45 IAC 3.1 — ARTICLE 3.1. ADJUSTED GROSS INCOME TAX
title-45-article-3.145 IAC 3.1Regulation
TITLE 45 DEPARTMENT OF STATE REVENUE
ARTICLE 3.1. ADJUSTED GROSS INCOME TAX
Rule 1
45 IAC 3.1-1-1 45 IAC 3.1-1-1 Definition of adjusted gross income for individuals
Rule 1. State Adjusted Gross Income Tax
45 IAC 3.1-1-1 Definition of adjusted gross income for individuals
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 1. Adjusted Gross Income for Individuals Defined. For individuals, "Adjusted Gross Income" is "Adjusted Gross Income" as defined in Internal Revenue Code § 62 modified as follows:
(1) Begin with gross income as defined in section 61 of the Internal Revenue Code.
(2) Subtract any deductions allowed by section 62 of the Internal Revenue Code.
(3) Make all modifications required by IC 6-3-1-3.5(a).
(Department of State Revenue; Reg 6-3-1-3.5(a)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1511; errata, 2 IR 1743)
45 IAC 3.1-1-2 45 IAC 3.1-1-2 Definition of gross income for individuals
45 IAC 3.1-1-2 Definition of gross income for individuals
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3-1-8
Sec. 2. "Gross Income" Defined for Individuals. Indiana residents must report all income as defined by § 61 of the Internal Revenue Code. Sources of income include, but are not limited to:
(1) Compensation for services, including fees, commissions and similar items
(2) Gross income derived from business
(3) Gains derived from dealings in property
(4) Interest
(5) Rents
(6) Royalties
(7) Dividends
(8) Alimony and separate maintenance payments
(9) Annuities
(10) Income from life insurance and endowment contracts
(11) Pensions
(12) Income from discharge of indebtedness
(13) Distributive share of partnership gross income
(14) Distributive share of taxable income from an electing small business corporation
(15) Income in respect of a decedent
(16) Income from an interest in an estate or trust
Nonresidents and part-year residents are also required to report gross income, as defined above, from all sources. These taypayers [sic.] are afforded a deduction for non-Indiana income as explained in Regulation 6-3-1-3.5(a)(050) [45 IAC 3.1-1-5] .
(Department of State Revenue; Reg 6-3-1-3.5(a)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1511; errata, 2 IR 1743)
45 IAC 3.1-1-3 45 IAC 3.1-1-3 Allowed Internal Revenue Code deductions
45 IAC 3.1-1-3 Allowed Internal Revenue Code deductions
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 3. Internal Revenue Code Section 62 Deductions in Arriving at Indiana Adjusted Gross Income for Individuals. The following deductions contained in Internal Revenue Code Section 62 are allowed in determining Indiana Adjusted Gross Income:
(1) Trade and business deductions
(2) Certain trade or business deductions of employees
(3) Long-term capital gains deduction (Internal Revenue Code § 1202)
(4) Losses from the sale or exchange of property (Internal Revenue Code § 161 and following)
(5) Deductions attributable to rents and royalties (Internal Revenue Code § 161 and following, § 212, and § 611)
(6) Certain deductions of life tenants and income beneficiaries of property (Internal Revenue Code § 167 and § 611)
(7) Pension, profit-sharing, annuity, and bond purchase plans of self-employed individuals [Internal Revenue Code § 401 (c)(1), § 404, and § 405 (c)]
(8) Moving expense deduction–Indiana residents may take a deduction against gross income for moving expenses incurred in a move into or within Indiana, provided that the requirements outlined in Section 217 of the Internal Revenue Code are met. If a taxpayer moves out of Indiana he is not allowed to take this deduction. An exception to this rule occurs when the taxpayer remains a resident of Indiana after he changes locations. For example, an Indiana resident who is in the military remains an Indiana resident regardless of where he is stationed. If such person's duty station is changed he may take this deduction for expenses incurred in the move.
(9) Pension, profit-sharing, annuity, and bond purchase plans of electing small business corporations [Internal Revenue Code § 1379 (b) (3)]
(10) Retirement savings [Internal Revenue Code § 219 and § 220]
(11) Certain portions of lump-sum distributions from pension plans taxed under Internal Revenue Code § 402 (e) [IRC § 402 (e) (3)]
(12) Penalties for premature withdrawal of funds from time savings accounts or deposits (IRC § 165)
(13) Alimony (Internal Revenue Code § 215)
(Department of State Revenue; Reg 6-3-1-3.5(a)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1511; errata, 2 IR 1743)
45 IAC 3.1-1-4 45 IAC 3.1-1-4 Disallowed Internal Revenue Code deductions
45 IAC 3.1-1-4 Disallowed Internal Revenue Code deductions
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 4. Deductions from Federal Adjusted Gross Income Taken in Determining Federal Taxable Income Which Are Not Allowed in Determining Indiana Adjusted Gross Income for Individuals. Deductions under Internal Revenue Code Subchapter B, Parts VI and VII which are allowable in determining Federal taxable income (itemized deductions) are not allowable deductions in determining Indiana Adjusted Gross Income.
(Department of State Revenue; Reg 6-3-1-3.5(a)(040); filed Oct 15, 1979, 11:15 am: 2 IR 1512; errata, 2 IR 1743)
45 IAC 3.1-1-5 45 IAC 3.1-1-5 Modifications to federal adjusted gross income to determine Indiana adjusted gross income (Repealed)
45 IAC 3.1-1-5 Modifications to federal adjusted gross income to determine Indiana adjusted gross income (Repealed)
(Repealed by Department of State Revenue; filed Sep 6, 2017, 2:19 p.m.: 20171004-IR-045160569FRA)
45 IAC 3.1-1-6 45 IAC 3.1-1-6 Net operating loss deduction for individuals (Repealed)
45 IAC 3.1-1-6 Net operating loss deduction for individuals (Repealed)
(Repealed by Department of State Revenue; filed Sep 6, 2017, 2:19 p.m.: 20171004-IR-045160569FRA)
45 IAC 3.1-1-7 45 IAC 3.1-1-7 Allocation of income among states; reciprocity
45 IAC 3.1-1-7 Allocation of income among states; reciprocity
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3-1-17; IC 6-3-2-2; IC 6-3-2-3.5; IC 6-3-5-1
Sec. 7. Allocation and Apportionment of Unearned Income for Individuals. (1) Interest, dividends, except earnings from Subchapter S corporations, rents and royalties are generally taxed by the state of legal residence.
(2) Income from a pension, annuity, profit-sharing, or stock-option plan that meets the qualifications of the Internal Revenue Code is taxed by the state of legal residence. Lump sum distributions from qualified plans are taxed by the state which, at the time of the distribution, is the taxpayer's legal residence. Whether a plan meets the qualifications of the Internal Revenue Code is determined by the Internal Revenue Service.
(3) Deferred compensation, other than that from a qualified retirement plan as described above, is directly attributable to services performed, and is taxed by the state where the services were performed.
(4) Accumulated vacation, bonus, serverance [sic.] and sick pay is directly attributable to services performed and is taxed by the state where the services were performed.
(5) Taxpayers with income attributable to services performed in the past (3 & 4 [subsections 3 and 4 of this section] above), who performed those services in more than one state, must report this income for Indiana tax purposes if Indiana was the last state in which the taxpayer was employed prior to retirement.
(6) Indiana residents with income from partnerships and Subchapter S corporations are subject to Adjusted Gross Income Tax on their distributive share of partnership or corporate income. Nonresidents with income from partnerships and Subchapter S corporations doing business in the state are also subject to Adjusted Gross Income Tax on their distributive shares of income. However, such income is apportioned to this state using the 3-factor formula outlined in IC 6-3-2-2(b) if the partnership or Subchapter S corporation is doing business both within and without the state.
(7) Taxpayers with any of the types of income outlined in this regulation [45 IAC 3.1-1-7] who are taxed on such income by both Indiana and another state may be allowed a credit against their Indiana Adjusted Gross Income Tax liability for taxes paid to the other state. Such creidt [sic.] will be given only if the taxpayer meets the requirements of Regulations 6-3-3-3(a)(010) [45 IAC 3.1-1-74] or 6-3-3-3(b)(010) [45 IAC 3.1-1-77] .
(8) Reciprocity will apply in the usual manner to deferred compensation that consists of wages. [See Regulation 6-3-5-1(010) [45 IAC 3.1-1-115] .] All income other than wages such as pension, annuity, profit-sharing, and stock-option income is not covered by reciprocal agreements with other states.
(Department of State Revenue; Reg 6-3-1-3.5(a)(070); filed Oct 15, 1979, 11:15 am: 2 IR 1516; errata, 2 IR 1743)
45 IAC 3.1-1-8 45 IAC 3.1-1-8 Definition of adjusted gross income for corporations (Repealed)
45 IAC 3.1-1-8 Definition of adjusted gross income for corporations (Repealed)
(Repealed by Department of State Revenue; filed Sep 6, 2017, 2:19 p.m.: 20171004-IR-045160569FRA)
45 IAC 3.1-1-9 45 IAC 3.1-1-9 Allowance of corporate net operating loss; modifications (Repealed)
45 IAC 3.1-1-9 Allowance of corporate net operating loss; modifications (Repealed)
(Repealed by Department of State Revenue; filed Sep 6, 2017, 2:19 p.m.: 20171004-IR-045160569FRA)
45 IAC 3.1-1-10 45 IAC 3.1-1-10 Definition of adjusted gross income for fiduciaries (Repealed)
45 IAC 3.1-1-10 Definition of adjusted gross income for fiduciaries (Repealed)
(Repealed by Department of State Revenue; filed Sep 6, 2017, 2:19 p.m.: 20171004-IR-045160569FRA)
45 IAC 3.1-1-11 45 IAC 3.1-1-11 Exemptions for trusts and estates (Repealed)
45 IAC 3.1-1-11 Exemptions for trusts and estates (Repealed)
(Repealed by Department of State Revenue; filed Sep 6, 2017, 2:19 p.m.: 20171004-IR-045160569FRA)
45 IAC 3.1-1-12 45 IAC 3.1-1-12 Resident and nonresident trusts and estates
45 IAC 3.1-1-12 Resident and nonresident trusts and estates
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 12. Determination of Indiana Taxable Adjusted Gross Income for Fiduciaries. For purposes of the taxes imposed upon the income of estates or trusts and paid by the fiduciary thereof, estates and trusts are classified as either resident or nonresident. The residence of an estate or trust is the place where it is administered.
Resident estates or trusts are taxable on all income regardless of where earned. Deductions are limited to those deductions taken and allowable on the Federal Fiduciary Return, Form 1041.
Nonresident estates and trusts are taxable in Indiana on all income derived from Indiana sources. Income derived from sources within Indiana is divided into business and nonbusiness income.
(A) Business income is income derived from transactions in the regular course of the taxpayer's trade or business, including income from intangibles where intangibles are an integral part of that business. Business income from a business located in Indiana would be included as income for a nonresident estate or trust. Such income would include rents or leases from property located in Indiana.
(B) Nonbusiness income would include all other income other than business income. Such income shall be considered as derived from sources within Indiana if the property from which the income is derived has a situs in Indiana, and the property does not have a situs in any other state and the taxpayer has a commercial domicile in Indiana, or in the case of patent, or copyright royalties, the patent or trademark is either utilized in Indiana or utilized in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile is in Indiana.
(Department of State Revenue; Reg 6-3-1-3.5(c)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1518; errata, 2 IR 1743)
45 IAC 3.1-1-13 45 IAC 3.1-1-13 Deduction for distribution from estate or trust
45 IAC 3.1-1-13 Deduction for distribution from estate or trust
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 13. Distribution Deduction of Distributable Net Income from A Fiduciary. A deduction for the distribution of net income is allowed for Indiana adjusted gross income tax purposes in the same manner as provided under section 651 and 661 of the Federal Internal Revenue Code. In the case of a "simple trust," the trustee is required to distribute all of its income currently, whether or not he actually does so. The distribution deduction is mandatory.
The distribution deduction as described in section 651 and 661 of the Internal Revenue Code is defined to mean that portion of the distributable net income required to be distributed to the beneficiaries.
When an estate or trust is to be closed, or is required to distribute current income during the taxable year and there is distributable net income, the distribution deduction must be taken and the distributable net income allocated to the beneficiary's Individual Adjusted Gross Income Tax Return, Form IT-40.
(Department of State Revenue; Reg. 6-3-1-3.5(c)(040); filed Oct 15, 1979, 11:15 am: 2 IR 1519; errata, 2 IR 1743)
45 IAC 3.1-1-14 45 IAC 3.1-1-14 Report of distribution; allocation by nonresident estate or trust
45 IAC 3.1-1-14 Report of distribution; allocation by nonresident estate or trust
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3-2-2
Sec. 14. Allocation of Distributable Net Income Distributed to Beneficiaries. If an estate or trust must use the distribution deduction, then such estate or trust must complete the supplemental schedule of Form IT-41 (Schedule B).
The fiduciary will allocate the distributable net income to the beneficiaries and will show the character of the distributable net income required to be distributed.
If there is a distribution of distributable net income, the fiduciary will give the names, addresses and social security numbers of the beneficiaries.
The fiduciary will also show the amount of income required to be distributed by reason of a trust instrument.
Nonresident trusts and estates operating businesses in Indiana will allocate and apportion their income using the 3-factor formula outlined in IC 6-3-2-2(b).
(Department of State Revenue; Reg 6-3-1-3.5(c)(050); filed Oct 15, 1979, 11:15 am: 2 IR 1519; errata, 2 IR 1743)
45 IAC 3.1-1-15 45 IAC 3.1-1-15 Application of excess deductions of estate or trust
45 IAC 3.1-1-15 Application of excess deductions of estate or trust
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 15. Allocation of Excess Deductions. After the fiduciary of a trust or an estate in the year of termination has applied the allowable deductions against the income to which the deductions were directly attributable, he may apply the excess of such deductions against any item of gross income subject to the following limitations.
Deductions allocable to tax exempt income must be used only against tax exempt income. Any excess of such allocated deductions cannot be used to offset taxable income. Therefore, deductions allocable to tax exempt income will not be taken on Form IT-41.
Excess deductions other than deductions from business income, cannot be extended to the beneficiary in the year of termination since these deductions are itemized deductions for Federal tax purposes and not allowable when filing the Individual Income Tax Return.
(Department of State Revenue; Reg 6-3-1-3.5(c)(060); filed Oct 15, 1979, 11:15 am: 2 IR 1519; errata, 2 IR 1743)
45 IAC 3.1-1-16 45 IAC 3.1-1-16 Final account and certificate of clearance of fiduciary
45 IAC 3.1-1-16 Final account and certificate of clearance of fiduciary
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 16. Certificate of Clearance. A fiduciary entity opened before June 30, 1963, must file with the Fiduciary Section of the Indiana Department of Revenue a final accounting, showing proof of payments prior to July 1, 1963, and a Form IT-41 tax return, in order to receive a certificate of clearance.
If a fiduciary entity is opened after June 30, 1963, the fiduciary will not receive a certificate of clearance and will not submit to the Department a final accounting. However, the fiduciary shall allege in his final accounting that "an adjusted gross income tax return has been properly filed."
If the fiduciary was subject to a tax, then he should allege in his final acccounting [sic.] that "any and all taxes due or assessable by the Income Tax Division of the Indiana Department of Revenue against the fiduciary has been paid."
(Department of State Revenue; Reg 6-3-1-3.5(c)(070); filed Oct 15, 1979, 11:15 am: 2 IR 1519; errata, 2 IR 1743)
45 IAC 3.1-1-17 45 IAC 3.1-1-17 Net operating losses and capital losses for fiduciaries and beneficiaries
45 IAC 3.1-1-17 Net operating losses and capital losses for fiduciaries and beneficiaries
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 17. Net Operating Losses and Capital Losses for Fiduciaries. For Adjusted Gross Income Tax purposes, fiduciaries and beneficiaries may use the same carryback and carryforward provisions for net operating losses and capital losses as provided in the Internal Revenue Code subject to the applicable modifications of the Indiana Adjusted Gross Income Tax Act.
(Department of State Revenue; Reg 16-3-1-3.5(c)(080); filed Oct 15, 1979, 11:15 am: 2 IR 1520; errata, 2 IR 1743)
45 IAC 3.1-1-18 45 IAC 3.1-1-18 Charitable contributions of trust estate; exempt trusts
45 IAC 3.1-1-18 Charitable contributions of trust estate; exempt trusts
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5
Sec. 18. Charitable Contribution Deduction. The fiduciary shall be allowed to deduct without limitation any amount of the gross income of the estate or trust which by the terms of the will or instrument creating the trust, is required to be paid or permanently set aside during the taxable year for a purpose specified in section 170(c) of the Internal Revenue Code, or is to be used exclusively for religious, charitable, scientific, literary or educational purposes, or for the prevention of cruelty to children or animals, or for the establishment, acquisition, maintenance or operation of a public cemetery not operated for profit.
In the case of a trust, the charitable contribution deduction will be subject to the limitations of section 681 of the Internal Revenue Code.
Trusts which are exempt from Federal income tax under section 501 of the Internal Revenue Code are also exempt from taxation under the Indiana Adjusted Gross Income Tax Act.
(Department of State Revenue; Reg 6-3-1-3.5(c)(090); filed Oct 15, 1979, 11:15 am: 2 IR 1520; errata, 2 IR 1743)
45 IAC 3.1-1-19 45 IAC 3.1-1-19 Definition of gross income
45 IAC 3.1-1-19 Definition of gross income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-8
Sec. 19. "Gross Income" Defined. "Gross income" for Adjusted Gross Income Tax purposes is gross income as defined in Internal Revenue Code § 61. See Regulation 6-3-1-3.5(a)(020) [45 IAC 3.1-1-2] .
(Department of State Revenue; Reg 6-3-1-8(010); filed Oct 15, 1979, 11:15 am: 2 IR 1520; errata, 2 IR 1743)
45 IAC 3.1-1-20 45 IAC 3.1-1-20 Definition of corporation
45 IAC 3.1-1-20 Definition of corporation
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-10
Sec. 20. "Corporation" Defined. The term "corporation" is used in the Act in a general sense and includes any form of businesss [sic.] association whose characteristics more nearly resemble those of a corporation than those of a trust or partnership, including corporations, partnerships with corporate members, associations, joint stock companies, real estate investment trusts, not-for-profit associations, business trusts and Massachusetts trusts. Proprietorships or partnerships formerly taxable under Internal Revenue Code § 1361 are now taxed as individuals. Internal Revenue Code § 1361 was repealed in 1969; thus proprietorships and partnerships taxable under this subsection are no longer included within the definition of "corporation."
Any receiver, trustee, conservator, liquidator, or other fiduciary controlling any of the above is also a "corporation" under the Act.
(Department of State Revenue; Reg 6-3-1-10(010); filed Oct 15, 1979, 11:15 am: 2 IR 1520; errata, 2 IR 1743)
45 IAC 3.1-1-21 45 IAC 3.1-1-21 Definition of resident
45 IAC 3.1-1-21 Definition of resident
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-12
Sec. 21. "Resident" Defined. An Indiana resident is:
(a) Any individual who was domiciled in Indiana during the taxable year, or
(b) Any individual who maintains a permanent place of residence in this state and spends more than 183 days of the taxable year within this state; or
(c) Any estate of a deceased person defined in (a) or (b) [subsections (a) or (b) of this section] , or
(d) Any trust which has a situs within this state.
