2008 House Bill 1001

Watchdog Indiana Home Page General Assembly Property Tax Legislation Homestead Deductions Threat Property Tax Caps Top Twenty Reasons to support Constitutional Property Tax Caps Property Tax Caps: How They Operate Property Tax Caps K-12 Schools Impact Property Tax Caps Municipal Impact Property Tax Caps: Referendum Implications Property Tax Assessment Issues Property Tax Betrayal & Incompetence Property Tax Replacement Accurate Property Tax Math Property Tax Replacement Impact Homeowner Property Tax Effects Property Tax "Stories" 2008 Property Tax Legislation Testimonies Property Tax Deferral Program

The 2008 House Bill 1001 passed the Indiana House 82-17 and the Indiana Senate 41-6 on March 14. Governor Mitch Daniels signed HB 1001 on March 19. HB 1001 is a comprehensive property tax relief bill.

Below is the Watchdog Indiana analysis of HB 1001. The analysis is organized under the following headings: Property Tax Caps, Homestead and Seniors Deductions, Property Tax Replacement and Homestead Credits, State Assumption of Property Tax Levies, State Taxes and Revenues, Distressed Unit Appeals Board, Local Option Income Tax Provisions, School Funding Provisions, Capital Projects Referendum and Remonstrance, Spending Controls, Debt Controls, Property Tax Assessment Issues, Other Changes.

HB 1001 may make the state and local tax burden of Hoosier working families more fair and affordable by moving away from property taxes to sales and income taxes. Listed next is the fiscal analysis for the next three calendar years.

2008 Tax Reductions = $620 million: $620 million from an additional Homestead Credit
2008 Tax Increases = $621 million: $621 million from the statewide Sales Tax increase

2009 Tax Reductions = $3.2078 billion: $2.8533 billion from the State Assumption of Property Tax Levies, $204.0 million from additional Property Tax Cap Circuit Breaker Credits, $140 million from a temporary Homestead Credit, $10.5 million from an increase in the Renter's Deduction
2009 Tax Increases = $2.9771 billion (excluding any new local option income taxes imposed by counties): $2.0285 billion from the elimination of PTRC/Homestead Credits, $948.6 million from the statewide Sales Tax increase

2010 Tax Reductions = $3.4082 billion: $2.9683 billion from the State Assumption of Property Tax Levies, $317.6 million from additional Property Tax Cap Circuit Breaker Credits, $80 million from a temporary Homestead Credit, $10.6 million from an increase in the Renter's Deduction, $31.7 million from an increase in the Earned Income Tax Credit
2010 Tax Increases = $3.0002 billion (excluding any new local option income taxes imposed by counties): $2.0285 billion from the elimination of PTRC/Homestead Credits, $971.7 million from the statewide Sales Tax increase

HB 1001 creates two significant problems.

PROBLEM #1 The Distressed Unit Appeals Board is a ticking property tax bomb.

Indiana Code 6-1.1-20.3 defines a "distressed" political subdivision as one that expects to have its property tax collections reduced by at least five percent (5%) in a calendar year. A distressed political subdivision can appeal to the state's Distressed Unit Appeals Board, which consists of four state bureaucrats, three elected local officials appointed by the governor, one other governor appointee, and one speaker of the house appointee. The Board may do any of the following for a distressed political subdivision: (a) increase the subdivision's property tax cap percentage thresholds, (b) provide for percentage reductions in the subdivision's property tax credits, (c) remove from the subdivision's property tax caps those property taxes imposed to pay bonds, leases, or other debt obligations. A distressed political subdivision may also petition the tax court for judicial review of a final determination of the Board. The term "political subdivision" includes all of the following: county, city, town, township, school corporation, library district, local housing authority, fire protection district, public transportation corporation, local building authority, local hospital authority or corporation, local airport authority, special service district, other separate local government entity that may sue or be sued, special taxing district.

The constitutional property tax caps in Senate Joint Resolution 1 must be passed to keep the legislative property tax caps in House Bill 1001 from being increased by the Distressed Unit Appeals Board. SJR 1 would make unconstitutional any Distressed Unit Appeals Board decision that would increase a political subdivision's property tax caps.

