate investors an additional incentive to invest in early stage firms. Investors who provide qualified debt or equity capital to Indiana companies receive a credit against their Indiana tax liability. The Venture Capital Investment Tax Credit is established by I.C. 6-3.1-24.

Calculation of Credits

The maximum amount of tax credits available for qualified investment capital to a particular qualified Indiana business equals the lesser of: The total amount of investment capital provided to the qualified Indiana business in the calendar year, multiplied by 20 percent or $1,000,000. If the amount of credit exceeds the taxpayer’s state tax liability for that taxable year, the taxpayer may carry over the excess credit for a period not to exceed the taxpayer’s following five taxable years. A taxpayer is not entitled to a carryback or a refund of any unused credit amount.

Eligibility

This credit is open to approved taxpayers and pass through entities. A business must first be certified by the IEDC as a Qualified Indiana Business. Next, the investor must submit a capital investment application for approval by the IEDC prior to making an investment. After the investment application is approved, the taxpayer may make a qualifying investment and submit supporting documentation to the IEDC for the investment to be certified. The taxpayer’s investment must be made within two years after the date on which the IEDC approves the investment plan.

Certification

Any current investor who or which holds a majority ownership position prior to the proposed investment in the Qualified Indiana Business generally is not eligible for the VCI tax credit.  Any current investor who or which, as a result of making the proposed investment, will hold a majority ownership position generally is eligible for the VCI tax credit for the investment portion up to 50% ownership position.  An investor who or which does not hold any ownership position, and does not have a potential ownership position of any kind, prior to making the proposed investment generally is eligible for the VCI tax credit on the entire proposed investment regardless of proposed ownership position.

An investor may be an individual or an entity.  An investor holds an ownership position when such investor (1) could potentially derive a financial benefit from a tax credit when another investor claims such tax credit, or (2) has tacit or express control over the interests of another investor in the Qualified Indiana Business, and in either such case the combined interest of those investors constitutes an ownership position in the Qualified Indiana Business.  For the purpose of clarity, such benefit or control shall automatically be presumed to be associated with an individual investor in the following circumstances:  (a) with respect to the spouse and unemancipated children of such individual investor; (b) with respect to any trust, family limited partnership, family limited liability company or other estate planning entity, the beneficiaries, partners or members of which include such individual investor or such individual investor’s spouse or unemancipated children; and (c) with respect to any partnership, corporation, limited liability company, joint venture, association, trust, or other such organization in which such individual investor possesses any ownership interest.

Debt investments from financial institutions secured by a valid mortgage, security agreement or other agreement or document that establishes a collateral or security position for the financial institution that is senior to all collateral or security interests of other taxpayers that provide debt or equity capital to the Qualified Indiana Business do not qualify for VCI Tax Credits.  Further, debt investments may not qualify to the extent that principal be paid or repaid prior to the expiration of a period of at least  thirty-six (36) months.

Applications

You may now submit your application online via our Project Information Management System (PIMS). It is through this system that you can access both the Qualified Capital Investment Application (QCI) and Qualified Indiana Business Application (QIB).

Pursuant to IC 6-3.1-24-7(d), the IEDC may impose an application fee of not more than two hundred dollars ($200) upon those companies that submit the QIB application.  The IEDC is not charging an application fee at this time.

Investor Application

QIB Application

NOTE: If you experience issues opening the above application links, please try opening them in a different internet browser or device.

Contact
Lee Robinson
LRobinson@iedc.in.gov
317.233.3638

Effective July 1, 2004:
Eliminates sales tax on ALL utilities for a period of five (5) years for qualified businesses that relocate all or part of its operations to a facility; or expands all or part of its operations in a facility located in a military base, a military base reuse area, an economic development area established under IC 36-7-14.5-12.5, or a military base recovery site.
To claim the utility sales tax exemption:

• An individual or business must submit a completed Form ST-200 “Utility Sales Tax Exemption Application”, with utility bill attached, to the Department of Revenue.
• It is also recommended that a letter from the reuse authority accompany the ST-200 concurring that the business is located on a closed/realigned military base as outline in IC 6-2.5-4-5.
• For assistance call (317) 232-2339

Effective January 1, 2005
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 qualified corporation that is derived from sources within a military base, a military base reuse area, an economic development area established under IC 36-7-14.5-12.5, or a military base recovery site. (Current rate is 6.0%) The rate 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.
The department of state revenue:

• Shall adopt rules under IC 4-22-2 to establish a procedure for determining the part of a corporations’ adjusted gross income that was derived from sources within a qualified area; and
• May adopt other rules that the department considers necessary for the implementation of this chapter.
• For assistance call (317) 615-2662

Effective January 1, 2005
A credit up to 30% towards state tax liability on the purchase of an ownership interest in a business that locates all or part of its operations in a qualified area during the taxable year or investment that is made in a business that locates all or part of its operations in a qualified area during the taxable year; through which the taxpayer does not acquire an ownership interest in the business. Qualified Area is defined as a military base, a military base reuse area, an economic development area established under IC 36-7-14.5-12.5, or a military base recovery site.
To claim the investment cost credit, an individual must:

• Request that the Indiana Economic Development Corporation (IEDC) determine if the purchase is a qualified investment. This must be done before the purchase is made. If the purchase is a qualified investment, the IEDC will then determine the precise percentage of the tax credit the individual may claim.
• Attach certification documentation to individual tax return (IEDC will provide the taxpayer with certification documents).

An enterprise zone is an area within a city where there is a significant amount of unemployment and several business facilities that are not being used to their maximum. An enterprise zone created is in effect for 10 years with the potential for two 5-year renewals. There are currently 23 areas that have been designated as enterprise zones. There are 4 state tax incentives and 1 local property tax incentive to encourage businesses to locate in a zone.

The state income tax incentives that are available include:

• The employee tax deduction;
• The employment expense credit;
• The loan interest credit; and
• The investment cost credit.