(Department of State Revenue; Reg 6-3-1-12(010); filed Oct 15, 1979, 11:15 am: 2 IR 1520; errata, 2 IR 1743)
45 IAC 3.1-1-21.5 45 IAC 3.1-1-21.5 "Permanent place of residence" defined
45 IAC 3.1-1-21.5 "Permanent place of residence" defined
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-12
Sec. 21.5. (a) "Permanent place of residence" means a building or structure where a person can live that:
(1) the person maintains, whether the individual owns it or not; and
(2) is suitable for year-round use.
(b) A residence maintained by a person primarily for the purpose of obtaining an educational degree is not a permanent place of residence.
(c) If a person is under a guardianship or conservatorship, the individual maintains a permanent place of residence in Indiana if he or she satisfies the criteria of subsections (a) and (b) as a result of the guardian or conservator's acts.
(Department of State Revenue; 45 IAC 3.1-1-21.5; filed Jun 6, 2017, 10:33 a.m.: 20170705-IR-045160497FRA; readopted filed Oct 20, 2023, 11:13 a.m.: 20231115-IR-045230658RFA)
45 IAC 3.1-1-22 45 IAC 3.1-1-22 "Domicile" defined
45 IAC 3.1-1-22 "Domicile" defined
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-12
Sec. 22. (a) "Domicile" means a person's domicile is the state or other place in which a person intends to reside permanently or indefinitely and to return to whenever he or she leaves the place. A person has only one (1) domicile at a given time even though that person may be statutorily a resident of more than one (1) state. A person is domiciled in Indiana if he or she intends to reside in Indiana permanently or indefinitely and to return to Indiana whenever he or she leaves the state.
(b) A person is domiciled in a state or other place until such time as he or she voluntarily takes affirmative action to become domiciled in another place. Once a person is domiciled in Indiana, that status is retained until such time as he or she voluntarily takes positive action to become domiciled in another state or country and abandons the Indiana domicile by relinquishing the rights and privileges of residency in Indiana.
(c) In order to establish a new domicile, the person must be physically present at a place, and must have the simultaneous intent of establishing a permanent place of residence at that place. The intent to change one's domicile must be present and fixed and not dependent upon the happening of some future or contingent event. It is not necessary that the person intend to remain there until death; however, if the person, at the time of moving to the new location, has definite plans to leave that new location, then no new domicile has been established.
(d) There is no one (1) set of standards that will accurately indicate the person's intent in every relocation. The determination must be made on the totality of facts, supported by objective evidence, in each individual case.
(Department of State Revenue; Reg 6-3-1-12(020); filed Oct 15, 1979, 11:15 a.m.: 2 IR 1520; errata, 2 IR 1743; filed Jun 6, 2017, 10:33 a.m.: 20170705-IR-045160497FRA; readopted filed Oct 20, 2023, 11:13 a.m.: 20231115-IR-045230658RFA)
45 IAC 3.1-1-22.5 45 IAC 3.1-1-22.5 Determination of domicile
45 IAC 3.1-1-22.5 Determination of domicile
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-12
Sec. 22.5. (a) The department may require documentation from a person to evaluate domicile.
(b) The one hundred eighty-three (183) day and permanent place of residence threshold in IC 6-3-1-12(b) and section 21 of this rule is not a test for domicile.
(c) A person is presumed not to have abandoned their state of domicile and established a new state or other place of domicile in a given year if, during that year, the person maintained a permanent place of residence (whether as an owner, renter, or other occupier of the residence) in that state and the person did more than one (1) of the following:
(1) Claimed a homestead credit or exemption or a military tax exemption on a home in that state.
(2) Voted in that state.
(3) Occupied a permanent place of residence in that state or other place of domicile for more days of the taxable year than in any other single state.
(4) Claimed a benefit on the federal income tax return based upon that state being the principal place of residence.
(5) Had a place of employment or business in that state.
A person may rebut this presumption through the presentation of substantial contrary evidence.
(d) If a person's domicile is not resolved by subsection (c), the department may consider additional relevant factors to determine the person's state or other place of domicile, including the state or other place where the person:
(1) maintained a driver's license or government issued identification card;
(2) was registered to vote;
(3) registered a vehicle;
(4) claimed as dependents immediate family members who relied, in whole or in part, on the taxpayer for their support;
(5) assigned or maintained a mailing address;
(6) maintained bank accounts;
(7) maintained active membership in a religious, social, cultural, or professional organization;
(8) received professional services; and
(9) kept valuables or family heirlooms.
This list of additional, relevant factors is not exclusive.
(Department of State Revenue; 45 IAC 3.1-1-22.5; filed Jun 6, 2017, 10:33 a.m.: 20170705-IR-045160497FRA; readopted filed Oct 20, 2023, 11:13 a.m.: 20231115-IR-045230658RFA)
45 IAC 3.1-1-23 45 IAC 3.1-1-23 Special cases of residency
45 IAC 3.1-1-23 Special cases of residency
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-12
Sec. 23. Residency As It Affects Tax Liability. (1) Taxpayer Moving to Indiana
When a taxpayer moves to Indiana and becomes a resident and/or domiciliary of Indiana during the taxable year, Indiana will not tax income from sources outside Indiana which the taxpayer received prior to becoming an Indiana domiciliary. Indiana will, however, assess adjusted gross income tax on all taxable income after the taxpayer becomes an Indiana resident.
(2) Taxpayer Moving from Indiana
Any person who, on or before the last day of the taxable year, changes his residence or domicile from Indiana to a place without Indiana, with the intent of abiding permanently without Indiana, is subject to adjusted gross income tax on all taxable income earned while an Indiana resident. Indiana will not tax income of a taxpayer who moves from Indiana and becomes an actual domiciliary of another state or country except that income received from Indiana sources will continue to be taxable.
(3) Nonresident Citizens
An individual from Indiana who is permitted to file Federal income tax returns as a nonresident citizen is considered as being domiciled in Indiana and his income taxable as a resident citizen, if he maintains a place of abode in Indiana immediately prior to residing in a foreign country as a nonresident citizen of the United States, and has not permanently established his domicile in a foreign country or in another state.
The fact that ordinary rights of citizenship, including voting at public elections are present but not exercised, shall not prevent a person from being classified as a resident if he meets the other tests set out in this regulation [45 IAC 3.1-1-23] .
(4) Part-Time Resident Individuals
Persons residing in Indiana but living part of the year in other states or countries will be deemed residents of Indiana unless it can be shown that the abode in the other state or country is of a permanent nature. Domicile is not changed by removal therefrom for a definite period or for a particular purpose. A domicile, once obtained, continues until a new one is acquired.
(5) Military personnel
Indiana residents who become members of the military service remain Indiana residents regardless of their geographical assignments. Military members can change their legal residence only by filing DD Form 2058, State of Legal Residence Certificate.
(Department of State Revenue; Reg 6-3-1-12(030); filed Oct 15, 1979, 11:15 am: 2 IR 1520; errata, 2 IR 1743)
45 IAC 3.1-1-24 45 IAC 3.1-1-24 Definition of nonresident
45 IAC 3.1-1-24 Definition of nonresident
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-13
Sec. 24. "Nonresident" Defined. A nonresident of Indiana is any individual, estate, trust, or other entity not included in the definition of "Resident" given in Regulation 6-3-1-12(010) [45 IAC 3.1-1-21] .
(Department of State Revenue; Reg 6-3-1-13(010); filed Oct 15, 1979, 11:15 am: 2 IR 1521; errata, 2 IR 1743)
45 IAC 3.1-1-25 45 IAC 3.1-1-25 Tax liability of nonresident
45 IAC 3.1-1-25 Tax liability of nonresident
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-13; IC 6-3-2-2
Sec. 25. Nonresident's Indiana Adjusted Gross Income Tax Liability. All persons who are not residents of Indiana are required to report that portion of their entire income directly or constructively from or attributable to business, activities or any other source within Indiana, with the exception of nonresident members of the armed forces receiving compensation for military duty in Indiana. These latter persons will not be subject to the adjusted gross income tax on their military pay. A nonresident must include on his tax return all gross income received from a business, activities or any other source in Indiana whether taxable or not. In order to avail himself of the deduction of non-taxable income, the nonresident must first include the non-taxable portion of his income in the total gross income figure.
In order to qualify as a nonresident, the taxpayer shall submit proof, upon demand by the department, of having indicated his bona fide intention to reside permanently elsewhere before the last day of the taxable year.
Such person changing his domicile during a taxable year may also be required to furnish evidence of compliance with the requirements of the other state with respect to taxation and the qualification as a resident citizen thereof.
(Department of State Revenue; Reg 6-3-1-13(020); filed Oct 15, 1979, 11:15 am: 2 IR 1521; errata, 2 IR 1743)
45 IAC 3.1-1-26 45 IAC 3.1-1-26 Definition of person
45 IAC 3.1-1-26 Definition of person
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-14
Sec. 26. "Person" Defined. Statutory definition of "person" is used synonymously with the Act.
(Department of State Revenue; Reg 6-3-1-14(010); filed Oct 15, 1979, 11:15 am: 2 IR 1521; errata, 2 IR 1743)
45 IAC 3.1-1-27 45 IAC 3.1-1-27 Definition of taxpayer
45 IAC 3.1-1-27 Definition of taxpayer
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-15
Sec. 27. "Taypayer" [sic.] Defined. The term "taxpayer" means any person or corporation subject to taxation under these Regulations [45 IAC] .
(Department of State Revenue; Reg 6-3-1-15(010); filed Oct 15, 1979, 11:15 am: 2 IR 1521; errata, 2 IR 1743)
45 IAC 3.1-1-28 45 IAC 3.1-1-28 Taxable year
45 IAC 3.1-1-28 Taxable year
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-16
Sec. 28. "Taxable Year" Defined. The term "taxable year" means the taxable year of the taxpayer as shown on the return required to be filed or filed pursuant to the Internal Revenue Code. When the Internal Revenue Code requires no return to be filed, the taxable year will be the calendar year.
(Department of State Revenue; Reg 6-3-1-16(010); filed Oct 15, 1979, 11:15 am: 2 IR 1521; errata, 2 IR 1743)
45 IAC 3.1-1-29 45 IAC 3.1-1-29 Definition of business income
45 IAC 3.1-1-29 Definition of business income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-20
Sec. 29. "Business Income" Defined. "Business Income" is defined in the Act as income from transactions and activity in the regular course of the taxpayer's trade or business, including income from tangible and intangible property if the acquisition, management, or disposition of the property are integral parts of the taxpayer's regular trade or business.
Nonbusiness income means all income other than business income.
The classification of income by the labels occasionally used, such as manufacturing income, compensation for services, sales income, interest, dividends, rents, royalties, gains, operating income, non-operating income, etc., is of no aid in determining whether income is business or nonbusiness income. Income of any type or class and from any source is business income if it arises from transactions and activity occurring in the regular course of a trade or business. Accordingly, the critical element in determining whether income is "business income" or "nonbusiness income" is the identification of the transactions and activity which are the elements of a particular trade or business.
(Department of State Revenue; Reg 6-3-1-20(010); filed Oct 15, 1979, 11:15 am: 2 IR 1521; errata, 2 IR 1743)
45 IAC 3.1-1-30 45 IAC 3.1-1-30 Trade or business construed
45 IAC 3.1-1-30 Trade or business construed
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-20
Sec. 30. Whether An Activity Is A "Trade or Business". For purposes of determining whether income is derived from an activity which is in the regular course of the taxpayer's trade or business, the expression "trade or business" is not limited to the taxpayer's corporate charter purpose of its principal business activity. A taxpayer may be in more than one trade or business and derive business therefrom depending upon but not limited to some or all of the following:
(1) The nature of the taxpayer's trade or business.
(2) The substantiality of the income derived from activities and transactions and the percentage that income is of the taxpayer's total income for a given tax period.
(3) The frequency, number, or continuity of the activities and transactions involved.
(4) The length of time the property producing income was owned by the taxpayer.
(5) The taxpayer's purpose in acquiring and holding the property producing income.
(Department of State Revenue; Reg 6-3-1-20(020); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-31 45 IAC 3.1-1-31 Definition of nonbusiness income
45 IAC 3.1-1-31 Definition of nonbusiness income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-21
Sec. 31. "Nonbusiness Income" Defined. Statutory definition of "nonbusiness income" is used synonymously with the Act.
(Department of State Revenue; Reg 6-3-1-21(010); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-32 45 IAC 3.1-1-32 Definition of commercial domicile
45 IAC 3.1-1-32 Definition of commercial domicile
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-22
Sec. 32. "Commercial Domicile" Defined. The term "commercial domicile" is defined in the Act as "the principal place from which the trade or business of the taxpayer is directed or managed." Commercial domicile is not necessarily in the state of incorporation. A corporation that is incorporated in a state, but that has little or no activity in that state, has not established a commercial domicile there.
Each corporation has one, and only one, commercial domicile. Generally, it is where the executive authority of the business is concentrated. However, if such authority is not centralized in one state, then the commercial domicile is the place where the majority of the corporation's daily operational decisions are made. There are several factors to be considered in determining the commercial domicile of a corporation. These factors include, but are not limited to:
(a) The relative amount of revenue from sales in the various states
(b) The relative value of fixed assets in the various states
(c) The principal place of work of a majority of the employees
(d) The place where the corporate records are kept
(e) The principal place of work of the corporate executives
(f) The place where policy and investment decisions are made
(g) The relative amount of decision-making power held by various executives and employees
(h) The place where payments are made on intangibles held by the corporation
(i) Whether income from intangibles held by the corporation is taxable elsewhere
(j) The office from which the Federal income tax return is filed
(k) Information contained in the corporation's annual and quarterly reports
(l) The place where the board of directors meets.
(Department of State Revenue; Reg 6-3-1-22(010); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-33 45 IAC 3.1-1-33 Definition of compensation
45 IAC 3.1-1-33 Definition of compensation
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-23
Sec. 33. "Compensation" Defined. The term "compensation" is used synonymously with the Act.
(Department of State Revenue; Reg 6-3-1-23(010); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-34 45 IAC 3.1-1-34 Definition of sales
45 IAC 3.1-1-34 Definition of sales
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-23; IC 6-3-1-24; IC 6-3-2-2
Sec. 34. "Sales" Defined. The term "sales" as used in the Act includes all gross receipts which are not subject to allocation under IC 6-3-2-2 (g)–(k), and which are not the compensation of an employee for personal services [See IC 6-3-1-23] . Thus any business income of a corporate taxpayer is considered to be from "sales" under this definition, regardless of its actual source.
(Department of State Revenue; Reg 6-3-1-24(010); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-35 45 IAC 3.1-1-35 Definition of state
45 IAC 3.1-1-35 Definition of state
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-25
Sec. 35. "State" Defined. The term "state" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.
(Department of State Revenue; Reg 6-3-1-25(010); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-36 45 IAC 3.1-1-36 Tax rates
45 IAC 3.1-1-36 Tax rates
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-1
Sec. 36. Imposition of Tax. The rate of adjusted gross income tax for individuals is 2%. The rate of adjusted gross income tax for corporations is 3%.
(Department of State Revenue; Reg 6-3-2-1(010); filed Oct 15, 1979, 11:15 am: 2 IR 1522; errata, 2 IR 1743)
45 IAC 3.1-1-37 45 IAC 3.1-1-37 Allocation and apportionment of income of multistate corporations
45 IAC 3.1-1-37 Allocation and apportionment of income of multistate corporations
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3-2-2
Sec. 37. Division of Income in General. Corporations doing business both within and without Indiana shall determine their income from Indiana sources through the use of the allocation and apportionment provisions contained in IC 6-3-2-2(b)-(n), which generally follow the Uniform Division of Income For Tax Purposes Act. The multistate corporation must first determine what part of its adjusted gross income constitutes business income [See Regulation 6-3-1-20(010) [45 IAC 3.1-1-29] ] and what part is nonbusiness income. Business income is apportioned to this state based on the 3-factor (or other approved) formula. Nonbusiness income is allocated to specific jurisdictions pursuant to paragraphs (g)-(k) of IC 6-3-2-2. Business income apportioned to this state plus nonbusiness income allocated to Indiana plus the modifications required by IC 6-3-1-3.5(b) gives the total of the taxpayer's net income which is subject to adjusted gross income tax. As used above, the word "apportionment" refers to the division of income between states by use of the 3-factor (or other approved) formula; "allocation" means the assignment of income to a particular jurisdiction.
(Department of State Revenue; Reg 6-3-2-2(b)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1523; errata, 2 IR 1743)
45 IAC 3.1-1-38 45 IAC 3.1-1-38 Definition of doing business
45 IAC 3.1-1-38 Definition of doing business
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 38. Doing Business. For apportionment purposes, a taxpayer is "doing business" in a state if it operates a business enterprise or activity in such state including, but not limited to:
(1) Maintenance of an office or other place of business in the state
(2) Maintenance of an inventory of merchandise or material for sale distribution, or manufacture, or consigned goods
(3) Sale or distribution of merchandise to customers in the state directly from company-owned or operated vehicles where title to the goods passes at the time of sale or distribution
(4) Rendering services to customers in the state
(5) Ownership, rental or operation of a business or of property (real or personal) in the state
(6) Acceptance of orders in the state
(7) Any other act in such state which exceeds the mere solicitation of orders so as to give the state nexus under P.L.86-272 to tax its net income.
As stated in Regulation 6-3-2-2(b)(010) [45 IAC 3.1-1-37] , corporations doing business in Indiana as well as other states are subject to the allocation and apportionment provisions of IC 6-3-2-2(b)-(n).
(Department of State Revenue; Reg 6-3-2-2(b)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1523; errata, 2 IR 1743)
45 IAC 3.1-1-39 45 IAC 3.1-1-39 Apportionment of business income by corporations
45 IAC 3.1-1-39 Apportionment of business income by corporations
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 39. Apportionment of Business Income. All corporations subject to the allocation and apportionment provisions of IC 6-3-2-2(b)-(n) shall apportion their business income by use of the 3-factor formula described below, unless the taxpayer obtains a ruling which permits, or the Department requires, the use of a different formula which more fairly reflects its income from Indiana sources. See IC 6-3-2-2(1). The 3-factor formula is as follows:
(Department of State Revenue; Reg 6-3-2-2(b)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1523; errata, 2 IR 1743)
45 IAC 3.1-1-40 45 IAC 3.1-1-40 Property factor for apportionment (Repealed)
45 IAC 3.1-1-40 Property factor for apportionment (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-41 45 IAC 3.1-1-41 Property included in property factor (Repealed)
45 IAC 3.1-1-41 Property included in property factor (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-42 45 IAC 3.1-1-42 Consistency among reports
45 IAC 3.1-1-42 Consistency among reports
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 42. Consistency in Reporting. In filing returns with this state, the taxpayer's valuation and treatment of property as business or nonbusiness property must be consistent from year to year. It must also be consistent with the taxpayer's treatment of such property for purposes of returns filed with other states having apportionment statutes and regulations substantially similar to Indiana's. If the taxpayer's Indiana returns are not consistent in these respects, the returns should disclose the nature and extent of the inconsistency.