PROBLEM #2 The county-wide Local Option Income Tax that counties can impose to replace revenue lost from property tax caps punishes low-tax areas to support high-tax areas.

Additional property tax replacement revenue tools are needed to keep income tax payers in county areas with a lower property tax burden from improperly subsidizing those county areas with a higher property tax burden. Political subdivisions with higher property tax rates will cause the property tax caps to be triggered faster than political subdivisions with lower property tax rates. It is not right for income tax payers in political subdivisions with a lower property tax rate to bear the burden of replacement revenue for political subdivisions with higher property tax rates.

The Legislative Services Agency is preparing a new Jeff Thompson Property Tax Replacement Plan that allows each local taxing unit within a county to impose its own unique variable income tax to replace the revenue lost from property tax caps. This will keep income tax payers in local taxing units with a lower property tax burden from having to subsidize local taxing units with a higher property tax burden.

Circuit Breaker Credits (Property Tax Caps)

1. CIRCUIT BREAKERS FOR ALL TAXPAYER CLASSES: Beginning January 1, 2009, the circuit breaker credit is equal to the amount by which a person's property tax liability attributable to the person's (a) homestead exceeds 1.5%, (b) residential property exceeds 2.5%, (c) agricultural land exceeds 2.5%, (d) long-term care property exceeds 2.5%, (e) nonresidential real property exceeds 3.5%, or (f) personal property exceeds 3.5%, of the gross assessed value of the property. Beginning January 1, 2010 and thereafter, the circuit breaker credit is equal to the amount by which a person's property tax liability attributable to the person's (a) homestead exceeds 1%, (b) residential property exceeds 2%, (c) agricultural land exceeds 2%, (d) long-term care property exceeds 2%, (e) nonresidential real property exceeds 3%, or (f) personal property exceeds 3%, of the gross AV of the property. Assisted living facilities and residential nursing homes are considered residential property. The threshold defining an assisted living facility is changed from 6 to 8 individuals. Residential property also includes land rented or leased for the placement of a manufactured or mobile home (manufactured houses and mobile homes are already defined as homesteads). When fully implemented, the circuit breaker threshold will be 3% for second homes and short-term rentals. Political subdivisions are required to fully fund debt obligations regardless of any revenue loss resulting from circuit breakers. The State Auditor may intercept revenues distributed to civil units to pay debt service.

2. REFERENDUM PROPERTY TAXES EXEMPTED FROM CIRCUIT BREAKERS: Property taxes imposed after being approved by the voters in a referendum or local public question cannot be considered for purposes of calculating the circuit breaker credit.

3. DEBT SERVICE EXEMPTIONS IN LAKE AND ST. JOSEPH COUNTIES: Property taxes imposed in Lake and St. Joseph counties to pay debt service or make lease payments for bonds or leases entered into before July 1, 2008, cannot be considered for purposes of calculating the circuit breaker credit. (These exemptions would expire 2020 if the property tax caps in Senate Joint Resolution 1 become part of the Indiana Constitution.)

Homestead and Seniors Deductions

4. HOMESTEAD STANDARD DEDUCTION: The standard homestead deduction will be $45,000 for all years and will be increased to 60% (from 50%) of a home's assessed value. An individual or married couple cannot receive more than one standard deduction regardless of the number of properties owned. The Department of Local Government Finance must adopt rules or guidelines concerning the application for the standard deduction.

5. HOMESTEAD SUPPLEMENTAL DEDUCTION: Beginning January1, 2009, homesteads receive a supplemental deduction (after subtracting the $45,000 standard deduction) that would equal 35% of the first $600,000 of net AV plus 25% of any net AV that exceeds $600,000.

6. SENIORS HOMESTEAD DEDUCTION: An individual who is at least 65 years of age, who owns a homestead with a gross AV less than $160,000, and who has adjusted gross income no more than $30,000 (in the case of a single return) or $40,000 (in the case of a joint return) is entitled to a property tax credit to the extent that property taxes on the individual's homestead increase by more than 2% from the prior year (without adjustments for debt levies).

