HB 1302 Summary

• Eliminates all ad valorem property taxes effective after January 15, 2010, replacing lost revenue with four new tax sources: local resident income tax (IC 6-1.6), fire and safety benefit tax (IC 6-1.7), state commercial activity tax (IC 6-1.8), and state employer payroll expense tax (IC 6-1.9).

• Increases state gross retail and use tax from 7% to 7.5% effective January 1, 2011, and reduces state adjusted gross income tax rate from 3.4% to 3% effective July 1, 2011.

• Imposes local resident income tax on individuals based on principal place of residence in a taxing unit, with tax revenues distributed to political subdivisions providing services; establishes fire and safety benefit tax on property owners for public safety services up to 50% of service costs.

• Creates statewide commercial activity tax at 0.25% on gross receipts of persons with substantial nexus to Indiana, with distributions based on business property values; establishes employer payroll expense tax at 0.25% on compensation paid to Indiana resident employees or those performing work in Indiana.

• Establishes budget and tax rate procedures under IC 6-1.2 for taxing units to adopt replacement taxes, including rainy day funds, bond obligations, and allocation area requirements to distribute revenue to tax increment financing districts.