(Department of State Revenue; Reg 6-3-2-2(c)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1524; errata, 2 IR 1743)
45 IAC 3.1-1-43 45 IAC 3.1-1-43 Numerator of property factor (Repealed)
45 IAC 3.1-1-43 Numerator of property factor (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-44 45 IAC 3.1-1-44 Valuation of owned property (Repealed)
45 IAC 3.1-1-44 Valuation of owned property (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-45 45 IAC 3.1-1-45 Valuation of rented property (Repealed)
45 IAC 3.1-1-45 Valuation of rented property (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-46 45 IAC 3.1-1-46 Methods of averaging property values (Repealed)
45 IAC 3.1-1-46 Methods of averaging property values (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-47 45 IAC 3.1-1-47 Payroll factor for apportionment (Repealed)
45 IAC 3.1-1-47 Payroll factor for apportionment (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-48 45 IAC 3.1-1-48 Denominator of payroll factor (Repealed)
45 IAC 3.1-1-48 Denominator of payroll factor (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-49 45 IAC 3.1-1-49 Numerator of payroll factor (Repealed)
45 IAC 3.1-1-49 Numerator of payroll factor (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-50 45 IAC 3.1-1-50 Sales factor for apportionment; sales defined
45 IAC 3.1-1-50 Sales factor for apportionment; sales defined
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 50. Sales Factor–Sales Made in General Business Operations. "Sales" means all gross receipts of the taxpayer which are not subject to allocation as nonbusiness income. The following are examples of "sales" in various situations:
(1) If the taxpayer's business activity consists of manufacturing and selling or purchasing and reselling goods or products, "sales" includes all gross receipts from the sales of such goods or products (or other property which would be included as inventory of the taxpayer if on hand at the close of the tax year) held by the taxpayer primarily for sale in the ordinary course of business. Gross receipts for this purpose means gross sales price, less returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales. Federal and state excise taxes (including sales taxes) shall be included as part of such receipts and shall be in the sales factor only if such taxes are included in the gross receipts or gross sales as reported on the taxpayer's Federal returns.
(2) If the taxpayer's business activity consists of providing services, such as the operation of an advertising agency, or the performance of equipment service contracts or research and development contracts, "sales" includes the gross receipts from the performance of such services including fees, commissions and similar items.
(3) If the taxpayer is working under a cost plus fixed fee contract, such as the operation of a government owned plant for a fee, gross receipts includes the entire reimbursed cost plus the fee.
(4) If the taxpayer is in the business of renting real or tangible personal property, "sales" includes the gross receipts from the rental, lease, or licensing the use of the property.
(5) If the taxpayer is in the business of selling, assigning, or licensing of intangible personal property such as patents and copyrights, "sales" includes the gross receipts therefrom.
In some cases, certain gross receipts should be disregarded in determining the sales factor to effectuate an equitable apportionment. See Regulation 6-3-2-2(l)(010) [45 IAC 3.1-1-62] . The sales factor should be consistent in the manner described in Regulation 6-3-2-2(c)(030) [45 IAC 3.1-1-42] .
(Department of State Revenue; Reg 6-3-2-2(e)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1526; errata, 2 IR 1743)
45 IAC 3.1-1-51 45 IAC 3.1-1-51 Denominator of sales factor
45 IAC 3.1-1-51 Denominator of sales factor
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2; IC 6-3-4-14
Sec. 51. Denominator of Sales Factor. The denominator of the sales factor includes all gross receipts from the taxpayer's sales, except as noted in Regulation 6-3-2-2(l)(010) [45 IAC 3.1-1-62] . The denominator shall not include sales made between members of an affiliated group filing consolidated returns under IC 6-3-4-14.
(Department of State Revenue; Reg 6-3-2-2(e)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1527; errata, 2 IR 1743)
45 IAC 3.1-1-52 45 IAC 3.1-1-52 Numerator of sales factor
45 IAC 3.1-1-52 Numerator of sales factor
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2; IC 6-3-4-14
Sec. 52. Numerator of Sales Factor. The numerator of the sales factor generally includes gross receipts from sales attributable to this state, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales regardless of the place where the accounting records are maintained or the location of the contract or other evidence of indebtedness. The numerator shall not include sales between members of an affiliated group filing consolidated returns under IC 6-3-4-14.
(Department of State Revenue; Reg 6-3-2-2(e)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1527; errata, 2 IR 1743)
45 IAC 3.1-1-53 45 IAC 3.1-1-53 In-state sales of tangible personal property
45 IAC 3.1-1-53 In-state sales of tangible personal property
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 53. When Sales of Tangible Personal Property Are in This State. Gross receipts from the sales of tangible personal property (except sales to the United States Government–See Regulation 6-3-2-2(e)(050) [45 IAC 3.1-1-54] are in this state: (a) if the property is delivered or shipped to a purchaser within this state regardless of the F.O.B. point or other conditions of sales; or (b) if the property is shipped from an office, store, factory, or other place of storage in this state, and the taxpayer is not taxable in the state of the purchaser. See Regulation 6-3-2-2(n)(010) [45 IAC 3.1-1-64] .
Examples:
(1) Property shall be deemed to be delivered or shipped to a purchaser within this state if the recipient is located in this state, even though the property is ordered from outside this state. Example: The taxpayer, with inventory in State A sold $100,000 of its products to a purchaser having branch stores in several states including this state. The order for the purchase was placed by the purchaser's central purchasing department located in State B. $25,000 of the purchase order was shipped directly to the purchaser's branch store in this state. The branch store in this state is the "purchaser within this state" with respect to $25,000 of the taxpayer's sales.
(2) Property is delivered or shipped to a purchaser within this state if the shipment terminates in this state, even though the property is subsequently transferred by the purchaser to another state. Example: The taxpayer makes a sale to a purchaser who maintains a central warehouse in this state at which all merchandise purchases are received. The purchaser reships the goods to its branch offices in other states for sale. All of taxpayer's products shipped to the purchaser's warehouse in this state is property "delivered or shipped to a purchaser within this state."
(3) The term "purchaser within this state" shall include the ultimate recipient of the property if the taxpayer in this state, at the designation of the purchaser, delivers to or has the property shipped to the ultimate recipient within this state. Example: A taxpayer in Indiana sold merchandise to a purchaser in State A. The taxpayer directed the manufacturer or supplier of the merchandise in State B to ship the merchandise to the purchaser's customer in Indiana pursuant to the purchaser's instructions. The sale by the taxpayer is "in this state."
(4) When the property being shipped by a seller from the state of origin to a consignee in another state is diverted while enroute to a purchaser in this state, the sales are in this state. Example: The taxpayer, a produce grower in State A, begins shipment of perishable produce to the purchaser's place of business in State B. While enroute the produce is diverted to the purchaser's place of business in Indiana in which state the taxpayer is subject to tax. The sale by the taxpayer is attributed to Indiana.
(5) If the taxpayer is not taxable in the state of the purchaser, the sale is attributed to this state if the property is shipped from an office, store, warehouse, factory, or other place of storage in this state. Such sale is termed a "Throwback" sale. Example: The taxpayer has its head office and factory in State A. It maintains a branch office and inventory in Indiana. Taxpayer's only activity in State B is the solicitation of orders by a resident salesman. All orders by the State B salesman are sent to the branch office in Indiana for approval and are filled by shipment from the inventory in Indiana. Since the taxpayer is immune under P.L.86-272 from tax in State B, all sales of merchandise to purchasers in State B are attributed to Indiana, the state from which the merchandise was shipped.
(6) If a taxpayer whose salesman operated from an office located in Indiana makes a sale to a purchaser in another state in which the taxpayer is not taxable and the property is shipped directly by a third party to the purchaser, the sale will be attributed to the state from which the property is shipped if the taxpayer is taxable in that state. If the taxpayer is not taxable in the state from which the property is shipped, then the property will be deemed to have been shipped from Indiana and the sale is attributed to Indiana. Example: The taxpayer in Indiana sold merchandise to a purchaser in State A. Taxpayer is not taxable in State A. Upon direction of the taxpayer, the merchandise was shipped directly to the purchaser by the manufacturer in State B. If the taxpayer is taxable in State B, the merchandise is deemed to have been shipped from State B to the purchaser in State A. If the taxpayer is not taxable in State B, the merchandise is deemed to have been shipped from Indiana by the taxpayer to the purchaser in State A.
(7) Sales are not "in this state" if the purchaser picks up the goods at an out-of-state location and brings them back into Indiana in his own conveyance.
(Department of State Revenue; Reg 6-3-2-2(e)(040); filed Oct 15, 1979, 11:15 am: 2 IR 1527; errata, 2 IR 1743)
45 IAC 3.1-1-54 45 IAC 3.1-1-54 Definition of sales to United States government
45 IAC 3.1-1-54 Definition of sales to United States government
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 54. Sales to United States Government. Gross receipts from the sales of tangible personal property to the United States Government are in this state if the property is shipped from an office, store, warehouse, factory or other place of storage in this state. For the purposes of this regulation [45 IAC 3.1-1-54] , only sales for which the United States Government makes direct payment to the seller pursuant to the terms of the contract constitute sales to the United States Government. Thus, as a general rule, sales by a subcontractor to the prime contractor, the party to the contract with the United States Government, do not constitute sales to the United States Government. However, sales made to a prime contractor will be considered sales to the United States Government where the prime contractor is authorized to act as agent for the United States Government, and for this reason only qualifies to purchase under Federal Supply Contracts entered into between the taxpayer and the United States Government.
Examples:
(1) A taxpayer contracts with the General Services Administration to deliver X number of trucks which were paid for by the United States Government. The United States Government is the purchaser.
(2) The taxpayer as a subcontractor to a prime contractor with the National Aeronautics and Space Administration contracts to build a component of a rocket for $1,000,000. The sale of the subcontractor to the prime contractor is not a sale to the United States Government. When the United States Government is the purchaser of property which remains in the possession of the taxpayer in this state for further processing under another contract, or for other reasons, "shipment" is deemed to be made at the time of acceptance by the United States Government.
(Department of State Revenue; Reg 6-3-2-2(e)(050); filed Oct 15, 1979, 11:15 am: 2 IR 1528; errata, 2 IR 1743)
45 IAC 3.1-1-55 45 IAC 3.1-1-55 Attribution of sales to state (Repealed)
45 IAC 3.1-1-55 Attribution of sales to state (Repealed)
(Repealed by Department of State Revenue; filed Jan 29, 2025, 9:40 a.m.: 20250226-IR-045240432FRA)
45 IAC 3.1-1-55.5 45 IAC 3.1-1-55.5 Definitions; attribution of sales to state
45 IAC 3.1-1-55.5 Definitions; attribution of sales to state
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2; IC 6-3-2-2.2; IC 6-5.5-4-3; IC 6-5.5-4-13
Sec. 55.5. (a) The definitions in this section apply throughout this rule.
(b) "Airline rule" means the Special Rules: Airlines, adopted July 14, 1983, by the Multistate Tax Commission.
(c) "Construction contractor rule" means the Special Regulation: Construction Contractors, adopted July 10, 1980, by the Multistate Tax Commission.
(d) "MGAAR" means the Multistate Tax Commission Multistate General Allocation and Apportionment Regulations, adopted February 21, 1973, and as amended through February 24, 2017, including Section 18(c), adopted July 25, 2018.
(e) "Publishing rule" means the Special Rules: Publishing, adopted July 30, 1993, by the Multistate Tax Commission.
(f) "Railroad rule" means the Special Rules: Railroads, adopted July 16, 1981, by the Multistate Tax Commission.
(g) "Trucking rule" means the Special Rules: Trucking Companies, adopted July 11, 1986, by the Multistate Tax Commission and as amended July 27, 1989.
(h) The terms referenced in this rule have the same meaning as provided in MGAAR Reg. IV.17.(a)(3) unless the context specifically requires otherwise.
(i) If a provision of this rule lists multiple possible tests, the tests shall be applied as a hierarchy unless clearly indicated by the particular provision in this rule. The hierarchy is applied in the order by which the test is listed in the particular provision. For instance, subdivision (1) is the first test, and if subdivision (1) cannot result in a determination of a state, subdivision (2) is applied. However, if subdivision (4) states that subdivision (1) must be applied in a particular situation, the test in subdivision (2) is disregarded for that particular situation.
(j) The provisions of this rule do not apply to the following:
(1) Receipts from insurance premiums.
(2) Receipts from motorsports racing, including advertising that would otherwise be sourced under this rule.
(3) Receipts from repatriated foreign dividends under Section 965 of the Internal Revenue Code or global intangible low-taxed income under Section 951A of the Internal Revenue Code.
(4) Receipts from broadcast services.
(5) Receipts from telecommunications services.
(6) Receipts attributable under IC 6-3-2-2.2.
(k) A provision of MGAAR that requires the exclusion of a receipt from a service because the taxpayer is not taxable in a jurisdiction shall be disregarded. However, the disregard for a MGAAR provision does not prevent the exclusion of receipts if:
(1) the exclusion is specifically provided in IC 6-3; or
(2) the receipts cannot be sourced to a jurisdiction under this rule.
For purposes of this rule, if receipts can be attributed to any jurisdiction under this rule, but the taxpayer is not subject to tax in that jurisdiction, those receipts are treated as sourced to that jurisdiction.
(l) A receipt may be excluded from the receipts denominator only if and to the extent:
(1) exclusion of the receipt is explicitly provided under IC 6-3-2-2 or IC 6-3-2-2.2; or
(2) the jurisdiction to which the receipt can be attributed cannot be determined after applying the provisions set forth in this rule.
(m) A provision of MGAAR that requires a reasonable approximation in the absence of information, but provides a specific methodology for the reasonable approximation, shall be treated as if the specific methodology reflects the benefit of the intangible. However, if a substantial portion of the sales can be determined and the taxpayer or the department reasonably believes the remaining sales follow the same geographic distribution as the determinable sales, the taxpayer or the department may attribute those remaining receipts in the same proportion as the determinable sales.
(n) For a related party transaction, the information the customer has that is relevant to sourcing the receipts of the taxpayer is imputed to the taxpayer.
(o) For a sale, rental, lease, or license of real property, the receipts from the sale are in this state if and to the extent that the real property is in this state.
(p) For a rental, lease, or license of tangible personal property, the following conditions apply:
(1) Receipts from the sale are in this state if and to the extent that the property is in this state.
(2) If property is mobile property located both inside and outside this state during the lease or other contract period, the receipts attributable to this state are the receipts from the contract period multiplied by the ratio of the time the property is used in this state to the time the property is used everywhere.
(3) For purposes of this rule, property in transit between locations of the customer shall be considered to be at the destination of the property.
(4) Receipts from the rental, lease, or license of an automobile assigned to a traveling employee shall be included in the numerator of the factor of the state:
(A) to the extent to which the employee's compensation would be assigned under IC 6-3-2-2(c); or
(B) in the state where the automobile is licensed if clause (A) cannot be determined.
(q) For purposes of this subsection, "in-person services" means the services described in MGAAR Reg. IV.17.(d)(2)(A). However, the term does not include legal, accounting, financial, consulting, architectural, engineering, or similar services described in MGAAR Reg. IV.17.(d)(4). For purposes of determining where in-person services are sourced, the following apply:
(1) If a service is performed with respect to the body of an individual customer in this state (e.g., hair cutting or x-ray services) or in the physical presence of the customer in this state (e.g., live entertainment or athletic performances), the benefit of the service is received in the state where the service is performed. However, if the service is provided remotely, the following apply:
(A) If a service would be considered an in-person service, but is offered remotely as opposed to in person, the service is in this state if the person receiving the service is in this state. For purposes of determining whether a person is in this state, the taxpayer shall first make a reasonable effort to determine the state or states where the service is received. If the taxpayer cannot determine that state, the receipts shall be sourced to the state from which the service was provided.
(B) If a live entertainment event or athletic performance occurs in one (1) jurisdiction, but a ticket or other admissions price is paid to simulcast the event or performance at a location in this state, the ticket or admissions price is in this state. This does not apply to charges that would be considered broadcast services, such as pay-per-view charges.
(2) If a service is performed with respect to the customer's real estate in this state or if the service is performed with respect to the customer's tangible personal property at the customer's residence, or in the customer's possession in this state, the service is received in this state.
(3) If a service is performed with respect to the customer's tangible personal property and the tangible personal property is to be shipped or delivered to the customer, whether the service is performed within or outside this state, the service is received in this state if the property is shipped or delivered to the customer in this state.
(r) Services delivered to a customer by physical means shall be attributed to the extent the customer receives the benefit in Indiana, subject to the following conditions:
(1) For mail, parcel, or similar delivery services of an item, the benefit is determined by the state to which the underlying item is delivered.
(2) For services where an underlying product is to be delivered in one (1) or more states, the receipts from the services are attributable to this state in the proportion that the underlying product is apportioned to this state. This includes, but is not limited to, the following:
(A) Products delivered to or on behalf of the customer.
(B) Delivery of brochures, fliers, or other direct mail services.
(3) For advertising delivered by physical means, the benefit of the service is as follows:
(A) For billboard or fixed place advertising, where the billboard or fixed place is located.
(B) For advertising services by television, radio, Internet, or broadcast means, the receipts shall be sourced based on the intended audience. In the absence of actual information, the ratio can be determined based on the targeted population in this state to the targeted population in all states.
(C) For advertising by mail, parcel, or similar delivery means, the advertising shall be sourced based on the delivery address where the advertising is mailed.
(s) Services delivered to an individual customer by electronic transmission are sourced to Indiana if the customer receives the services in this state. In the absence of actual knowledge of the place of receipt, the taxpayer may source the receipts based on the customer's billing address.
(t) Services delivered to a business customer by electronic transmission shall be sourced to Indiana if and to the extent the employees or designees of the customer directly use the service in Indiana. If the taxpayer cannot determine the state or states where the service is used, the taxpayer shall use the following to determine sourcing:
(1) If the taxpayer knows where the contract is principally managed by the customer, the receipts shall be sourced to that state.
(2) If the taxpayer cannot determine the state as forth in subdivision (1), the taxpayer shall source the receipts to the state where the customer's order was placed.
(3) If the taxpayer cannot determine the state set forth in subdivision (1) or (2), the taxpayer shall source the receipts to the state of the customer's billing address.
(4) Notwithstanding subdivisions (2) and (3), if a taxpayer derives more than five percent (5%) of its receipts from the sale of services from any single customer and cannot reasonably determine where the service is used, the taxpayer shall source any receipts in accordance with subdivision (1).
(5) Notwithstanding subdivisions (1) through (3), if a taxpayer engages in substantially similar service transactions with more than two hundred fifty (250) customers and a particular customer does not meet the criteria described in subdivision (4), the taxpayer may source the receipts according to the billing address of the customer. However, the taxpayer may only use this attribution for receipts under this subdivision if:
(A) the taxpayer cannot determine the state where the service is used by the customer; and
(B) the taxpayer sources all receipts under this subdivision, other than those described in subdivision (4), or the taxpayer can determine the state where the service is used by the customer.
(6) If a sale under this subsection is made to a related party, the taxpayer shall source the receipts as provided in this subsection; however, if the taxpayer cannot determine the state or states where the service is used, the taxpayer shall attribute the receipts based on the related party's ratio of sales to Indiana to sales to all jurisdictions.
(u) For purposes of subsections (s) and (t), if the taxpayer cannot determine if a taxpayer is an individual or a business customer, the taxpayer shall treat the receipts as being attributable to a business customer.
(v) For services delivered electronically through or on behalf of an individual or a business customer, receipts are sourced to this state to the extent that the end users or other intended recipients of the services are in this state, subject to the following conditions:
(1) For purposes of this subsection, a service is delivered "on behalf of" a customer if:
(A) a customer contracts for electronic delivery of a service; and
(B) the recipient of the service is a third party.
(2) A service is delivered "through" a customer to third party recipients only if the service is delivered to the customer for purposes of resale in substantially identical form to end users or third party recipients.