Property Tax Replacement and Homestead Credits

7. 2008 HOMESTEAD CREDIT: An additional $620 million is appropriated from the state General Fund for homestead credits to be paid in calendar year 2008. In a county that adopted a local option income tax in 2007, the county auditor, with the approval of the county fiscal body, may petition the Department of Local Government Finance to permit a portion of the additional 2008 homestead credit to be used instead to increase the temporary state-funded homestead credit provided for 2009 or both 2009 and 2010.

8. 2009 AND 2010 HOMESTEAD CREDITS: The state will fund a temporary homestead credit in the amount of $140 million in calendar year 2009 and $80 million in CY 2010. The temporary homestead credits will be distributed to counties within two weeks of tax bills issuance.

9. PTR AND HOMESTEAD CREDITS REDIRECTION: After calendar year 2008, the current property tax replacement credits, state homestead credits, and the Property Tax Replacement Fund, and the Property Tax Reduction Trust Fund are abolished. The revenues are redirected so the state can assume selected property tax levies.

State Assumption of Property Tax Levies

10. SCHOOL TUITION SUPPORT LEVIES ELIMINATION: School General Fund property tax levies are eliminated and assumed by the state General Fund beginning January 1, 2009.

11. SPECIAL EDUCATION PRESCHOOL LEVIES ELIMINATION: A school corporation may not impose a special education preschool property tax levy after December 31, 2008, and requires the Department of Education to make distributions equal to $2,750 multiplied by the number of special education preschool children who are students in the school corporation.

12. CHILD WELFARE LEVIES ELIMINATION: Property tax levies are eliminated and assumed by the state General Fund beginning January 1, 2009, for the following child welfare funds: Children with Special Health Care Needs, County Medical Assistance to Wards, County Children's Psychiatric Residential Treatment Services, County Family and Children. The Department of Child Services must assume the costs previously paid by the individual County Family and Children funds for foster care, adoption subsidies, services, programs, and placements ordered for children adjudicated to be children in need of services and delinquent children. The Adoption Assistance Account, Child Welfare Program Fund, and the Child Trust Clearance Account are created in the state General Fund to help pay for certain programs and services offered by DCS. If a court places a delinquent child in facilities outside of the state, DCS is not responsible for these costs; rather, the county where a delinquent child resides will be responsible. DCS adoption subsidy decisions are not subject to administrative review or appeal, but they are subject to judicial review. Procedures and requirements are established for the juvenile courts, juvenile probation, and DCS to be used in the determination of services, programs, and out-of-home placements to be provided for CHINS and juvenile delinquents. A procedural process is specified for handling disagreements between the juvenile courts and DCS concerning the need for or alternatives to services, programs, or placements. DCS is not responsible for any child services costs if a juvenile court orders services, programs, or placement that are not eligible for Title IV-E of the Social Security Act and the services or programs were not recommended or approved by DCS. The state is allowed to consolidate local offices into regions or districts, but no county may be divided in the determination of a region or district office of the Division of Family Resources or the DCS. Counties remain responsible for all bonds issued and loans made for welfare purposes before January 1, 2009. The DCS is required to pay a service provider's claims not later than 60 days after the date the department receives the properly documented invoice.

13. STATE FAIR AND STATE FORESTRY LEVIES ELIMINATION: Beginning January 1, 2009, State Fair and State Forestry property tax levies are eliminated and assumed by the state General Fund. The State Forestry Fund includes an amount distributed to the State Budget Agency for Department of Local Government Finance database management.

14. JUVENILE INCARCERATION LEVIES ELIMINATION: Effective January 1, 2009, the state General Fund is used to eliminate the county general fund property tax levies that pay for the incarceration of juveniles in the state's Department of Correction facilities. The Department of Child Services will be required to provide and administer services to children adjudicated as juvenile offenders, as well as pay for programs and services provided under juvenile law. However, the costs for secure detention will still be paid by the county.

15. HOSPITAL CARE FOR THE INDIGENT LEVIES ELIMINATION: Effective January 1, 2009, property tax levies are eliminated for indigent hospital care. The state will make an annual transfer of $40 million to the Health and Hospital Corporation of Marion County to cover its share of HCI expenses (Marion County does not have a HCI levy).

16. PRE-1977 LOCAL POLICE AND FIRE PENSION LEVIES ELIMINATION: Beginning January 1, 2009, the state Pension Relief Fund pays to each unit of local government the total amount of pension, disability, and survivor benefit payments from the pre-1977 police and firefighter funds. Certain interest earned by the Public Deposit Insurance Fund will continue to be used to pay local police and firefighter pensions through 2022. The property tax levies used to make the pre-1977 payments are eliminated.

State Taxes and Revenues

17. SALES TAX INCREASE: Beginning April 1, 2008, the statewide sales tax rate is increased from 6% to 7% with all the new sales tax revenues deposited in the state General Fund. The retail merchant collection allowances are reduced so the same amount of collection allowance revenue is received by retailers after the 1% increase in the sales tax rate. Sales tax revenues will increases $152.5 million in FY 2008, $937.1 million in FY 2009, and $960.0 million in FY 2010.

18. RENTER'S DEDUCTION: The maximum renter's deduction under the individual Adjusted Gross Income Tax is increased from $2,500 to $3,000. beginning in tax year 2008.

19. EARNED INCOME TAX CREDIT: The EITC under the individual Adjusted Gross Income Tax is increased from 6% to 9% of the federal Earned Income Tax Credit beginning in tax year 2009.

20. HOMEOWNER'S PROPERTY TAX DEDUCTION: The maximum allowable homeowner's property tax deduction under the individual Adjusted Gross Income Tax is increased in tax year 2008 only. The increase in the maximum allowable deduction would apply only to homeowners who pay any or all of their 2006 Pay 2007 property taxes in 2008.

21. REVENUES DISTRIBUTION CHANGE: Revenues from sales, income, and certain wagering taxes formerly deposited in the repealed Property Tax Relief Fund and the repealed Property Tax Reduction Trust Fund are deposited in the state General Fund to help pay for the property tax levies assumed by the state.

22. TAX PAYMENTS SEPARATION: Employers and individuals filing estimated tax payments must separate amounts paid between state and county liability.

Distressed Unit Appeals Board

23. DISTRESSED UNIT APPEALS BOARD: Beginning in 2009, the Distressed Unit Appeals Board (previously named the Circuit Breaker Relief Board) may provide that some or all of the property taxes that are being imposed to pay debt and that would otherwise be included in the calculation of the circuit breaker credit shall not be included for purposes of calculating the credit. A distressed political subdivision is also authorized to petition the Tax Court for judicial review of a final determination of the Board. The membership of the Board is changed to include appointees by the governor and speaker of the house. A unit is distressed if the circuit breaker credit would reduce the unit's property tax collections by at least 5 %.

Local Option Income Tax Provisions

24.. LOCAL OPTION INCOME TAX: Local option income taxes are retained for property tax levy replacement including budget increases (up to 1%), dollar-for-dollar property tax relief (up to 1%), and public safety (up to 0.25%, or 0.5% in Marion County). A county council or county income tax council must hold at least one public meeting each year to discuss whether the LOIT for levy replacement should be imposed or increased. The county council or county income tax council may also adopt before October 1 an ordinance reallocating the property tax relief LOIT among homesteads, residential property (homestead and rental), all real and personal property, or any combination of these three options. A county may adopt the public safety rate if the combined rate for levy replacement and property tax relief is at least 0.25%. Counties can agree to pool LOIT for public safety to pursue a single project. Political subdivisions may continue to receive LOIT allocations that would otherwise be lost as a result of levies elimination.

25. LAKE COUNTY LOIT: If Lake County adopts the LOIT for property tax replacement, the Lake County Council may also determine the distribution method from the following three choices: (a) the tax revenue may be used to proportionately reduce all property tax levies imposed by the county unit of government; (b) the tax revenue collected from taxpayers within a particular municipality may be used to provide a local property tax credit at a uniform rate against property taxes imposed by that municipality and the tax revenue collected from taxpayers within the unincorporated area may be used to provide a local property tax credit to taxpayers within the unincorporated area at a uniform rate against the county unit levy; or (c) sixty percent of the tax revenue would be used the same way as the option (b) and the remaining 40% would be distributed to the county and to townships and municipalities on the basis of population and used to reduce those taxing units' property tax levies.

26. JASPER COUNTY: An industrial plant in Jasper County with an assessed value that exceeds 20% of the county's 2006 taxable AV is ineligible for a local property tax replacement credit.