(3) If a taxpayer selling advertising lacks specific information regarding the intended recipients in a particular state but has, or can reasonably obtain, a known list of subscribers for the advertising service, the taxpayer may use the total number of subscribers in a specific geographic area where the advertising is to be provided. In the absence of information regarding an intended audience or known subscribers, the ratio of the intended population in Indiana to the total population in the intended geographic area shall be used to determine the portion of receipts attributable to Indiana.
(w) For professional services provided to an individual customer, receipts from those services shall be sourced to the customer's state of primary residence, subject to the following conditions:
(1) If the taxpayer cannot reasonably identify the customer's state of primary residence, the taxpayer shall source the receipts to the customer's billing address.
(2) Notwithstanding subdivision (1), if a taxpayer receives more than five percent (5%) of its service receipts from an individual customer, the taxpayer shall identify the customer's state of primary residence and source the receipts to that location.
(x) For professional services provided to a business customer, receipts from those services are sourced as follows:
(1) For professional services provided with regard to real or tangible personal property, including, but not limited to, architectural and engineering services, the location of the real or tangible personal property.
(2) For other professional services, to the state from which the contract is principally managed.
(3) If the state in subdivision (2) cannot be determined, the state of the customer's place of order.
(4) If the state in subdivision (2) or (3) cannot be determined, the state of the customer's billing address.
(5) Notwithstanding subdivision (3) or (4), if a taxpayer receives at least five percent (5%) of its receipts from a customer, the taxpayer is required to identify the state where the contract of sale is principally managed by the customer.
(6) Notwithstanding any other provision of this subsection, for professional services provided to a related party, the portion of the taxpayer's services in Indiana must be in proportion to the related party's receipts from Indiana to the related party's receipts from all jurisdictions.
(y) For the license or lease of intangible property, receipts are attributable to this state to the extent the intangible is used in this state, subject to the following conditions:
(1) A license of intangible property that conveys all substantial rights in the intangible property shall be treated and sourced as a sale of intangible property as provided in subsection (z).
(2) Intangible property licensed as part of the sale or lease of tangible personal property shall be treated as the sale or lease of tangible personal property, and attributed in the same way as the associated tangible personal property.
(3) For a marketing intangible, the receipts from the marketing intangible are attributed as follows:
(A) If and to the extent that the taxpayer has actual evidence of the portion of the receipts attributable to this state, the receipts shall be attributed in that proportion.
(B) If the taxpayer does not have the information needed to determine the proportion under clause (A), the proportion shall be determined based on the proportion of the population in the geographic area in this state as compared to the population of the entire geographic area of the intended market.
(C) For the use of a marketing intangible regarding wholesale sales or transfers, the portion of the receipts attributable to this state shall be determined based on the geographic area where the product is ultimately marketed. The proportion is the population in the geographic area in this state as compared to the population of the entire geographic area.
(D) For purposes of this subdivision, a marketing intangible includes the license of the following:
(i) A service mark.
(ii) A trademark.
(iii) A trade name.
(iv) A copyright.
(v) A license of a film, television, or multimedia production or event for commercial distribution, if the receipts are not considered to be from telecommunications or broadcast services.
(vi) A franchise agreement.
(4) For receipts from the licensing of rights to use intangible goods other than in connection with the sale, lease, license, or other marketing of goods, services, or other items, and the license is to be used in a production capacity, hereinafter referred to as a "production intangible", the licensing fees shall generally be sourced as follows:
(A) If the licensee is not a related party, to the state where the licensee uses the intangible, if this is known or reasonably should be known to the taxpayer. However, if that state is not known or cannot be determined:
(i) to the state of the licensee's commercial domicile, if the licensee is a business; or
(ii) to the state of the licensee's primary residence, if the licensee is an individual.
(B) If the licensee is a related party, to the state where the manufacturing or production process takes place.
(5) If a license of intangible property includes both a marketing intangible and a production intangible, the receipts shall be sourced as follows:
(A) If the amounts are separately and reasonably stated in the licensing contract, those amounts shall be sourced separately.
(B) If the amounts are not separately stated or the separate statement is unreasonable, the receipts shall be treated and sourced as the licensing of a marketing intangible unless, and only to the extent, either the department or the taxpayer can reasonably establish that an amount represents a production intangible.
(6) If the license of intangible property resembles the sale of an electronically delivered good or service, the receipts from the intangible shall be sourced in the same way as the electronically delivered good or service. This includes licenses for which the customer intends to resell the good or service in a substantially identical form to end users or other recipients.
(z) For a sale or an exchange of intangible property, the following conditions apply:
(1) For a sale or an exchange of property where the property is a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area, receipts are assigned if and to the extent the property is used in this state.
(2) For a sale where the receipts depend on the productivity, use, or disposition of the intangible property, the sale shall be sourced in the manner prescribed in subsection (y).
(3) For receipts from the sale of intangible property that resembles the sale of goods and services, the receipts shall be sourced in the same way as the sale of the underlying goods or services.
(4) Any other receipts from the sale or disposition of intangible property shall be excluded from both the numerator and denominator for apportionment purposes.
(aa) For receipts from providing airline transportation, the receipts shall be attributed to Indiana in the ratio of departures from Indiana, measured by the value and cost of the aircraft, to the departures from all jurisdictions measured by the value and cost of the aircraft. For purposes of this rule, the following conditions apply:
(1) The value and cost of the aircraft will be determined for each departure. Therefore, a plane making six (6) Indiana departures and thirty (30) total departures in which receipts would otherwise be counted will have the value and cost of the plane included in the numerator six (6) times and the denominator thirty (30) times. However, if the plane was operated by a foreign operating company with seven (7) of those flights occurring outside the United States, those seven (7) flights would not be included in the receipts denominator.
(2) If a taxpayer operates multiple aircraft of a particular type that are ready for flight, the taxpayer may use the average cost or value of that aircraft.
(3) For purposes of this rule, if an aircraft is both owned and operated by a taxpayer, the value and cost of the aircraft must be the original basis of the property for federal income tax purposes at the time of acquisition, adjusted by subsequent capital additions or improvements to the property and any partial disposition of the property. If the property is not acquired by purchase, the property shall be valued otherwise under MGAAR IV.11.(a).
(4) For an aircraft leased or rented by an operator, the value and cost of the aircraft shall be eight (8) times the net annual rental rate, as determined under MGAAR IV.11.(b), including exceptions for subrentals, negative net rental rates, and nominal rental rates.
(5) Any other matters not specifically addressed shall be determined in the manner provided by the airline rule.
(bb) For receipts from providing railroad transportation, the following conditions apply:
(1) The attribution of receipts from the transportation of passengers, and freight and other tangible personal property, shall be determined separately. However, if tangible personal property is handled in passenger service, receipts from the transportation of the tangible personal property shall be considered to be from the transportation of passengers.
(2) Receipts from intrastate transportation, whether in this state or any other state, shall be determined separately from receipts from interstate transportation.
(3) Receipts from the transportation of passengers or property shall be determined as follows:
(A) All receipts from transportation that originates and terminates at a point in Indiana shall be considered as being from this state.
(B) For receipts from interstate transportation of passengers or property, the receipts are in this state determined by the ratio of miles traveled in this state to the total miles traveled everywhere.
(4) Any other matters not specifically addressed shall be determined in the manner provided by the railroad rule.
(cc) For receipts from providing trucking or transportation services of tangible personal property, the following conditions apply:
(1) All receipts from transportation that originates and terminates at a point in Indiana shall be considered as being from this state.
(2) For receipts from interstate transportation, the receipts are in this state determined by the ratio of miles traveled in this state to the total miles traveled everywhere.
(3) Any other matters not specifically addressed shall be determined in the manner provided by the trucking rule.
(dd) For receipts from construction contracts, the receipts from those contracts are in this state if the construction project is in this state, subject to the following conditions:
(1) If the project is located partly within this state and partly outside this state, the portion in this state must be equal to the proportion of construction costs incurred in this state during the period that the receipts are to be otherwise included.
(2) In general, receipts shall be considered to be received if, and to the extent, the receipts are included in income for federal income tax purposes.
(3) If a taxpayer uses a completed contract method of accounting and stops doing business in this state before the contract is completed, the receipts and income from the contract up to the date the taxpayer stops doing business must be included in the taxpayer's receipts and income during the last year in which the taxpayer is doing business in Indiana.
(4) Other matters not specifically addressed shall be determined in the manner provided by the construction contractor rule.
(ee) For newspaper and magazine publishers, the following conditions apply:
(1) For receipts from the sales of magazines and newspapers by digital means, the receipts attributable to those sales are in this state if the purchaser is in this state.
(2) Receipts from advertising are in this state based on the ratio of subscribers in this state to subscribers in all states. If advertising is intended to reach only a specified geographic area, the receipts shall be attributed based on the ratio of subscribers in this state in the specified geographic area to all subscribers in that specified geographic area.
(3) Receipts from the sale of customer lists or similar subscriber data are in this state based on the ratio of subscribers in the list or data in Indiana compared to all subscribers in the list or data.
(ff) For receipts from lottery or gambling, the following conditions apply:
(1) For a person receiving gambling winnings, such as a lottery ticket purchaser or player at a casino, the receipts from gambling winnings shall be sourced to this state if the gambling winnings are the result of the following:
(A) A lottery ticket or an equivalent purchased from a location in Indiana, regardless of whether the contest is conducted solely in Indiana or in conjunction with another jurisdiction.
(B) Wagers at a casino, horse track, sports betting facility, or similar operation conducted at a physical location in this state and from which the wager is placed in person at the location of the operator in this state.
(C) Gambling conducted through Internet, telephone, or other remote means, if the person placing the wager is in this state.
(2) For an operator of a casino, horse racing track, sports betting facility, or similar operation, the following applies:
(A) Gambling receipts from the conduct of in-person gambling, horse racing, sports betting, or similar operations at a physical location in this state are considered to be receipts attributable to this state.
(B) For gambling conducted through Internet, telephone, or other remote means, receipts are in this state if the person placing the wager is in this state.
(C) For purposes of clauses (A) and (B), receipts from gambling activities must equal the portion of wagers, gross receipts, or adjusted gross receipts that are subject to tax if the activities had been conducted in Indiana.
(gg) Receipts from the sale, exchange, or assignment of tax credits, or from the refundable portion of a tax credit includible as income for federal tax purposes, are in this state if:
(1) the tax credit is for a tax imposed by this state, or by or on behalf of a political subdivision of this state; or
(2) the tax credit is a federal tax credit and is earned by doing business in Indiana.
(hh) Receipts described in IC 6-5.5-4-3 through IC 6-5.5-4-13 are attributable to this state in the same manner as provided in those citations, except as specifically provided in this rule, IC 6-3-2-2, or IC 6-3-2-2.2.
(Department of State Revenue; 45 IAC 3.1-1-55.5; filed Jan 29, 2025, 9:40 a.m.: 20250226-IR-045240432FRA)
45 IAC 3.1-1-56 45 IAC 3.1-1-56 Allocation of nonbusiness income
45 IAC 3.1-1-56 Allocation of nonbusiness income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 56. Allocation of Nonbusiness Income. Rents, royalties, capital gains, interest and dividends when considered nonbusiness income are allocated to specific jurisdictions as outlined in Regulations 6-3-2-2(h) through 6-3-2-2(k) [45 IAC 3.1-1-57–45 IAC 3.1-1-61] . Such income and the deductions connected therewith are not taken into consideration in computing the taxpayer's apportionment formula. When the taxpayer has deductions applicable to both business and nonbusiness income, such deductions must be prorated to determine what part is subject to allocation.
(Department of State Revenue; Reg 6-3-2-2(g)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1530; errata, 2 IR 1743)
45 IAC 3.1-1-57 45 IAC 3.1-1-57 Rents and royalties from real property and tangible personal property as nonbusiness income
45 IAC 3.1-1-57 Rents and royalties from real property and tangible personal property as nonbusiness income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 57. Rents and Royalties from Real and Tangible Personal Property. Rental income from real and tangible property is nonbusiness income if the property with respect to which the rental income was received is not or could not be used in the taxpayer's trade or business or is not incidental thereto.
Examples:
(1) The taxpayer operates a multistate car rental business. The income from car rentals is business income since such activity is the taxpayer's principal business.
(2) The taxpayer is engaged in the heavy construction business in which it uses equipment such as cranes, tractors, and earthmoving vehicles. The taxpayer makes short-term leases of the equipment when particular pieces of equipment are not needed on any particular project. The rental income is business income.
(3) The taxpayer operates a multistate chain of men's clothing stores. The taxpayer purchases a five-story office building for use in connection with its trade or business. It used the street floor as one of its retail stores and the second and third floors for its general corporate headquarters. The remaining two floors are incidental to the operation of the taxpayer's trade or business. The rental income is business income.
(4) The taxpayer, who operates a multistate chain of grocery stores, purchases as an investment an office building in another state with surplus funds and leases the entire building to others. The net rental income is nonbusiness income.
(5) The taxpayer constructed a plant in 1930 as a part of its multistate manufacturing business. On June 30, of the tax year, the plant was closed and put up for sale. The plant was rented from July 1 of that year, until sold in November of the following year. Rental income is business income.
Net rents and royalties from real property, to the extent they constitute nonbusiness income, are allocated to the state where the property is located. Nonbusiness income from tangible personal property is allocated to Indiana to the extent the property is utilized in the state, or to Indiana in its 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.
(Department of State Revenue; Reg 6-3-2-2(h)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1530; errata, 2 IR 1743)
45 IAC 3.1-1-58 45 IAC 3.1-1-58 Allocation of capital gains and losses
45 IAC 3.1-1-58 Allocation of capital gains and losses
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 58. Capital Gains and Losses. Capital gains and losses from the sale of real property formerly used to produce nonbusiness income are allocated to the state where the property is located. Capital gains and losses from the sale of nonbusiness tangible personal property are allocated to Indiana if the property had a situs in the state when sold, or if the taxpayer's commercial domicile is in Indiana and it is not taxable in the state in which the property had a situs. Capital gains and losses from sales of nonbusiness intangible property are allocated to Indiana if the taxpayer's commercial domicile is in this state.
(Department of State Revenue; Reg 6-3-2-2(i)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1530; errata, 2 IR 1743)
45 IAC 3.1-1-59 45 IAC 3.1-1-59 Interest as nonbusiness income
45 IAC 3.1-1-59 Interest as nonbusiness income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 59. Interest. Interest income is nonbusiness income if the intangible with respect to which the interest was received did not arise out of or was not created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the intangible was not related to or incidental to such trade or business operations. The term "interest" as used in this regulation [45 IAC 3.1-1-59] includes service charges, time-price differentials, and all other charges for the use of money.
Examples:
(1) The taxpayer operates a multistate chain of department stores, selling for cash and on credit. Service charges, interest, or time-price differentials and the like are received with respect to installment sales and revolving charge accounts. These amounts are business income.
(2) The taxpayer conducts a multistate manufacturing business. During the year the taxpayer receives a Federal income tax refund and collects a judgment against a debtor of the business. Both the tax refund and the judgment bore interest. The interest income is business income.
(3) The taxpayer is engaged in a multistate manufacturing and wholesaling business. In connection with that business, the taxpayer maintains special accounts to cover such items as Workmen's Compensation claims, rain and storm damage, machinery replacement, etc. The monies in those accounts are invested as interest. Similarly, the taxpayer temporarily invests funds intended for payment of Federal, State and local tax obligations. The interest income is business income.
(4) The taxpayer is engaged in a multistate money order and traveler's checks business. In addition to the fees received in connection with the sale of the money orders and traveler's checks, the taxpayer earns interest income by the investment of the funds pending their redemption. The interest income is business income.
(5) The taxpayer is engaged in a multistate manufacturing and selling business. The taxpayer usually has working capital and extra cash totaling $200,000 which it regularly invests in short-term interest bearing securities. The interest income is business income.
(6) In January the taxpayer sold all stock of a subsidiary for $20,000,000. The funds are placed in a separate interest-bearing account pending a decision by management as to how the funds are to be utilized. The interest income is business income.
(7) The taxpayer, a multistate manufacturer, purchases and maintains a portfolio of interest-bearing securities for investment purposes. The interest from such securities is nonbusiness income.
Nonbusiness interest is allocated to Indiana if the taxpayer's commercial domicile is in this state.
(Department of State Revenue; Reg 6-3-2-2(j)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1530; errata, 2 IR 1743)
45 IAC 3.1-1-60 45 IAC 3.1-1-60 Dividends as business income
45 IAC 3.1-1-60 Dividends as business income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 60. Dividends. Dividends are nonbusiness income if the stock with respect to which the dividends are received did not arise out of or was not acquired in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the stock is not related to or incidental to such trade or business operation.
Examples:
(1) The taxpayer operates a multistate chain of stock brokerage houses. During the year the taxpayer receives dividends on stock it owns. The dividends are business income.
(2) The taxpayer is engaged in a multistate manufacturing and wholesaling business. In connection with that business the taxpayer maintains special accounts to cover such items as Workmen's Compensation claims, etc. A portion of the monies in those accounts is invested in interest-bearing bonds. The remainder is invested in various common stocks listed on national stock exchanges. Both the interest income and any dividends are business income.
(3) The taxpayer and several unrelated corporations own all of the stock of a corporation whose business operations consist solely of acquiring and processing materials for delivery to the corporate owners. The taxpayer acquired the stock in order to obtain a source of supply and materials used in its manufacturing business. The dividends are business income.
(4) The taxpayer is engaged in a multistate heavy construction business. Much of its construction work is performed for agencies of the Federal government and various state governments. Under state and Federal laws applicable to contracts for these agencies, a contractor must have adequate bonding capacity, as measured by the ratio of its current assets (cash and marketable securities) to current liabilities. In order to maintain an adequate bonding capacity the taxpayer holds various stocks and interest-bearing securities. Both the interest income and any dividends received are business income.
(5) The taxpayer receives dividends from the stock of its subsidiary or affiliate which acts as the marketing agency for products manufactured by the taxpayer. The dividends are business income.
(6) The taxpayer is engaged in a multistate glass manufacturing business. It also holds a portfolio of stock for investment purposes, the acquisition and holding of which are unrelated to the manufacturing business. The dividends received are nonbusiness income.
Nonbusiness dividends are allocated to Indiana if the taxpayer's commercial domicile is in this state.
(Department of State Revenue; Reg 6-3-2-2(j)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1531; errata, 2 IR 1743)
45 IAC 3.1-1-61 45 IAC 3.1-1-61 Patent and copyright royalties as nonbusiness income
45 IAC 3.1-1-61 Patent and copyright royalties as nonbusiness income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 61. Patent and Copyright Royalties. Patent and copyright royalties are nonbusiness income if the patent or copyright with respect to which the royalties were received did not arise out of or was not created in the regular course of the taxpayer's trade or business operations or where the purpose for acquiring and holding the patent or copyright is not related to or incidental to such trade or business operations.
Examples:
(1) The taxpayer is engaged in the multistate business of manufacturing and selling industrial chemicals. In connection with that business the taxpayer obtained patents on certain of its products. The taxpayer licensed the production of chemicals in foreign countries, in return for which the taxpayer receives royalties. The royalties received by the taxpayer are business income.
(2) The taxpayer is engaged in the music publishing business and holds copyrights on numerous songs. The taxpayer acquired the assets of a smaller publishing company, including music copyrights. Their acquired copyrights are therefore used by the taxpayer in its business. Any royalties received on these copyrights are business income.
(3) Same as last example, except that the acquired company also held the patent on a type of phonograph needle. The taxpayer does not manufacture or sell phonographs or phonograph equipment. Any royalties received on the patent would be nonbusiness income.