27. STATE AGENCY CLARIFICATIONS: The Department of State Revenue (DOR) and the Office of Management and Budget (OMB) must develop a quarterly report, beginning 2011, that summarizes the amount of local option income taxes reported and processed for each county. The DOR must develop a system of crosschecks between annual withholding tax reports and individual taxpayer W-2 forms. The OMB must provide county councils with an information summary of the calculations used to determine the certified distributions. The local property tax replacement credit percentage for a particular year that is funded by a LOIT is based on the amount of tax revenue that will be used under the LOIT to provide local property tax replacement credits. The Commission on State Tax and Financing Policy must study LOIT allocation alternatives.

28. LEVY-BASED REVENUE DISTRIBUTIONS: For purposes of computing and distributing excise taxes or local option income taxes, the computation and distribution is based on the taxing unit's property tax levy as calculated before any reduction due to circuit breaker credits.

School Funding Provisions

29. SCHOOL CIRCUIT BREAKER REPLACEMENT: An appropriation of $50 million in calendar year 2009 and $70 million in CY 2010 is provided to local schools to offset their reduction in property tax revenue due to the circuit breaker if their reduction is more than 2% of the affected levies. The distribution is to be allocated only to schools with circuit breaker impacts greater than 2% and is apportioned on the basis of each school's total circuit breaker impact relative to the total circuit breaker impacts of all schools with reductions greater than 2%.

30. SCHOOL REFERENDUM: A school corporation does not need the approval of the School Property Tax Control Board or the Department of Local Government Finance before holding a referendum concerning a 7-year referendum tax levy to replace property tax revenue that the school corporation will not receive because of the application of the circuit breaker credit. A referendum tax levy cannot be considered for purposes of calculating the circuit breaker credit.

31. TUITION RESERVE FUND: Beginning July 1, 2009, the State Budget Agency is to create the state Tuition Reserve Fund to provide an amount available to schools in years when state tax revenues are insufficient to fully fund the operation of the schools. The $316.6 million balance of the General Fund Tuition Reserve Account will be transferred to the Tuition Reserve Fund. The state will also make transfers totaling $50 million before December 31, 2010, from the state General Fund into the Tuition Reserve Fund. NOTE: The $50 million transfer from the General Fund is no longer necessary because the governor has already ordered that $83.4 million of the state's surplus be shifted into the Tuition Reserve Fund, bringing the current balance of the Tuition Reserve Fund up to $400 million.

32. SCHOOL LEVY APPEALS: School appeals to impose a shortfall levy for property tax shortfalls are eliminated starting calendar year 2010. A school corporation is permitted to appeal to the Department of Local Government Finance to impose a shortfall levy for 2009 to replace a shortfall in a 2008 tuition support levy.

33. SCHOOL NEW FACILITY APPEALS: Starting calendar year 2009, a school corporation may appeal to the Department of Local Government Finance for a new facility adjustment to increase the school corporation's tuition support distribution from the state's General Fund for the following year to pay increased costs to open: (a) a new school facility; or (b) an existing facility that has not been used for at least three years. Department of Education appropriations for the new facility appeals are $10 million for 2009 and 2010.

34. SCHOOL CAPITAL PROJECTS REVIEW: After June 30, 2008, review and approval by the Department of Local Government Finance are not required before a school corporation may construct, alter, or repair a capital project.

35. SCHOOL BUS REPLACEMENT: A school bus replacement plan must apply to at least 12 years (rather than 10 years). This should reduce the school bus replacement levy.

36. SCHOOL BUDGET YEAR CHANGE: Schools will switch from a calendar year General Fund budget to a July 1 to June 30 budget starting with fiscal year 2011. Schools will be required to adopt a CY 2010 General Fund budget and also a FY 2011 budget.

37. SCHOOL STANDARDIZED PLANS: The State Board of Education must adopt administrative rules setting forth guidelines for the selection of school sites and the construction, alteration, and repair of school buildings, athletic facilities, and other categories of facilities related to the operation and administration of school corporations. Beginning July 1, 2008, a school corporation must consider the guidelines and submit proposed plans and specifications to the DOE. The DOE must provide written recommendations to the school corporation, including findings as to any material differences between the plans and specifications and the guidelines. The school corporation must have a public hearing on the plans and specifications. The DOE must establish a central clearinghouse containing prototype designs for school facilities.