Nonbusiness patent and copyright royalties are allocated to Indiana to the extent used in the state, or, if the taxpayer's commercial domicile is in Indiana, to the extent used in states in which the taxpayer is not taxable.
(Department of State Revenue; Reg 6-3-2-2(k)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1531; errata, 2 IR 1743)
45 IAC 3.1-1-62 45 IAC 3.1-1-62 Special cases of allocation and apportionment
45 IAC 3.1-1-62 Special cases of allocation and apportionment
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 62. Special Formulas for Division of Income. All corporations doing business in more than one state shall use the allocation and apportionment provisions described in Regulations 6-3-2-2(b)-(k) [45 IAC 3.1-1-37–45 IAC 3.1-1-61] unless such provisions do not result in a division of income which fairly represents the taxpayer's income from Indiana sources. In such case the taxpayer must request in writing or the Department may require the use of a more equitable formula for determining Indiana income. However, the Department will depart from use of the standard formula only if the use of such formula works a hardship or injustice upon the taxpayer, results in an arbitrary division of income, or in other respects does not fairly attribute income to this state or other states. It is anticipated that these situations will arise only in limited and unusual circumstances (which ordinarily will be unique and nonrecurring) when the standard apportionment provisions produce incongruous results.
(Department of State Revenue; Reg 6-3-2-2(l)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1532; errata, 2 IR 1743)
45 IAC 3.1-1-63 45 IAC 3.1-1-63 Apportionment in absence of one or more factors
45 IAC 3.1-1-63 Apportionment in absence of one or more factors
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 63. Property, Payroll and Sales Factors–Special Circumstances. In the case of a taxpayer that lacks one or more of the factors in the 3-factor formula, the taxpayer's business income will generally be apportioned by use of the remaining factor or factors.
Examples:
(1) The taxpayer, a wholly-owned subsidiary of a manufacturing corporation, has no employees of its own in Indiana or any other state. The taxpayer will apportion its business income by a formula the numerator of which is the property and sales factors, and the denominator of which is two.
(2) The taxpayer, a sales subsidiary for a multistate manufacturer, has no property or payroll of its own in Indiana, but does in other states. The taxpayer's business income will be apportioned by a formula the numerator of which is the sales factor and the denominator of which is three.
Where in the computation of the property, payroll or sales factors, the taxpayer has not assigned part of its property, payroll, or sales to any state, the Department may require the exclusion of the unassigned property, payroll or sales from the denominator of the appropriate factor in order to prevent distortion of the apportionment.
Transportation Companies. IC 6-3-2-2(b) requires that interstate carriers and all other multistate taxpayers use the three-factor formula in apportioning their business income. This method will assure consistency in the application of the Adjusted Gross Income Tax Act to multistate carriers. Business income for transportation companies is apportioned to Indiana by the use of the following formula:
Definition of Factors
(A) Tangible Property. Fixed properties such as buildings and land used in business, shop and terminal equipment and trucks or cars used locally or any other tangible property connected with the transportation business, will be assigned to the state in which such properties are located.
The value of all movable equipment used in interstate transportation will be assigned to this State on the basis of total miles traveled in this State, as compared to total miles traveled everywhere. Fixed and movable property will then be combined to arrive at the total property factor, Indiana property over property everywhere.
Property owned by the transportation company is valued at original cost. Property rented is valued at eight (8) times the annual rental rate less any annual subrental.
(B) Payroll. Wages and salaries of employees assigned to fixed locations within this State shall be included in the payroll factor of this State. Wages of personnel operating interstate transportation equipment will be assigned to this State on the basis of total miles traveled in Indiana, as compared to total miles traveled everywhere. The payroll of permanent and transient personnel will then be combined to arrive at the total payroll factor, Indiana payroll over payroll everywhere.
(C) Revenue from Transportation. The total revenue dollars from transportation (both intra-state and inter-state) are to be assigned to the states traversed on the basis of class or category mileage in each state in which or through which the freight or passengers move. Pipelines may substitute revenue miles with barrel miles, cubic foot miles, or other appropriate measures of product movement. In order to determine the percentage of revenue from transportation services in Indiana, the fraction of revenue miles in Indiana over revenue miles everywhere must be applied to total revenue from transportation.
Example:
Computation of Three-Factor Apportionment Formula
| A. Tangible Property Factor | ||
| Fixed property in Indiana | 40,000 | |
| Fixed property everywhere | 1,000,000 | |
| Milage [sic.] Factor 2% | (see C below) | |
| Movable property everywhere | 24,000,000 |
- Indiana value of movable property
2% × 24,000,000 = 480,000
- Fixed and movable property is combined to arrive at the total property factor
| B. Payroll Factor | ||
| Payroll at fixed Indiana location | 20,000 | |
| Payroll at fixed location everywhere | 1,000,000 | |
| Mileage Factor 2% | (see C below) | |
| Payroll of employees operating interstate transportation everywhere | 2,000,000 |
- Indiana value of transient payroll
2% × 2,000,000 = 40,000
- Fixed and transient payroll is combined to arrive at the total payroll factor
| C. Revenue From Transportation Factor | ||
| Road miles over Indiana | 90,000 | |
| Road miles everywhere | 4,500,000 | |
| Total gross receipts from transportation | 6,000,000 |
- Mileage Factor
90,000 ÷ 4,500,000 = 2%
Mileage factor is combined with total gross receipts to arrive at the revenue from transportation factor
2% × 6,000,000 = 120,000
120,000 ÷ 6,000,000 = 2% revenue
from transportation factor
| D. Total Apportionment | ||
| Percentage Property | 2.08 | |
| Payroll | 2.00 | |
| Revenue | 2.00 |
6.08 ÷ 3 = 2.03% apportionment percentage
(Department of State Revenue; Reg 6-3-2-2(l)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1532; errata, 2 IR 1743)
45 IAC 3.1-1-64 45 IAC 3.1-1-64 Definition of taxable in another state
45 IAC 3.1-1-64 Definition of taxable in another state
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-25; IC 6-3-2-2
Sec. 64. "Taxable in Another State" Defined. A corporation is "taxable in another state" under the Act when such state has jurisdiction to subject it to a net income tax. This test applies if the taxpayer's business activities are sufficient to give the state jurisdiction to impose a net income tax under the Constitution and statutes of the United States. Jurisdiction to tax is not present where the state is prohibited from imposing the tax by reason of the provision of Public Law 86-272, 15 U.S.C.A. §381-385. In the case of any "State," as defined in IC 6-3-1-25, other than a state of the United States or political subdivision of such state, the determination of whether such "state" has jurisdiction to subject the taxpayer to a net income tax shall be made by application of the jurisdictional standards applicable to that state of the United States. If jurisdiction to tax is otherwise present, such "state" is not considered as being without jurisdiction to tax by reason of the provisions of a treaty between that state and the United States.
Example:
Corporation X is actively engaged in manufacturing farm equipment in State A and foreign country B. Both State A and foreign country B impose a net income tax but foreign country B exempts corporations engaged in manufacturing farm equipment. Corporation X is subject to the jurisdiction of State A and foreign country B.
Taxpayers are not subject to throwback on sales into states in which they are taxable under this regulation [45 IAC 3.1-1-64] . See Regulation 6-3-2-2(e)(040) [45 IAC 3.1-1-53] .
(Department of State Revenue; Reg 6-3-2-2(n)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1533; errata, 2 IR 1743)
45 IAC 3.1-1-65 45 IAC 3.1-1-65 Exempt organizations and income; report
45 IAC 3.1-1-65 Exempt organizations and income; report
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2.8
Sec. 65. Exempt Organizations. Organizations exempt from Federal income tax under IRC §501 (a) are exempt from adjusted gross income tax. However, this exemption extends only to income of such organizations which is not taxable for Federal tax purposes. Thus organizations subject to tax under IRC §511 on their unrelated business income are also subject to adjusted gross income tax on such income.
Exempt organizations are required to file an annual report by the fifteenth day of the fifth month following the close of the tax year. Those organizations having unrelated business income must report such income by filing an annual income tax return no later than the time the annual report is due. The organization must make quarterly payments of adjusted gross income tax and file quarterly income tax returns if its adjusted gross income tax liability exceeds its gross income tax liability by $1000. See Regulation 6-3-4-4 (020) [45 IAC 3.1-1-92] .
For the supplemental net income tax liability of exempt organizations having unrelated business income, see Regulation 6-3-2-3.1 (010) [45 IAC 3.1-1-68] .
(Department of State Revenue; Reg 6-3-2-3(a)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1533; errata, 2 IR 1743)
45 IAC 3.1-1-66 45 IAC 3.1-1-66 Subchapter S corporations and shareholders
45 IAC 3.1-1-66 Subchapter S corporations and shareholders
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2.8; IC 6-3-4-13
Sec. 66. Subchapter S Corporations. Corporations electing Subchapter S status under Internal Revenue Code §1372 and which comply with the withholding requirements of IC 6-3-4-13 are exempt from adjusted gross and supplemental net income tax on all income except capital gains subject to tax under Internal Revenue Code §1378. This exemption is effective until the corporation's shareholders terminate the election with the Internal Revenue Service or until the corporation engages in transactions which disqualify it from Subchapter S status. A complete or partial corporate liquidation or the intent to dissolve will not in itself terminate the election.
Subchapter S corporation shareholders are taxed on their distributive shares of income at the individual income tax rate. The character of the income (as capital gains or ordinary income) also passes through to the shareholders.
Although Subchapter S corporations are generally not subject to adjusted gross income tax, they are subject to use tax and intangibles tax, and must report and pay such tax at the time the annual return is filed. Subchapter S corporations must also withhold adjusted gross income tax on any nonresident shareholder's share of corporate income. See Regulation 6-3-4-13(010) [45 IAC 3.1-1-109] et seq.
For filing requirements of Subchapter S corporations, see Regulation 6-3-2-3(b)(020) [45 IAC 3.1-1-67] .
(Department of State Revenue; Reg 6-3-2-3(b)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1534; errata, 2 IR 1743)
45 IAC 3.1-1-67 45 IAC 3.1-1-67 Subchapter S corporation reports; taxation of shareholders
45 IAC 3.1-1-67 Subchapter S corporation reports; taxation of shareholders
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2.8
Sec. 67. Subchapter S Corporations Filing Requirements. Qualified Subchapter S corporations will file an annual return, Form It-20S on or before the fifteenth day of the fourth month following the close of the corporation's tax year. The first annual return of the corporation must be accompanied by copies of Federal Form 2553, Election by Small Business Corporation, and by Federal Form 1120S covering the corporation's first-year business activities. Corporations must designate their Federal business activity code numbers in the appropriate place on the return, as well as designating their Federal identification numbers. Annual returns must be filed by any Subchapter S corporation incorporated in Indiana or having income from Indiana sources.
Indiana resident shareholders of a Subchapter S corporation that conducts business in more than one state are subject to the adjusted gross income tax on their entire share of the corporation's income. They may, however, be allowed a credit for any taxes paid to another state on this income. Such credit will be pursuant to the provisions of Regulation 6-3-3-3(a)(010) [45 IAC 3.1-1-74] .
Nonresident shareholders of a Subchapter S corporation conducting business both within and without Indiana must divide their income by using the corporate division of income provisions contained in Regulation 6-3-2-2(b)(010) [45 IAC 3.1-1-37] et seq. In particular, these shareholders must apportion their business income on the three-factor formula outlined in Regulation 6-3-2-2(b)(030) [45 IAC 3.1-1-39] .
Any Subchapter S corporation which is a member of a partnership, joint venture, or pool will cause such partnership, joint venture, or pool to become subject to gross and adjusted gross income tax. See Regulation 6-3-7-1(b)(010) [45 IAC 3.1-1-151] . In that case, the partnership, joint venture, or pool will file annual return IT-65T and pay the tax shown to be due thereon. Profits from such entities are deductible by the corporation on its annual return.
Subchapter S corporations are required to make information returns as described in Regulation 6-3-4-9(010) [45 IAC 3.1-1-104] .
(Department of State Revenue; Reg 6-3-2-3(b)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1534; errata, 2 IR 1743)
45 IAC 3.1-1-68 45 IAC 3.1-1-68 Unrelated business income of exempt organizations
45 IAC 3.1-1-68 Unrelated business income of exempt organizations
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-3.1
Sec. 68. Unrelated Business Income of Exempt Organizations. Under IC 6-3-2-3.1, exempt organizations are subject to adjusted gross income tax and supplemental net income tax on income derived from an unrelated trade or business as defined in Internal Revenue Code §513. This section does not apply to the United States and its agencies and instrumentalities, nor to the State of Indiana, a state agency as defined in IC 34-4-16.5-2 [IC 34-4 was repealed by P.L.1-1998, SECTION 221, effective July 1, 1998.] , nor a political subdivision of the state as defined in IC 34-4-16.5-2 [IC 34-4 was repealed by P.L.1-1998, SECTION 221, effective July 1, 1998.] , all of which are exempt from adjusted gross income tax on all income. This section does apply to all other exempt organizations such as churches, fraternal organizations and professional societies.
An "unrelated trade or business" is one the conduct of which is not substantially related (aside from the needs of income or the use of the profits) to the performance by the exempt organization of the function constituting the basis for which it was granted exemption. However, under Internal Revenue Code § 513 the term does not include income from a trade or business:
(1) in which substantially all the work is done for the organization without compensation; or
(2) which is carried on primarily for the convenience of its members, employees, etc.; or
(3) which is the selling of merchandise substantially all of which has been received by the organization as gifts or contributions.
The exempt organization will compute its taxable unrelated business income in the same manner as any other taxpayer having business income. However, its business deductions are limited to those directly connected with the carrying on of the unrelated trade or business. Taxpayers should consult the Internal Revenue Code §§511-515 and the regulations established thereunder for a more detailed explanation of the Federal income tax on unrelated business income.
(Department of State Revenue; Reg 6-3-2-3.1(010); filed Oct 15, 1979, 11:15 am: 2 IR 1534; errata, 2 IR 1743)
45 IAC 3.1-1-69 45 IAC 3.1-1-69 Federal civil service annuity income
45 IAC 3.1-1-69 Federal civil service annuity income
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-3.7
Sec. 69. Federal Civil Service Annuity Income. See Regulation 6-3-1-3.5(a)(050)(12) [Subsection (12) of 45 IAC 3.1-1-5] .
(Department of State Revenue; Reg 6-3-2-3.7(010); filed Oct 15, 1979, 11:15 am: 2 IR 1535; errata, 2 IR 1743)
45 IAC 3.1-1-70 45 IAC 3.1-1-70 Military pay
45 IAC 3.1-1-70 Military pay
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-4
Sec. 70. Military Pay. See Regulation 6-3-1-3.5(a)(050)(10) [Subsection (10) of 45 IAC 3.1-1-5] .
(Department of State Revenue; Reg 6-3-2-4(010); filed Oct 15, 1979, 11:15 am: 2 IR 1535; errata, 2 IR 1743)
45 IAC 3.1-1-71 45 IAC 3.1-1-71 Credits and adjustments for taxes withheld
45 IAC 3.1-1-71 Credits and adjustments for taxes withheld
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3-3-1
Sec. 71. Individual Withholding Credits. To claim credit for taxes withheld under this Act, an individual taxpayer must attach a copy of the wage and tax statement, Form W-2, to the Indiana Individual Income Tax return. No credit may be claimed for tax withheld to any other state or political subdivision of any other state with the exception of local taxes paid against County Adjusted Gross Income Tax. Amounts withheld for local income taxes under provisions of IC 6-3-1-3.5(a)(5) may be deducted as an adjustment (but not as a credit) to the extent allowed.
(Department of State Revenue; Reg 6-3-3-1(010); filed Oct 15, 1979, 11:15 am: 2 IR 1535; errata, 2 IR 1743)
45 IAC 3.1-1-72 45 IAC 3.1-1-72 Credit for other taxes paid by corporation (Repealed)
45 IAC 3.1-1-72 Credit for other taxes paid by corporation (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-73 45 IAC 3.1-1-73 Completed contract accounting; credit for taxes paid (Repealed)
45 IAC 3.1-1-73 Completed contract accounting; credit for taxes paid (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-74 45 IAC 3.1-1-74 Credit for other state income taxes
45 IAC 3.1-1-74 Credit for other state income taxes
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-3
Sec. 74. Credit for Taxes Paid To Other States. An Indiana resident must report income from all sources, including out-of-state income, in calculating Indiana adjusted gross income tax. If a resident is required and does pay an income tax to any other state (depending upon which state), possession or foreign country on income derived therefrom, he may, upon production of satisfactory evidence of such payment of tax, claim a credit against his Indiana Adjusted Gross Income Tax.
The credit is the lesser of:
(a) The amount of income tax actually paid to the other state on income from that state; or,
(b) An amount equal to two percent (2%) of the income from the other state which is taxed by Indiana; or
(c) The amount of state tax due to Indiana.
Credit is not allowed for city income or occupational taxes paid in other states or state income taxes paid in states allowing Indiana residents a nonresident credit.
Satisfactory evidence is as follows:
The credit taken must be supported by a separate calculation of the credit along with a copy of the tax return filed with the other state, certified as true, and/or having been received by the proper taxing authority of such state. Withholding statements or other evidence of tax payments without a certified copy of an annual tax return will not be acceptable.
Income from another state is that part of Federal gross income, minus all attributable Internal Revenue Code section 62 deductions, derived from sources without Indiana that is taxable in a particular state or country and is also taxable under this Act.
| EXAMPLE: | ||
| Assuming the following facts: | ||
| Income from Indiana | $ 6,000.00 | |
| Income from other state | 4,000.00 | |
| Total Indiana exemptions | 3,000.00 | |
| Tax liability to other state | 100.00 | |
| Calculate Indiana tax and credits as follows: | ||
| Total income | $10,000.00 | |
| Less: Exemptions | 3,000.00 | |
| Taxable Income | 7,000.00 | |
| Indiana tax rate | .02 | |
| Indiana tax | 140.00 | |
| Credit for tax paid to other state: | ||
| Income from other state | $ 4,000.00 | |
| Indiana rate | .02 | |
| *Tax Credit | $ 80.00 | |
| Balance of tax due Indiana | $ 60.00 |
*[This amount cannot be larger than tax actually paid to other state.]
(Department of State Revenue; Reg 6-3-3-3(a)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1535; errata, 2 IR 1743)
45 IAC 3.1-1-75 45 IAC 3.1-1-75 Nonresident credit from other states
45 IAC 3.1-1-75 Nonresident credit from other states
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-3
Sec. 75. Credit Agreement States. Credit for taxes paid other states will not be allowed for taxes paid to states which allow Indiana residents a nonresident credit.
Credit should instead be obtained from the state imposing the tax upon Indiana residents. These states include:
| Arizona | Maryland | West Virginia | |
| California | New Mexico | Washington D.C. |
All income received from these states is reported in the same manner as if it were received from Indiana. No credit may be taken on the Indiana tax return for any taxes withheld or otherwise paid to the other state. Instead, after filing the Indiana tax return, the taxpayer should file a nonresident tax return with the other state, taking credit for the Indiana tax. This nonresident return must be filed in accordance with the instructions received from the other state.
| EXAMPLE: Taxpayer is Full-Year Indiana Resident | ||
| Income from Indiana | $6,000.00 | |
| Income from Arizona | 4,000.00 | |
| Total Income Exemptions | 3,000.00 | |
| Total liability to Arizona | 120.00 | |
| Calculate Indiana tax and credits as follows: | ||
| Total income | $10,000.00 | |
| Less: Exemptions | 3,000.00 | |
| Taxable Income | 7,000.00 | |
| Indiana tax rate | .02 | |
| Indiana tax | 140.00 | |
| Credit for tax paid to Arizona | NONE |
Take credit on nonresident return filed with Arizona for tax paid to Indiana based on Arizona income.