38. UTILITY SERVICES AND INSURANCE: The expiration date is deleted in the provision authorizing a school corporation to use money in its capital projects fund for utility services and property and casualty insurance.

Capital Projects Referendum and Remonstrance

39. CAPITAL PROJECTS REFERENDUM AND REMONSTRANCE: A capital project is a controlled project if it will cost the political subdivision more than the lesser of $2 million or an amount equal to 1% of the total gross assessed value of property within the political subdivision on the last assessment date (if that amount is at least $1 million). A project that is in response to a natural disaster, emergency, or accident that makes a building or facility unavailable for its intended use and that is approved by the county council is not a controlled project for purposes of the referendum process. A controlled project for a school building for kindergarten through Grade 8 is subject to a referendum if the cost is more than $10 million. A controlled project for a school building for Grade 9 through Grade 12 is subject to a referendum if the cost is more than $20 million. Other controlled projects with a cost that exceeds the lesser of $12 million or 1% of assessed value (but at least $1 million) are also subject to a referendum. It takes the lesser of 100 persons who are either owners of real property within the political subdivision or registered voters residing within the political subdivision or 5% of the registered voters residing within the political subdivision to initiate a referendum. The referendum is to be held during a general or primary election unless there is no election within 6 months from when the county auditor certifies the public question; in that case, a special election would be held between 90 an 120 days after the public question is certified. A referendum for issuance of debt may be held in a municipal election. Controlled projects that are not subject to a referendum are subject to the petition and remonstrance process.

Spending Controls

40. CIVIL CAPITAL PROJECTS REVIEW: The county boards of tax and capital projects review are repealed. After June 30, 2008, review and approval by the Department of Local Government Finance are not required before a civil taxing unit may construct, alter, or repair a capital project. If a taxing unit's governing body does not consist of a majority of officials who are elected, the governing body may not issue bonds or enter into a lease payable in whole or in part from property taxes unless it obtains the approval of the city or town fiscal body or the county fiscal body (as applicable).

41. CIVIL UNIT LEVY APPEALS: Several excess property tax levy appeals are eliminated beginning in 2009. Certain exceptions to the property tax levy limits are also eliminated. The levy appeal for increased costs resulting from annexation, consolidation, or other extensions of governmental services is allowed in the first year that increased costs are incurred and is phased in over the immediately succeeding four years. An appeal in a case where the civil taxing unit cannot carry out its governmental functions may be granted by the Department of Local Government Finance only if the unit's inability to carry out its governmental functions is due to a natural disaster, an accident, or another unanticipated emergency. The DLGF approves the correction of math errors and erroneous assessed value. The appeal for reallocation of PTRC in Goshen is not repealed.

42. CIVIL UNIT BUDGETS REVIEW: In counties without a county board of tax adjustment, each civil taxing unit that imposes property taxes must file with the fiscal body of the county in which the civil taxing unit is located (a) a statement of the proposed or estimated tax rate and tax levy for the civil taxing unit for the ensuing budget year and (b) a copy of the civil taxing unit's proposed budget for the ensuing budget year. A county fiscal body must issue a nonbinding recommendation to a civil taxing unit regarding the civil taxing unit's tax rate or levy or proposed budget.

43. UNELECTED GOVERNING BODY BUDGETS APPROVAL: In counties other than Marion County, if the percentage increase in the proposed budget for a civil taxing unit with an unelected governing body for the ensuing calendar year is greater than the growth allowed under the assessed value growth quotient, the governing body of the civil taxing unit must submit its proposed budget and property tax levy for approval by the county fiscal body or municipal fiscal body. Budgets, levies, and bond issues for taxing units in Marion County with an unelected board must be approved by the city-county council.

44. EMERGENCY FIRE LOANS: A township board must consider certain factors when determining whether a fire and emergency services need exists requiring the expenditures of money not included in the township's budget estimates and levy. The township board may authorize the executive to borrow funds in an amount equal to 80% of the total anticipated revenue for the remainder of the year.

Debt Controls

45. REFUNDING BONDS: With respect to bonds payable from property taxes, special benefit taxes, or tax increment revenues, a local issuing body is prohibited from (a) issuing refunding bonds that have a repayment date that is beyond the maximum term of the bonds being refunded or (b) using savings resulting from refunding bonds or surplus proceeds for any purpose other than to maintain a debt service reserve fund, repay bonds, or reduce levies.

46. SURPLUS BOND PROCEEDS: Local issuing bodies may use surplus bond proceeds or investment earnings only to maintain a debt service reserve, pay debt service on other bonds, or reduce taxes.

47. DEBT PAYMENTS: The local issuing body is to pay interest and principal on bonds on a schedule that provides for substantially equal installment amounts and regular payment intervals, with the following exceptions: maintain substantially equal payments in the aggregate for all obligations, accelerate repayment of principal, provide for level principal payments, account for variations in collections of tax increment revenues.

48. REDEVELOPMENT COMMISSION DECISIONS: The elected fiscal or legislative body must approve some decisions made by redevelopment commissions, including eminent domain use, tax abatements, enterprise zone investment decisions, federal grant applications, all bond issues, and payment of property tax replacement credits in allocation areas (including those in certified technology parks).

49. MAXIMUM REPAYMENT TERM: The maximum terms for property tax-based obligations issued after June 30, 2008, are (a) the maximum applicable period under federal law for obligations issued under a federal program, (b) 25 years for tax increment financing obligations payable wholly or partially from property taxes (reduced from 50 years), and (c) 20 years for other property tax-based obligations. Construction for a coal gasification plant that has received certain approvals by December 31, 2007, is not subject to the 25-year limit on maximum maturity for bonds.

50. UNELECTED GOVERNING BODY BONDS APPROVAL: Bond issues for taxing units in Marion County and other counties with an unelected board must be approved by the City-Council Council.

51. TAX INCREMENT FINANCING SHORTFALLS: If the TIF revenues of an allocation area have been decreased by a General Assembly law or Department of Local Government Finance action below the amount needed to make debt obligation payments, the governing body of the TIF district may (a) impose a special assessment on the owners of property in an allocation area, (b) impose a tax on all taxable property in the TIF district, or (c) reduce the base assessed value of property in the allocation area to an amount that is sufficient to increase the tax increment revenues. The legislative body of the unit that established the TIF district must approve a special assessment or tax levy imposed by the TIF governing body. The legislative body can (a) reduce or increase the amount of the special assessment or tax or (b) determine that no special assessment or levy be imposed.

52. OTHER TAX INCREMENT FINANCING CHANGES: TIF districts cannot be created for a period exceeding 25 years (reduced from 30 years). A school board member (in a school corporation that wholly or partially includes the area served by the commission) must serve as a non-voting advisor to each redevelopment commission. To enlarge the boundaries of an allocation area, there must be a finding that the existing area does not generate sufficient revenues to meet the obligations of the original project. TIF revenues may be used to finance local public improvements only if the improvements are located in or are physically connected to the allocation area. A redevelopment commission is required to provide written notice each year stating (a) the amount of excess assessed value that may be reallocated to other taxing units or (b) that there is no excess.

Property Tax Assessment Issues

53. COUNTY AND TOWNSHIP ASSESSORS: Effective July 1, 2008, the duties of township assessors in all townships in which the number of real property parcels is less than 15,000 and in townships with a trustee-assessor are transferred to the elected county assessor. A referendum must be held at the general election in 2008 in each township in which the number of parcels of real property on January 1, 2008, is at least 15,000. The referendum shall determine whether to transfer to the county assessor the assessment duties that would otherwise be performed by the elected township assessor. Township assessors elected after June 30, 2008, must complete the Level II assessor-appraiser certification prior to taking office. A person who runs in an election after January 1, 2012, for the office of county or township assessor must have attained the certification of a Level III assessor-appraiser before taking office. Each appraiser performing assessments must attain a Level II assessor-appraiser certification, and after June 30, 2009, an employee of a county or township assessor who performs real property assessing duties must have attained the level of certification that the assessor is required to attain (a Level II or Level III assessor-appraiser certification). Based on a finding by the Department of Local Government Finance, the county council or county commissioners with the county prosecutor may file an information for removal from office of county and township assessors who fail to adequately perform the duties of office.