(Department of State Revenue; Reg 6-3-3-3(a)(020); filed Oct 15, 1979, 11:15 am: 2 IR 1536; errata, 2 IR 1743)
45 IAC 3.1-1-76 45 IAC 3.1-1-76 Reciprocity
45 IAC 3.1-1-76 Reciprocity
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-3; IC 6-3-5-1
Sec. 76. Reciprocal Agreements States. Residents who have income consisting of salaries, wages, and commissions from states with which Indiana has a reciprocal tax agreement must report all such income as if it were from Indiana. These states include:
| Illinois | Michigan | Pennsylvania | |
| Kentucky | Ohio | Wisconsin |
Credit cannot be taken for any taxes withheld by or paid to any of these states in connection with salaries, wages, or commissions received from such states. If tax has been withheld by any of these states, a claim for refund should be filed with the state which withheld the taxes.
| EXAMPLE: Taxpayer is Full-Year Indiana Resident | ||
| Income from Indiana | $6,000.00 | |
| Income from Illinois (wages) | 4,000.00 | |
| Total Income Exemptions | 3,000.00 | |
| Total liability to Illinois | -0- | |
| Calculate Indiana tax and credits as follows: | ||
| Total income | $10,000.00 | |
| Less: Exemptions | 3,000.00 | |
| Taxable Income | 7,000.00 | |
| Indiana tax rate | .02 | |
| Indiana tax | 140.00 | |
| Credit for tax paid to Illinois: | NONE |
No credit is allowed taxpayer since Indiana and Illinois have a reciprocal agreement. Taxpayer must file with Illinois to recover any withholding to Illinois.
For income other than salaries, wages and commissions, a credit will be allowed under the procedures for claiming credit for taxes paid to other states as outlined in Regulation 6-3-3-3(a)(010) [45 IAC 3.1-1-74] .
Likewise, a resident of another reciprocal agreement state who works in Indiana and has Indiana withholding tax deducted from his wages, salaries or commissions may claim a refund of the amount so withheld. To claim a refund, an individual must file an Indiana Nonresident tax return indicating residency in a reciprocal state and attaching a wage and tax statement (Form W-2) showing that Indiana taxes were withheld.
(Department of State Revenue; Reg 6-3-3-3(a)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1536; errata, 2 IR 1743)
45 IAC 3.1-1-77 45 IAC 3.1-1-77 Nonresident reverse credit reciprocity
45 IAC 3.1-1-77 Nonresident reverse credit reciprocity
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-3; IC 6-3-5-1
Sec. 77. Reverse Credit for Nonresidents. A credit is allowed against adjusted gross income tax imposed upon nonresidents who reside in states which grant similar credits to Indiana residents who become subject to tax under the laws of those states.
The Indiana credit (reverse credit) is the amount of income tax actually paid to the taxpayer's resident state but only on income derived from Indiana sources, or two percent (2%) of such income, whichever is less. The list of those states which grant a similar credit and the method for computing the allowable amount of credit are outlined under Regulation 6-3-3-3(a)(020) [45 IAC 3.1-1-75] .
In order to claim this credit, the taxpayer must file an Indiana Part-Year or Nonresident Tax Return along with a certified copy of the return filed with his resident state, reporting income which is subject to tax under this Act and under the laws of taxation of the other state.
(Department of State Revenue; Reg 6-3-3-3(b)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1536; errata, 2 IR 1743)
45 IAC 3.1-1-78 45 IAC 3.1-1-78 Credit for the elderly
45 IAC 3.1-1-78 Credit for the elderly
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-9
Sec. 78. Credit for the Elderly. A resident individual, and his spouse in the case of a joint return, is allowed a credit for the elderly on his Indiana return provided he qualifies for the credit under Section 37 of the Internal Revenue Code. The allowable credit is equal to the lesser of:
(A) Two-fifteenths (2/15) of tentative credit for the elderly on Federal schedules R and RP; or,
(B) *The remainder of:
(1) total taxes imposed for the taxable year less
(2) any allowable college credit or credit for taxes paid to other states.
*[The sum of college credit, credit for taxes paid to other states, and credit for the elderly may be equal to but cannot exceed the amount of state income tax due to Indiana.]
| EXAMPLE: | |
| Indiana Adjusted Gross Income | $10,000.00 |
| Tax Liability before Credits | 200.00 |
| College credit | 25.00 |
| Credit for taxes paid to other states | 125.00 |
| Subtotal | $ 50.00 |
| Tentative Federal Credit | $ 420.00 |
| 2/15 of Federal Credit | $ 56.00 |
| Indiana Credit for the Elderly | $50.00 |
| (lesser of $50.00 and $56.00) |
(Department of State Revenue; Reg 6-3-3-4.1(010); filed Oct 15, 1979, 11:15 am: 2 IR 1537; errata, 2 IR 1743) NOTE: IC 6-3-3-4.1 concerning the credit for the elderly was repealed by P.L.25-1981, SECTION 9. See, IC 6-3-3-9 concerning the unified tax credit for the elderly.
45 IAC 3.1-1-79 45 IAC 3.1-1-79 Credit for contributions to colleges
45 IAC 3.1-1-79 Credit for contributions to colleges
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-5
Sec. 79. College Credit. The Indiana Department of State Revenue will recognize credits taken on Individual, Fiduciary, and Corporation Income Tax Returns which are supported by contributions made to an "institution of higher education located in Indiana." In order to qualify for this credit, the contribution must be made directly to the institution of higher education, or to any corporation or foundation organized and operated solely for the benefit of any such institution of higher education, and/or to the Associated Colleges of Indiana.
However, any shareholder of a sub "S" corporation which makes a contribution to an accredited Indiana college, university or institution will not be eligible for college credit. This is because charitable contributions do not flow through to the shareholders for Federal tax purposes. Organizations which are not subject to the adjusted gross income tax, such as banks and savings and loan associations, may not claim the college credit.
The institution of higher education must grant an associate, bachelors, masters, or doctoral degree, or any combination thereof, and the school must be accredited to grant such degrees by one of the following agencies:
(1) North Central Association of Colleges and Secondary Schools;
(2) Indiana Department of Public Instruction; or
(3) American Association of Theological Schools.
Allowable Credit for Individuals, Trusts and Estates
An individual is entitled to a tax credit for gifts equal to fifty percent (50%) of the aggregate amount thereof, but not exceeding the lesser of:
(1) $100.00 for a single return, trust or estate;
(2) $200.00 for a joint return; or
(3) The individual's adjusted gross income tax liability for the year in which the gifts are made, less the amount of all other credits allowable against such tax under the Adjusted Gross Income Tax Act. With respect to the third limitation, the other credits presently allowed by the Act against adjusted gross income tax include the credit for taxes paid to other states and the credit for the elderly.
In no event will a tax credit for contribution to educational institutions in excess of tax owing in any year give rise to an overpayment of tax to be refunded.
A separate schedule, CC-40, will be available for reporting and claiming this credit. The schedule must be attached to the individual return, Form IT-40, the nonresident return, Form IT-40PNR, or the Fiduciary Return, Form IT-41.
Allowable Credit for Corporations
A corporation is entitled to a tax credit for gifts to institutions of higher education equal to fifty percent (50%) of their total gifts in that year, but not to exceed the lesser of (1) ten per cent (10%) of the corporation's adjusted gross income tax for the year in which the gifts are made; (2) the sum of $1000.00; or (3) the corporation's adjusted gross income tax for the year in which the gifts are made less the amount of all other credits allowable against such tax under the Adjusted Gross Income Tax Act. In no event will the sum of the credit for contributions to institutions of higher education and the credit for the Hard Core Unemployed be in excess of the tax due.
The tax credit may be applied against either the gross income tax or the adjusted gross income tax. The credit computation is based on the adjusted gross income tax. Thus, a corporation which has no taxable adjusted gross income would not be allowed this tax credit. A separate schedule, Form CC-20, is available for reporting and claiming this credit. The schedule must be attached to the corporation return, Form IT-20.
Following is a listing of the eligible schools in which the contributor may qualify for the college credit:
| INSTITUTION | CITY |
| Ancilla College | Donaldson |
| Anderson College | Anderson |
| The Associated Colleges of Indiana | Indianapolis |
| Ball State University | Muncie |
| Bethel College | Mishawaka |
| Butler University | Indianapolis |
| Calumet College | Whiting |
| Catholic Seminary Foundation of Indianapolis (St. Maur's Seminary) | Indianapolis |
| Christian Theological Seminary | Indianapolis |
| Concordia Senior College | Fort Wayne |
| DePauw University | Greencastle |
| Earlham College | Richmond |
| Fort Wayne Bible College | Fort Wayne |
| Franklin College of Indiana | Franklin |
| Goshen Biblical Seminary | Elkhart |
| Goshen College | Goshen |
| Grace Theological Seminary and Grace College | Winona Lake |
| Hanover College | Hanover |
| Huntington College | Huntington |
| Indiana Central University | Indianapolis |
| Indiana Institute of Technology | Fort Wayne |
| Indiana State University | Terre Haute |
| Indiana University | Bloomington and Regional Facilities |
| Indiana Vocational Technical College | Indianapolis and Regional Facilities |
| Manchester College | North Manchester |
| Marian College | Indianapolis |
| Marion College | Marion |
| Mennonite Biblical Seminary | Elkhart |
| Northwood Institute of Indiana | West Baden |
| Oakland City College | Oakland City |
| Purdue University | West Lafayette and Regional Campuses |
| Rose-Hulman Institute of Technology | Terre Haute |
| St. Francis College | Fort Wayne |
| St. Joseph College | Rensselaer |
| St. Mary-of-the-Woods College | Terre Haute |
| St. Mary's College | Notre Dame |
| St. Meinrad College | St. Meinrad |
| Taylor University | Upland |
| Tri- State College | Angola |
| University of Evansville | Evansville |
| University of Notre Dame | Notre Dame (South Bend) |
| Valparaiso University | Valparaiso |
| Vincennes University | Vincennes |
| Wabash College | Crawfordsville |
This is not necessarily a complete listing and taxpayers having any questions as to the eligibility of any particular contribution for credit should petition the Department in writing.
(Department of State Revenue; Reg 6-3-3-5(010); filed Oct 15, 1979, 11:15 am: 2 IR 1537; errata, 2 IR 1743)
45 IAC 3.1-1-80 45 IAC 3.1-1-80 Definition of household income for circuit breaker credit and credit for elderly and disabled (Repealed)
45 IAC 3.1-1-80 Definition of household income for circuit breaker credit and credit for elderly and disabled (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-1-81 45 IAC 3.1-1-81 Definition of homestead (Repealed)
45 IAC 3.1-1-81 Definition of homestead (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-1-82 45 IAC 3.1-1-82 Circuit breaker credit eligibility (Repealed)
45 IAC 3.1-1-82 Circuit breaker credit eligibility (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-1-83 45 IAC 3.1-1-83 Circuit breaker credit filing requirements (Repealed)
45 IAC 3.1-1-83 Circuit breaker credit filing requirements (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-1-84 45 IAC 3.1-1-84 Circuit breaker credit computation (Repealed)
45 IAC 3.1-1-84 Circuit breaker credit computation (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-1-85 45 IAC 3.1-1-85 Credit for motor fuel tax (Repealed)
45 IAC 3.1-1-85 Credit for motor fuel tax (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-1-86 45 IAC 3.1-1-86 Credit for neighborhood assistance contributions
45 IAC 3.1-1-86 Credit for neighborhood assistance contributions
Authority: IC 6-8.1-3-3
Affected: IC 6-3.1-9
Sec. 86. Neighborhood Assistance Credit. Credit will be allowed to individuals and corporations who make contributions to individuals, groups, or neighborhood organizations in "economically disadvantaged areas" as defined by the Indiana Department of Commerce in Regulation 104-1(K) of the Neighborhood Assistance Credit Program Regulations.
Contributions may consist of cash or goods, job training, education, community services, counseling and advice, crime prevention, housing facilities, emergency assistance, medical care or recreational facilities. Regulation 105-1 of the Neighborhood Assistance Credit Program Regulations issued by the Indiana Department of Commerce stipulates that contributions other than those of cash or goods must be "conducted on a not-for-profit basis only by not-for-profit organizations."
(Department of State Revenue; Reg 6-3-3.1-1(010); filed Oct 15, 1979, 11:15 am: 2 IR 1542; errata, 2 IR 1743)
45 IAC 3.1-1-87 45 IAC 3.1-1-87 Limitation on credit for neighborhood assistance
45 IAC 3.1-1-87 Limitation on credit for neighborhood assistance
Authority: IC 6-8.1-3-3
Affected: IC 6-3.1-9
Sec. 87. Limitation of Neighborhood Assistance Credit. The individual or corporation who makes the contribution in the approved program may take a credit of fifty percent (50%) of the amount invested for the taxable year. If the contribution is of a non-monetary nature, the allowable credit will be 50% of the fair market value at the time of the contribution. In no case, however, may the credit exceed $25,000.00.
EXAMPLE: F.U.G. Corporation made an $80,000.00 qualified contribution during the taxable year to the G.U.F. Neighborhood Organization, which is a tax exempt organization for Federal and State tax purposes. The allowable Neighborhood Assistance Credit for F.U.G. Corporation is determined as follows:
| Amount contributed | $80,000.00 |
| 50% of contribution | 40,000.00 |
| Allowable credit | 25,000.00* |
*[The allowable credit is the lesser of $25,000.00 or 50% of the contribution.]
(Department of State Revenue; Reg 6-3-3.1-4(010); filed Oct 15, 1979, 11:15 am: 2 IR 1542; errata, 2 IR 1743)
45 IAC 3.1-1-88 45 IAC 3.1-1-88 Claim for neighborhood assistance credit
45 IAC 3.1-1-88 Claim for neighborhood assistance credit
Authority: IC 6-8.1-3-3
Affected: IC 6-3.1-9
Sec. 88. Procedure for Claiming Neighborhood Assistance Credit. Any business, firm, or individual that desires to claim the Neighborhood Assistance Credit must first apply to the Indiana Department of Commerce, requesting approval of the program. Such application should set forth the program to be conducted, the disadvantaged area(s) selected, the amount to be invested, and the plans for implementing the program.
After receiving approval of the program the applicant must then file Form NC-10, Neighborhood Assistance Credit Application, with the Indiana Department of Revenue. Form NC-10 is used to determine the tentative credit amount to be claimed, and must contain the Certificate of Approval from the Department of Commerce.
The Department of Revenue will then make a determination on the credit application and return to the taxpayer Form NC-20, Notice of Department Decision on Neighborhood Assistance Credit Application, which will set forth the approved credit amount, if any, to be claimed by the taxpayer. If the application is disapproved, a reason for the disapproval will be on Form NC-20.
On approved applications, Form NC-30, Statement of Payment for Neighborhood Assistance Credit, must be filed with the Department of Revenue within thirty (30) days after the taxpayer's receipt of Form NC-20. This form must be accompanied by the taxpayer's proof of payment substantiating that payment has been made on an approved program.
A final statement, Form NC-40, Tax Return Attachment to Support Neighborhood Assistance Credit Claimed, must then be attached to the Indiana Income Tax Return filed by the taxpayer, in order to provide a reference to the claimant's file.
(Department of State Revenue; Reg 6-3-3.1-5(010); filed Oct 15, 1979, 11:15 am: 2 IR 1543; errata, 2 IR 1743)
45 IAC 3.1-1-89 45 IAC 3.1-1-89 Limitation on total neighborhood assistance credits granted by state
45 IAC 3.1-1-89 Limitation on total neighborhood assistance credits granted by state
Authority: IC 6-8.1-3-3
Affected: IC 6-3.1-9
Sec. 89. Maximum Amount of Neighborhood Assistance Credit Allowable. The total amount of Neighborhood Assistance Credit in any State fiscal year (July 1-June 30) may not exceed one million dollars. When the total credits approved equal one million dollars, no applications thereafter will be approved. Due to this limitation, applications for the credit will be considered in the chronological order in which they are filed.
(Department of State Revenue; Reg 6-3-3.1-6(010); filed Oct 15, 1979, 11:15 am: 2 IR 1543; errata, 2 IR 1743)
45 IAC 3.1-1-90 45 IAC 3.1-1-90 Time extensions for filing returns (Repealed)
45 IAC 3.1-1-90 Time extensions for filing returns (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-91 45 IAC 3.1-1-91 Declarations of estimated tax by individuals
45 IAC 3.1-1-91 Declarations of estimated tax by individuals
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-4
Sec. 91. Declarations of Estimated Tax By Individuals. An individual who does not have Indiana Adjusted Gross Income Tax or County Adjusted Gross Income Tax withheld from his wages on a regular basis is required to file a Declaration of Estimated Tax if he owes $100.00 or more of Indiana Adjusted Gross Income Tax or County Adjusted Gross Income Tax. Specifically, he will declare the amount of tax estimated for the current year and submit quarterly payments to prepay the tax. Also, individuals who have tax withheld by an employer are required to file a declaration if they have income other than wages in excess of $5,000.00 which is not covered by withholding. The following schedule illustrates the determination of the declared amount:
| (A) | Total Estimated Income in current year | $ |
| (B) | Total Exemption | $ |
| (C) | Amount subject to tax (line A less line B) | $ |
| (D) | Amount of State Tax (line C x 2%) | $ |
| (E) | Estimated State Tax Withheld by employer (if any) | $ |
| (F) | Amount of State Declaration (line D less line E) (Enter this amount on Form IT-40, in the space for total State Estimated Tax) | $ |
| (G) | Estimated Amount of County Tax (line C x appropriate county tax rate) | $ |
| (H) | Estimated County Tax Withheld by employer (if any) | $ |
| (I) | Amount of County Declaration (line G, less line H) (Enter this amount on Form IT-40 in the space provided for County Declaration of Estimated Tax) | $ |
An individual subject to estimated tax must, when filling out his tax return for the previous year, make a Declaration of Estimated Tax for the current year; i.e., 1978 estimated tax must be declared and shown on the 1977 income tax return. The taxpayer is then required to add one fourth (1/4) of the declared estimated tax to his tax due for the preceding year. The remainder of his estimated tax due is to be made in three quarterly payments. The subsequent quarterly payments are to be made on voucher form ES-40.
If a taxpayer has estimated his tax in the previous year he will receive vouchers and envelopes with his return for quarterly payments of his estimated tax. If this is his first year to estimate, the vouchers and envelopes will be sent to him after he makes a declaration on his individual income tax return.
EXAMPLE: Mr. Smith, while completing his 1977 Indiana return in March of 1978, determines that he will owe the State $100.00 of Indiana Adjusted Gross Income Tax for 1978. He then declares $100.00 for 1978 on the appropriate line of his 1977 return and includes $25.00 [one fourth (1/4) of his 1978 estimated tax] with his payment of 1977 taxes. He pays the remaining three fourths (3/4) of his estimated tax in three (3) quarterly payments of $25.00 (June 15, September 15, and January 15).
A declaration may be made after the Individual Income Tax Return has been filed by filling out a voucher which the Department of Revenue will furnish on request, along with a remittance in the appropriate amount. To amend an estimate, a voucher should be submitted with the necessary changes and remittance reflecting same. No other form is necessary.
However, an estimated tax payment may not be made on a prior-year return. If the taxpayer is not filing a current-year return, then estimated payments must be made on a voucher. NOTE: The Department does not send quarterly notices of estimated tax due, but rather it is the responsibility of the taxpayer to send in his payments with the appropriate voucher.
PENALTIES:
A penalty may be assessed for failure to make sufficient payment of estimated tax. Penalty is computed at a rate of 8% per annum on the amount of unpaid tax.
EXCEPTIONS:
If at least two-thirds (2/3) of total gross income from all sources is attributable to farming or fishing (including oyster farming) a declaration of estimated tax need not be made if the individual's income tax return is filed any time on or before March 1 of the succeeding year (IRC §6073b).
In addition, the Department will not assess penalty for underpayment of estimated tax if the taxpayer falls within the exceptions of IRC §6654d.
(Department of State Revenue; Reg 6-3-4-4(010); filed Oct 15, 1979, 11:15 am: 2 IR 1544; errata, 2 IR 1743)
45 IAC 3.1-1-92 45 IAC 3.1-1-92 Declarations of estimated tax by corporations
45 IAC 3.1-1-92 Declarations of estimated tax by corporations
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-4
Sec. 92. Declaration of Estimated Tax By Corporations. Corporations are required under Indiana law to make estimated payments of both gross and adjusted gross income tax, as well as supplemental net income tax.
Any corporation whose gross income tax liability exceeds $250.00 ($25.00 prior to January 1, 1978) per quarter is required to file a Corporation Quarterly Income Tax Return, Form IT-6, within thirty (30) days after the close of the quarter. Failure to make quarterly payments of gross income tax will result in a 10% penalty together with interest at 8% per annum.
Corporations are required to make quarterly payments of the adjusted gross income tax when the estimated annual amount of such tax exceeds the gross income tax by more than $1,000.00. Quarterly payments of supplemental net income tax are required when the estimated annual amount of such tax exceeds $1,000.00. Failure to make quarterly payments will result in an 8% penalty as explained in IC 6-3-4-4(c).
Tax booklets which include the necessary quarterly and annual tax returns will be mailed automatically once the corporation is established on the mailing list after the initial return is filed.
Use of the correct Federal Identification Number is most important in assuring credit to the proper account. If the I.D. number is changed in any way, an explanation for the change should be sent to the Department immediately.
All taxpayers are cautioned that fifth quarter or supplemental payments with extensions are to be clearly designated as such so that the payment is not applied to a subsequent taxable year. In addition, all taxpayers should note that refunds derived from filing the annual corporate income tax return cannot be applied to the next taxable year's quarterly estimated liability. If a taxpayer has overpaid quarterly payments, the credit must be claimed on the annual corporate return to obtain a refund. If a taxpayer remits one check for the entire remainder of a year's estimated liability, no further quarterly returns should be filed with the Department after the date of the payment. It is important to note that all checks remitted to the Department should be accompanied by a return or a complete explanation for the payment.
| EXAMPLES OF QUARTERLY INCOME TAX PAYMENTS | ||||
| EXAMPLE A | ||||
| (1) Estimated Adjusted Gross Income for the quarterly period | $1,025,000 | |||
| (2) Estimated Adjusted Gross Income Tax (3%) | 30,750 | |||
| (3) Gross Income Tax | 30,250 | |||
| (4) Excess Line 2 minus Line 3 | 500 | |||
| Quarterly Tax Payments-Gross Income Tax | $30,250 | |||
| Adjusted Gross Income Tax | 500 | |||
| Total | $ 30,750.00 | |||
| Supplemental Net Income Tax- | ||||
| Supplemental Net Income for the quarterly period-Subtract the greater of the estimated adjusted gross income tax or gross income tax from adjusted gross income | $994,250.00 | |||
| Supplemental Net Income Tax (3%) | 29,827.50 | |||
| Quarterly tax payment | $ 29,827.50 | |||
| Total Quarterly Payment | $ 60,577.50 | |||
| EXAMPLE B | ||||
| (1) Estimated Adjusted Gross Income for the quarterly period | $1,000,000.00 | |||
| (2) Estimated Adjusted Gross Income Tax (3%) | 30,000.00 | |||
| (3) Gross Income Tax31,250.00 | ||||
| (4) Excess Line 2 minus Line 3 | -0- | |||
| Quarterly Tax Payment-Gross Income tax | $31,250.00 | |||
| Adjusted Gross Income Tax | -0- | |||
| Total | $ 31,250.00 | |||
| Supplemental Net Income Tax | ||||
| Supplemental Net Income for the quarterly period-Subtract the greater of the estimated adjusted gross income tax or gross income tax from adjusted gross income | $968,750.00 | |||
| Supplemental Net Income Tax (3%) | $29,062.50 | |||
| Quarterly tax payment | $ 29,062.50 | |||
| Total Quarterly Payment | $ 60,312.50 |
PENALTIES
Eight percent (8%) penalty per annum shall be assessed by the Department on corporations failing to make payments as required of the adjusted gross income tax and the supplemental net income tax; however, no penalty shall be assessed as to any quarterly payment which equals or exceeds twenty percent (20%) of the final tax liability for such taxable year, or as to any quarterly payment which shall equal or exceed twenty-five percent (25%) of the final tax liability for the taxpayer's previous taxable year. The eight percent (8%) per annum penalty as to any underpayment of tax on a quarterly return shall only be assessed on the difference between the actual amount paid by the corporation on such quarterly return and twenty-five percent (25%) of the corporation's final adjusted gross income tax liability or supplemental net income tax liability, as the case may be for such taxable year.
NOTE:
The information contained herein with regard to the adjusted gross income tax and the supplemental net income tax is not applicable to municipal corporations and not-for-profit organizations which are exempt from Federal income taxes.
(Department of State Revenue; Reg 6-3-4-4(010); filed Oct 15, 1979, 11:15 am: 2 IR 1545; errata, 2 IR 1743)
45 IAC 3.1-1-93 45 IAC 3.1-1-93 Copies of federal returns; social security numbers; confidentiality (Repealed)
45 IAC 3.1-1-93 Copies of federal returns; social security numbers; confidentiality (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-94 45 IAC 3.1-1-94 Notice of change in federal return or liability
45 IAC 3.1-1-94 Notice of change in federal return or liability
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-6
Sec. 94. Notice of Modification. All taxpayers, except resident individuals, are required to file a notice with the Department within 120 days after a modification of a Federal income tax return or a modification of Federal income tax liability explaining the modification. For individual taxpayers, Form IT-40X must be used for this purpose. Taxpayers other than individuals should use the proper annual income tax return, and should mark it "amended."
(Department of State Revenue; Reg 6-3-4-6(b)(010); filed Oct 15, 1979, 11:15 am: 2 IR 1546; errata, 2 IR 1743)
45 IAC 3.1-1-95 45 IAC 3.1-1-95 Prescribed forms (Repealed)
45 IAC 3.1-1-95 Prescribed forms (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-96 45 IAC 3.1-1-96 Copies of forms (Repealed)
45 IAC 3.1-1-96 Copies of forms (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-97 45 IAC 3.1-1-97 Returns and reports by withholding agents
45 IAC 3.1-1-97 Returns and reports by withholding agents
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 97. Withholding Agent's Returns and Reports to the Department. Employers who make payments of wages subject to the Adjusted Gross Income Tax Act, and who are required to withhold Federal taxes pursuant to the Internal Revenue Code (USC Title 26), are required to withhold from employees' wages Adjusted Gross and County Adjusted Gross Income Tax.
Withholding agents who are required to withhold Indiana Adjusted Gross Income Tax and County Adjusted Gross Income Tax (where applicable), shall make return of and payment to the Department monthly whenever the amount of tax due, for either County and State, exceeds an aggregate of $50 per month with such payment due on the thirtieth (30th) day of the following month. Where the aggregate amount of tax due under the Adjusted Gross Income Tax or County Adjusted Gross Income Tax does not exceed $50 per month, payment and return of the amount of tax due shall be made quarterly, with such payment due on the last day of the month following the end of the quarter. The following criteria should be used:
(1) A withholding agent who falls within the monthly reporting system, due to maintaining an aggregate of fifty dollars ($50) per month, but who in any month thereafter may maintain an aggregate of less than fifty dollars ($50) per month, should remit that lesser amount on a monthly basis so as to maintain the status of being on the monthly system.
(2) A withholding agent who falls within the quarterly reporting system, due to not maintaining an aggregate of fifty dollars ($50) per month, but who in any month thereafter does maintain an aggregate of fifty dollars ($50) per month, should then, and thereafter, begin reporting and making returns on a monthly basis and thereby maintain the status of being on the monthly system.
EXAMPLES:
(1) A withholding agent withheld $45.00 state income tax and $20.00 county income tax during July, 1978. Since the aggregate withheld exceeds $50.00 per month the withholding agent falls within the monthly system and must submit the return and make payment for the month of July no later than August 30, 1978.
(2) A withholding agent withheld $30.00 state income tax and $10.00 county income tax during July, 1978. Since the aggregate does not exceed $50.00 per month the withholding agent must submit a return and make payment on a quarterly basis with such return and payment due on or before the last day of the month following the end of the quarter.
All amounts deducted and withheld by an employer shall immediately upon deduction become the money of the State. All employers who make a declaration of withholding must provide each employee annually, but not later than January 30, a statement on Form W-2 of the total amount of wages paid, and adjusted gross and county adjusted gross income tax withheld. In the case of delinquency or nonpayment of withholding tax, the employer is liable for such tax, penalties, and interest. If the employer is a corporation or partnership, all officers, employees, or members under a duty to withhold and remit adjusted gross income tax are personally liable for such taxes, penalty, and interest.
The withholding provisions of this Act apply to both resident and nonresident employers having employees resident and/or working in the state (except employees resident in states having reciprocal agreements with Indiana).
(Department of State Revenue; Reg 6-3-4-8(010); filed Oct 15, 1979, 11:15 am: 2 IR 1547; errata, 2 IR 1743)
45 IAC 3.1-1-98 45 IAC 3.1-1-98 Withholding and returns by interstate transportation companies
45 IAC 3.1-1-98 Withholding and returns by interstate transportation companies
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 98. Withholding of Compensation Paid To Employees of Interstate Transportation Companies. The following policy prescribed by the Department applies to the withholding of state income tax on transportation companies including railroads, motor carriers, airlines, and water carriers on compensation paid to their employees who work in more than one state.
Transportation companies who employ Indiana residents in this State will continue to withhold the Indiana Adjusted Gross Income Tax as prescribed under Section 408 of the Indiana Adjusted Gross Income Tax Act of 1963, as amended. In the event that the Indiana resident earns more than 50% of his compensation outside of Indiana the employer, under Public Law 91-569, is required to withhold the tax for the state in which more than 50% of the compensation is earned; however, if more than 50% of the compensation is not earned in any state, the employer must withhold on the basis of residency. If tax is withheld on an Indiana resident and remitted to a state other than Indiana, the employer must file an annual information return reporting any wages on those Indiana residents subject to the withholding provisions of another state.
It is the opinion of this Department that the 50% test prescribed under this Federal Act does not apply to Indiana residents employed by a railroad, motor carrier, airline or water carrier in the States of Georgia, Illinois, Kentucky, Michigan, Mississippi, North Carolina, Ohio and Wisconsin. Since Indiana has reciprocal tax agreements with the above states for transportation company employees, any tax assessed on an Indiana transportation employee other than Indiana adjusted gross income tax would be inoperative as a result of these agreements. Nonresident transportation employees who are employed in Indiana and receive more than 50% of their compensation for services performed in this state, are subject to the withholding of the Indiana adjusted gross income tax; however, if the employees subject to Public Law 91-569 are residents of Georgia, Illinois, Kentucky, Michigan, Mississippi, North Carolina, Ohio or Wisconsin, these nonresident employees are not subject to the withholding tax provisions in accordance with the previously mentioned reciprocal agreements. Nonresident employees who are residents of those states having a reciprocal agreement with Indiana should file a certificate of residency with the employer, and the employer should withhold on the basis of residency.
Information returns are required to be submitted by the transportation company to the state of residency of those employees subject to withholding tax as a nonresident employee.
In determining whether more than 50% is earned in the state of employment, the measurement in determining compensation on the various workers is as follows:
Railroad employees assigned to track borne vehicles = Mileage traveled in a state
Maintenance and terminal employees = Time worked in a state
Motor Carrier employees operating vehicle = Mileage traveled in a state
Employees operating a water carrier = Time worked in a state
Employees operating an aircraft = Scheduled flight time
(Department of State Revenue; Reg 6-3-4-8(020); filed Oct 15, 1979, 11:15 am: 2 IR 1547; errata, 2 IR 1743)
45 IAC 3.1-1-99 45 IAC 3.1-1-99 Withholding for church and clergy
45 IAC 3.1-1-99 Withholding for church and clergy
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 99. Withholding Instructions for Church and Clergy. Ministers are not subject to the withholding tax but may allow their tax to be withheld on a voluntary basis. Those ministers whose Indiana adjusted gross income tax liability is $100.00 in excess of any taxes withheld must file a Declaration of Estimated Tax on Form IT-40ES by April 15.
Every withholding agent who employs any persons in the performance of personal service is subject to the same rules and regulations contained in the Internal Revenue Code. Even though a minister may or may not choose to have the tax withheld on his own salary, others employed by the church in the performance of a personal service must pay withholding tax and the church would act as the withholding agent.
Liability of Withholding Agent:
(1) Each church is liable for the tax which is required to be withheld.
(2) Each church is required to keep correct records of each person's income and tax withheld.
(3) At the end of every calendar year, each church is required to give each person a statement of his income and tax withheld.
(4) Each church is required to make quarterly returns on forms prescribed by the Department, such forms to be mailed, together with remittance of the tax to the Department of Revenue.
(Department of State Revenue; Reg 6-3-4-8(030); filed Oct 15, 1979, 11:15 am: 2 IR 1548; errata, 2 IR 1743)
45 IAC 3.1-1-100 45 IAC 3.1-1-100 Withholding from certain types of employees and incomes
45 IAC 3.1-1-100 Withholding from certain types of employees and incomes
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-8; IC 6-3-4-8.1; IC 6-3-4-9; IC 6-8-8-1
Sec. 100. Withholding Information For Part-Time Employees and Other Miscellaneous Withholding Requirements.
WITHHOLDING FROM INCOME OF PART-TIME OR "SUMMER" EMPLOYEES
Withholding agents are required to withhold tax, at the applicable rate stated on the rate schedules, from the income of part-time or "summer" employees just as though they were full-time or permanent employees. The fact that the employer or the employee are reasonably, or even absolutely, certain that the employee will not earn income in excess of his or her $1,000.00 exemption has no bearing on withholding the tax by the withholding agent. Similarly, the Internal Revenue Service rules which allow the employee to waive withholding, for federal tax purposes, when the income is not expected to be in excess of the Federal filing requirements and income allowances, have no bearing on withholding taxes from the income of part-time employees for Indiana tax purposes.
WITHHOLDING FROM SUPPLEMENTAL UNEMPLOYMENT COMPENSATION BENEFIT INCOME
Supplemental Unemployment Compensation Benefits paid to an individual are treated as if they were income, to the extent such benefits are includable in the gross income of such individuals, and therefore are subject to withholding by the withholding agent for Indiana tax purposes.
WITHHOLDING FROM PENSION INCOME AND ANNUITY PAYMENTS
Withholding is not required on pension and annuity payments that meet certain qualifications of the Internal Revenue Service, unless the recipient requests that federal income tax be withheld. If such a request is made, the payor must also withhold and remit Indiana adjusted gross income tax.
Pensions and annuities that do not meet the Internal Revenue Service qualifications are considered to be deferred compensation and, therefore, require withholding in the same manner as for wages and salaries.
WITHHOLDING FROM AGRICULTURAL OR CASUAL EMPLOYEES
Withholding agents are not required to withhold Indiana state income tax from payments made to agricultural laborers or casual laborers, such as yardworkers, or domestic employees. Withholding of taxes in such cases must be agreed to by both employer and employee. If the employer does not withhold taxes he should report total annual payments made to each such employee on the Federal Form 1099, or the Indiana Form IT-12A.
WITHHOLDING FROM ATHLETES AND ENTERTAINERS
Athletes and entertainers generally perform under one of the three following types of contracts:
(1) Employees of the promoter or organizer
(2) "Independent contractors"
(3) Employees of a "production company"
The different types of contracts have different withholding requirements and thus, must be treated separately.
(1) The first situation involves athletes and entertainers performing on a salaried basis for example, basketball, hockey, and baseball players. These performers are under contract for a specific time period and they receive a predetermined salary regardless of the number or the location of performances.
Based on these facts, athletes employed by an Indiana professional sports team or an Indiana promoter incur a tax liability on their entire salary. No apportionment will be permitted for out-of-state appearances because the athlete's compensation is unaffected by such appearances.
Because these performers are considered to be employees, withholding is required on their salaries in accordance with the provisions of Regulation 6-3-4-8(010) [45 IAC 3.1-1-97] . Because this compensation is considered to be salary, the reciprocal agreements defined in Regulation 6-3-5-1 (010) [45 IAC 3.1-1-115] are applicable.
(2) The second situation involves performers who directly receive payment for Indiana performances. This situation might include performers in tennis and golf tournaments, nightclubs, and concerts. These performers are not engaged in an employer-employee relationship.
Based on these facts, "independent contractors" incur a tax liability by performing within Indiana. Independent contractors who are Indiana residents are taxable on their entire income, but may receive a credit for taxes paid to other states in accordance with Regulation 6-3-3-3(a)(010) [45 IAC 3.1-1-74] . Because this income is not wages or salary, reciprocity will not apply.
Withholding is not required on this income since it is not wages or salary. These individuals are, however, required to make estimated tax payments if they expect to have an Indiana income tax liability of $100 or more. (See Regulation 6-3-4-4(010) [45 IAC 3.1-1-92] .
There are several means of enforcing the income tax liability of an independent contractor. The Department may issue a jeopardy assessment against a taxpayer in accordance with the provisions of Regulation 6-3-6-1(g)(010). This same regulation allows the Department to accept a surety bond from the taxpayer. In addition, the Reciprocal Full Faith and Credit Act (IC 6-8-8-1 et seq.) authorizes the Department to bring suit against a taxpayer in his or her state of residence.
(3) The third situation arises when a performer organizes a "production company" to receive payment for his performances rather than receiving payment directly. The production company then pays the performer a salary.
The withholding requirements for payments made to a production company vary. If the company is incorporated, gross income tax must be withheld from any payments, as provided in IC 6-2-1-22(f) [Repealed by P.L.77-1981, SECTION 22. Recodified as IC 6-2.1-6-1.] If the company is a partnership or a sole proprietorship, withholding is not required; however, the partners or proprietor are required to make estimated tax payments as provided in Regulation 6-3-4-4(010) [45 IAC 3.1-1-91] . Enforcement of the tax liability in case of a failure to make estimated tax payments is accomplished through the means outlined above for enforcing the liability of an independent contractor.
The withholding requirements for payments made by a production company to its employees vary. If the employees are paid on a salaried basis, their situation is analogous to that of professional team athletes explained above, and withholding is required if the production company has an Indiana business situs, or if the employee is an Indiana resident. Payments made to those who are not employees i.e., payments made on a per-performance basis, do not require withholding because this income is not wages. The recipient must make estimated tax payments, and enforcement is identical to the enforcement of the liability of independent contractors.