54. PROPERTY TAX MANAGEMENT SYSTEM: The Department of Local Government Finance must conduct operational audits of assessors to improve the quality and accuracy of assessments. A political subdivision may not make a payment to a vendor for assessment related software unless the DLGF has certified the software. The DLGF is authorized to adopt temporary rules to revise its rules establishing standards for computer systems used by Indiana counties for the administration of the property tax assessment, billing, and settlement processes. Certain assessment system software and hardware standards apply to all assessment system software and hardware rules and standards adopted by the DLGF. Policy documents provided to local taxing officials must be distributed to the Legislative Services Agency. Written standards for the operation and management of a property tax data base system is also required.

55. APPRAISAL CONTRACTS: Township assessors may not employ professional appraisers, but county assessors may employ professional appraisers for assessments in all county townships. The Department of Local Government Finance must be a party to appraisal and reassessment contracts and may approve employment under a contract. Before approving a contract, the DLGF must consider a contractor's experience, training, and number of employees.

56. ASSESSMENT APPEALS: The county property tax assessment board of appeals review procedure is amended. A taxpayer can obtain a preliminary informal meeting with the assessor to review an assessment without being required to present documentary evidence. A taxpayer that receives a tax statement or a provisional tax statement for the first installment of property taxes based on the assessment date in 2007 and first due and payable in 2008 may appeal the assessment by filing a notice in writing with the proper assessing official not later than the later of 45 days after the tax statement (or reconciling statement) is given to the taxpayer or July 1, 2008.

57. ASSESSED VALUE SUBMISSION: Counties with taxing units that cross into other counties may submit to the Department of Local Government Finance the AV shown on the most current abstract (and not wait for the other county to complete its work).

58. LAND COMMISSIONS: The county land valuation commission and obsolete provisions are repealed.

59. PROPERTY TAX STUDY. The Department of Local Government Finance must report to the Commission on State Tax and Financing Policy regarding (a) the possibility of eliminating the existing method of assessing and valuing property for the purpose of property taxation and (b) the use of alternative methods of valuing property for the purpose of property taxation. The CSTFP must study those issues and the following issues and report to the Legislative Council: (a) whether it is reasonable and appropriate to require all counties to use the state-designed software system, and (b) alternative methods for distribution of Local Option Income Taxes.

60. STRIP MINED LAND: The productivity factor for agricultural land that has been strip mined for coal after December 31, 2007, is increased from .5 to .75.

61. INVENTORY EXEMPTION: The 100% property tax deduction for inventory is converted to an exemption by excluding inventory from the definition of personal property subject to property tax, and it repeals property tax credits and exemptions applicable to inventory.

62. ASSESSMENT CORRECTIONS: If a township assessor determines that the township assessor has made an error concerning (a) the assessed valuation of property, (b) the name of a taxpayer, or (c) the description of property, the township assessor must on the township assessor's own initiative correct the error. If the correction results in a reduction in an assessment, the taxpayer is entitled to a credit on the taxpayer's next tax installment.

Other Changes

63. PROPERTY TAX INSTALLMENT PAYMENTS: A county council may adopt an ordinance to allow taxpayers to make installment payments of taxes due under a reconciling statement.

64. DEVELOPMENTAL DISABILITIES CENTER EXEMPTIONS: Exemptions from the property tax levy limits for certain taxes do not apply to a civil taxing unit that did not fund a community mental health center or community mental retardation and other developmental disabilities center in 2008. In addition, the levies for either type of center could not grow faster than the county's assessed value growth quotient.

65. TAX CONTROL BOARDS: The local government tax control boards are not abolished.

66. CUMULATIVE CAPITAL DEVELOPMENT FUNDS: The maximum property tax rates for county and municipal cumulative capital development funds are adjusted to reflect the change from 33.33% to 100% of true tax value.

67. 2007 ADDITIONAL HOMESTEAD CREDIT: A check issued by a county for a refund of the additional 2007 homestead credit is void if the check is (a) outstanding and unpaid for 180 days after it is issued and (b) for an amount that is not more than $10.

This page was last updated on 03/31/13 .