(Department of State Revenue; Reg 6-3-4-8(040); filed Oct 15, 1979, 11:15 am: 2 IR 1548; errata, 2 IR 1743)
45 IAC 3.1-1-101 45 IAC 3.1-1-101 Annual reconciliation of employers' withholding tax
45 IAC 3.1-1-101 Annual reconciliation of employers' withholding tax
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 101. Annual Reconciliation of Employers Withholding Tax, Form WH-3. Each withholding agent shall send or deliver the state copy of each withholding tax statement prepared by him, to the Department not later than the last day of February, immediately following the end of the calendar year. They shall be attached to a report showing the amount of Indiana Adjusted Gross Income Tax, if any, withheld and paid to the Department for the calendar year as indicated by the monthly or quarterly returns and a reconciliation with the total amount of tax withheld during this calendar year as reflected by the withholding statement. The County Adjusted Gross Income Tax shown on Form WH-3 should be indicated in the same manner as on Form WH-1, with no breakdown by county of individual tax withheld. Only on Form W-2 will the county tax be indicated as previously described. All reports and returns shall be on a calendar year basis, even though the withholding agent is on a fiscal year reporting basis.
(Department of State Revenue; Reg 6-3-4-8(050); filed Oct 15, 1979, 11:15 am: 2 IR 1550; errata, 2 IR 1743)
45 IAC 3.1-1-102 45 IAC 3.1-1-102 Changes in form WH-4
45 IAC 3.1-1-102 Changes in form WH-4
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 102. Refiling of State Form WH-4. The Employee's Withholding Exemption and County Residence Certificate (Form WH-4) must be refiled with the employer to show any change in residence or number of exemptions.
Change of Residence
All employees who change their county of residence or their county of principal work activity are required to file a new state Form WH-4 by January 1 of the following year.
Change in Exemptions
You may file a new WH-4 at any time if the number of your exemptions increase. You must file a new WH-4 within 10 days if the number of exemptions previously claimed by you decreases for any of the following reasons:
(a) Your wife (or husband) for whom you have been claiming an exemption is divorced or legally separated, or claims her (or his) own exemption on a separate certificate.
(b) The support of a dependent for whom you claim an exemption is taken over by someone else, so that you no longer expect to furnish more than half the support for the year.
(c) You find that a dependent for whom you claim an exemption will receive $750.00 or more of income of his own during the year.
Other decreases in exemptions such as the death of a spouse or a dependent, do not affect your withholding until the next year, but require the filing of a new WH-4 by December 1 of the year in which they occur.
(Department of State Revenue; Reg 6-3-4-8(060); filed Oct 15, 1979, 11:15 am: 2 IR 1550; errata, 2 IR 1743)
45 IAC 3.1-1-103 45 IAC 3.1-1-103 Refund or credit for excess withholding
45 IAC 3.1-1-103 Refund or credit for excess withholding
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4
Sec. 103. Refunds of Excess Withholding and Income Tax Credits. If the amount of withholding exceeds an employee's tax as imposed by these regulations [45 IAC 3.1] , the Indiana Department of Revenue will refund the amount of excess withholding deduction; however, such excess or part thereof may be applied against any outstanding claim or liability which the employee owes the Department. Neither will a refund of excess withholding be made to an employee who fails to file his Indiana Individual Income Tax Return within two (2) years from its initial due date, nor will any tax refund be made for an amount less than one dollar ($1.00).
An excess withholding deduction in no way relieves any employee from the obligation of filing an Indiana Individual Income Tax Return by the fifteenth day of the fourth month following the close of the individual's taxable year. In the case of withholding deductions not exceeding or not equaling the amount of tax due, the unpaid tax must be paid on the due date of the return.
(Department of State Revenue; Reg 6-3-4-8(070); filed Oct 15, 1979, 11:15 am: 2 IR 1550; errata, 2 IR 1743)
45 IAC 3.1-1-104 45 IAC 3.1-1-104 Information returns (Repealed)
45 IAC 3.1-1-104 Information returns (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-105 45 IAC 3.1-1-105 Annual return of partnership or trust fund
45 IAC 3.1-1-105 Annual return of partnership or trust fund
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-10; IC 6-3-4-11
Sec. 105. (a) A partnership must file an annual return, IT-65, with the department, disclosing each partner's distributive share of partnership income, on or before the fifteenth day of the fourth month following the close of the partnership's accounting year. Any partnership doing business in Indiana or deriving gross income from sources within Indiana is required to file the return.
(b) As used in this section, "partner's distributive share" means the amount determined under Section 704 of the Internal Revenue Code and its prescribed regulations before any modifications required by Indiana tax statutes.
(c) A Form IT-65 must be filed with Indiana by a bank with common trust funds filing a Form 1065 for federal income tax purposes. When reporting for Indiana purposes, a bank with common trust funds must comply with the provisions of Regulation 1.6032-1 of the Internal Revenue Code.
(Department of State Revenue; Reg 6-3-4-10(010); filed Oct 15, 1979, 11:15 a.m.: 2 IR 1551; errata, 2 IR 1743; filed May 13, 1993, 5:00 p.m.: 16 IR 2344)
45 IAC 3.1-1-106 45 IAC 3.1-1-106 Partner's distributive share
45 IAC 3.1-1-106 Partner's distributive share
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3-2-2; IC 6-3-4-11
Sec. 106. (a) A partnership is not subject to the adjusted gross income tax. The partners will include their share of partnership income whether distributed or undistributed on their separate or individual returns.
(b) An individual will report as follows:
(1) The distributive share of a resident partner will be reported in total no matter where the partnership's business is located or in which states it does business.
(2) The distributive share of a nonresident partner will be reported after apportionment to determine the partnership income derived from sources within Indiana. This determination will be accomplished by use of the apportionment formula described in IC 6-3-2-2(b).
(3) A resident partner's distributive share of income will be adjusted by the partner's proportionate share of the partnership's income that is exempt from taxation under the Constitution and statutes of the United States and by the partner's proportionate share of the partnership's deductions allowed or allowable under Section 62 of the Internal Revenue Code for taxes based on or measured by income and levied at the state level by any state of the United States or for taxes on property levied by any subdivision of any state of the United States.
(4) A nonresident partner's distributive share of income will be adjusted by the partner's proportionate share of the partnership's income that is exempt from taxation under the Constitution and statutes of the United States and by the partner's proportionate share of the partnership's deductions allowed or allowable under Section 62 of the Internal Revenue Code for taxes based on or measured by income levied at the state level by any state of the United States or for taxes on property levied by any subdivision of any state of the United States determined by use of the apportionment formula described in IC 6-3-2-2(b).
(c) A corporate partner will report its share in accordance with section 153 of this rule.
(Department of State Revenue; Reg 6-3-4-11(010); filed Oct 15, 1979, 11:15 a.m.: 2 IR 1551; errata, 2 IR 1743; filed May 13, 1993, 5:00 p.m.: 16 IR 2344)
45 IAC 3.1-1-107 45 IAC 3.1-1-107 Partnership withholding requirements
45 IAC 3.1-1-107 Partnership withholding requirements
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2; IC 6-3-4-12; IC 6-3.5
Sec. 107. (a) A partnership is required to withhold income taxes at the rates provided for under IC 6-2.1, IC 6-3, and IC 6-3.5 on any nonresident partner's distributive share of partnership income at the time the income is paid or credited to such partner as follows:
(1) For an individual partner, the adjusted gross income tax withheld shall be based on Indiana source income only, as determined by use of the apportionment formula described in IC 6-3-2-2(b), if applicable. This withholding requirement does not apply to withdrawals from the partner's drawing accounts, but applies to distributions to their accounts in the form of credits or payments based on anticipated profits or actual current profits.
(2) For a partner other than an individual partner, the income tax withheld may be calculated using any reasonable method designed to reflect the ultimate tax liability due Indiana because of the partnership's activities. As used in this section, "nonresident corporate partner" does not include a foreign corporation qualified to do business in Indiana.
(b) The partnership shall file a return and pay the tax on a monthly basis. The return and payment are due the thirtieth day of the month following the month for which the tax was withheld. However, if the total income taxes withheld by the partnership are less than fifty dollars ($50) per month, the tax shall be paid and returns remitted quarterly on a calendar year basis, with payment due the last day of the month following the close of the calendar quarter. If a partnership is withholding on a monthly basis but in any month withholds less than fifty dollars ($50), the lesser amount shall be remitted on a monthly basis to maintain the status of monthly reporting.
(c) If the partnership pays or credits amounts to its nonresident partners only one (1) time each year, it will be permitted to file one (1) return and payment each year. The return and payment are due thirty (30) days after the partnership's year end.
(d) The withholding requirements of IC 6-3-4-12 do not relieve any partnership from filing its annual return, IT-65, nor do they relieve any nonresident partner from filing an annual income tax return.
(e) For individual partners only, a partnership is allowed to file a composite adjusted gross income tax return on behalf of some or all non-Indiana resident partners if the partnership complies with all of the requirements outlined in Income Tax Information Bulletin #72 that is in effect for the taxable year in question. An individual nonresident partner who properly elects to participate in the composite return will not be required to file an individual adjusted gross income tax return.
(Department of State Revenue; Reg 6-3-4-12(010); filed Oct 15, 1979, 11:15 a.m.: 2 IR 1551; errata, 2 IR 1743; filed May 13, 1993, 5:00 p.m.: 16 IR 2345)
45 IAC 3.1-1-108 45 IAC 3.1-1-108 Partnership withholding returns
45 IAC 3.1-1-108 Partnership withholding returns
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-8.1; IC 6-3-4-12
Sec. 108. Partnership Withholding Returns. Partnerships required to withhold adjusted gross income tax under IC 6-3-4-12 shall make returns (Form WH-1) with each payment of tax to the Department, disclosing thereon the total amounts paid or credited to nonresident partners, the tax withheld therefrom, and such other information as the Department may require. The partnership must also file an annual withholding return, Form WH-3 (including a copy of the WH-18 furnished to each nonresident) within thirty (30) days of the close of the calendar year. The partnership must furnish Form WH-18 to each nonresident partner not later than thirty (30) days from the close of the calendar year as proof that the tax upon his share of the partnership income has been withheld.
(Department of State Revenue; Reg 6-3-4-12(020); filed Oct 15, 1979, 11:15 am: 2 IR 1552; errata, 2 IR 1743)
45 IAC 3.1-1-109 45 IAC 3.1-1-109 Withholding requirements for subchapter S corporations
45 IAC 3.1-1-109 Withholding requirements for subchapter S corporations
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-8.1; IC 6-3-4-13
Sec. 109. Subchapter S Corporations–Withholding Requirements. Small business corporations electing Subchapter S status under Internal Revenue Code section 1372 are required to withhold adjusted gross income tax and county adjusted gross income tax on any nonresident shareholder's share of taxable income of the corporation, whether distributed or undistributed, and pay such amounts to the Department in the manner described in Regulation 6-3-4-12(010) [45 IAC 3.1-1-107] and (020) [45 IAC 3.1-1-108] . Such corporations shall make monthly (or quarterly) and annual returns as provided in Regulation 6-3-4-12(020) [45 IAC 3.1-1-108] and furnish a copy of form WH-18 to each nonresident shareholder as provided in that regulation.
(Department of State Revenue; Reg 6-3-4-13(010); filed Oct 15, 1979, 11:15 am: 2 IR 1552; errata, 2 IR 1743)
45 IAC 3.1-1-110 45 IAC 3.1-1-110 Consolidated returns of affiliated groups
45 IAC 3.1-1-110 Consolidated returns of affiliated groups
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-14
Sec. 110. Consolidated Returns. An affiliated group as defined in IC 6-3-4-14(b) may file consolidated returns for Adjusted Gross Income Tax and Supplemental Net Income Tax purposes if the members of the affiliated group consent to follow the provision of IC 6-3-4-14 and the regulations established thereunder, including Federal regulations promulgated pursuant to Internal Revenue Code section 1502 which are incorporated by reference in IC 6-3-4-14. The inclusion of a member of an affiliated group in the consolidated return is deemed to be its consent to the consolidated filing. Once an election is made to file consolidated, a taxpayer must obtain written permission from the Department to change from this method of reporting.
Taxpayers filing consolidated returns should notify the Department of their election to so file by attaching to their first consolidated return a statement indicating which corporations are joining in the return. In addition, a worksheet must accompany all consolidated returns showing the consolidated income of the affiliates.
(Department of State Revenue; Reg 6-3-4-14(010); filed Oct 15, 1979, 11:15 am: 2 IR 1552; errata, 2 IR 1743)
45 IAC 3.1-1-111 45 IAC 3.1-1-111 Membership in affiliated groups; bank holding companies
45 IAC 3.1-1-111 Membership in affiliated groups; bank holding companies
Authority: IC 6-8.1-3-3
Affected: IC 6-3-2-2; IC 6-3-4-14
Sec. 111. Affiliated Group. The Adjusted Gross Income Tax Act adopts the definition of "affiliated group" contained in Internal Revenue Code section 1504, except that no member of the affiliated group may be included in the Indiana return unless it has adjusted gross income derived from sources within the state, as that phrase is defined in IC 6-3-2-2. For purposes of this subsection, "Adjusted Gross Income derived from sources within the state" means either income or losses derived from activities within the state.
Domestic International Sales Corporations (DISC'S) which are prohibited under the Internal Revenue Code from filing consolidated returns may not be included in the affiliated group for Indiana adjusted gross income tax purposes.
If any bank is a member of an affiliated group for Federal income tax purposes, it cannot be included as an affiliated member for Indiana adjusted gross income tax purposes, since the banking entity is not subject to the adjusted gross income tax. Any gross income tax liability of a bank must be added separately after the composite tax of the affiliated group has been computed. For supplemental net income tax purposes, the members of an affiliated group, including the banking entity, may compute the supplemental net income tax on a consolidated basis. Since banks are not included in the consolidation under the Adjusted Gross Income Tax Act, a separate schedule must accompany the consolidated return in order to compute the adjusted gross income of the affiliated group and subsequently the supplemental net income tax liability.
In the case of a bank holding company, the holding company may be allowed a special deduction for dividends received from its banking entity for Indiana adjusted gross income tax purposes in accordance with section 243(a)(1) of the Internal Revenue Code. The 100% dividend exclusion for those holding companies filing a consolidated return does not apply since, for Indiana adjusted gross income tax purposes, the banking entity is not taxable under the Act and thus cannot be part of the consolidation.
(Department of State Revenue; Reg 6-3-4-14(020); filed Oct 15, 1979, 11:15 am: 2 IR 1552; errata, 2 IR 1743)
45 IAC 3.1-1-112 45 IAC 3.1-1-112 Consolidated returns for other taxes not required
45 IAC 3.1-1-112 Consolidated returns for other taxes not required
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-14
Sec. 112. Consolidated Indiana Gross Income Tax and Federal Income Tax Returns. Whether an affiliated group is or is not filing Indiana gross and/or Federal income tax returns on a consolidated basis has no bearing on its eligibility to file consolidated adjusted gross income tax returns. However, the Department strongly recommends that taxpayers filing on a consolidated basis for purposes of one tax, do likewise for purposes of all taxes. If returns are filed separately for one tax and consolidated for the other, the burden will be on the taxpayers to provide a complete breakdown of the affiliated corporations' gross, adjusted gross, and supplemental net income tax liabilities, quarter payments, and other credits.
(Department of State Revenue; Reg 6-3-4-14(030); filed Oct 15, 1979, 11:15 am: 2 IR 1553; errata, 2 IR 1743)
45 IAC 3.1-1-113 45 IAC 3.1-1-113 Withholding on distributions to nonresident beneficiaries of Indiana trusts and estates
45 IAC 3.1-1-113 Withholding on distributions to nonresident beneficiaries of Indiana trusts and estates
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-15; IC 6-3-6; IC 6-8.1-10
Sec. 113. Withholding on Distributions To Nonresident Beneficiaries of Indiana Trusts and Estates. Beginning January 1, 1978, Indiana trusts and estates distributing income subject to withholding to nonresident beneficiaries are required to withhold adjusted gross income tax from such distribution. "Income subject to withholding" is defined as all income subject to adjusted gross income tax, except interest and dividends. An allowance is made for expenses, administrative fees, a personal exemption, and other allowable adjustments. Examples of income subject to withholding include farm income, business income, and rents and royalties from Indiana real estate.
These withholding provisions apply only to distributions to nonresident beneficiaries. A beneficiary's residency should be determined at the time of distribution. However, if a resident beneficiary later becomes a nonresident, the fiduciary is required to withhold on all subsequent payments to that beneficiary. Part-year residents and nonresidents should take credit on their adjusted gross income tax returns for any tax withheld.
The withholding rate for these fiduciaries is two percent (2%). Any deficiency in taxes withheld and remitted to the state will subject the trust or estate to the penalties and interest imposed by IC 6-3-6. The Department may, at its option, require the withholding agent to post a bond to ensure payment of the tax.
(Department of State Revenue; Reg 6-3-4-15(010); filed Oct 15, 1979, 11:15 am: 2 IR 1553; errata, 2 IR 1743)
45 IAC 3.1-1-114 45 IAC 3.1-1-114 Withholding returns and payments by trusts and estates
45 IAC 3.1-1-114 Withholding returns and payments by trusts and estates
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-15
Sec. 114. Withholding Returns and Remittances of Trusts and Estates. Trusts and estates required to withhold adjusted gross income tax by IC 6-3-4-15 will file monthly returns on Form WH-1. Remittance will be made with the return, and such remittance will be due on the thirtieth day of the month following the month during which the tax was withheld. If the fiduciary cannot determine what part of the distribution is made up of "income subject to withholding," the Department will permit the tax to be remitted when such determination can be made, i.e., at the end of the calendar or fiscal year when the net profits of a business can be determined.
Trusts and estates must furnish to each nonresident beneficiary a Form WH-18 by the thirtieth day of the month following the close of the taxable year. This statement will indicate the total distributions to the beneficiary for the year and the amount of tax withheld, and will accompany the beneficiary's annual return as proof of payment.
(Department of State Revenue; Reg 6-3-4-15(020); filed Oct 15, 1979, 11:15 am: 2 IR 1553; errata, 2 IR 1743)
45 IAC 3.1-1-115 45 IAC 3.1-1-115 Reciprocal agreement states
45 IAC 3.1-1-115 Reciprocal agreement states
Authority: IC 6-8.1-3-3
Affected: IC 6-3-5-1
Sec. 115. Reciprocity Agreements. Reciprocal income tax agreements now exist between Indiana and the states of Illinois, Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin. The agreements provide that Indiana will not impose its adjusted gross income tax on salaries, wages and commissions earned by legal residents of these states in Indiana and they in turn will not impose their individual income tax on wages, salaries and commissions earned by legal residents of Indiana in those states. Employees resident in any of the above-mentioned states and working in Indiana must submit to their Indiana employer an affidavit as to their legal residence as proof that no withholding of Indiana taxes is required (See Regulation 6-3-3-3(a)(030) [45 IAC 3.1-1-76] ).
(Department of State Revenue; Reg 6-3-5-1(010); filed Oct 15, 1979, 11:15 am: 2 IR 1553; errata, 2 IR 1743)
45 IAC 3.1-1-116 45 IAC 3.1-1-116 Credit against liability instead of refund (Repealed)
45 IAC 3.1-1-116 Credit against liability instead of refund (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-117 45 IAC 3.1-1-117 Payment of refunds; interest (Repealed)
45 IAC 3.1-1-117 Payment of refunds; interest (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-118 45 IAC 3.1-1-118 Demand for additional taxes (Repealed)
45 IAC 3.1-1-118 Demand for additional taxes (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-119 45 IAC 3.1-1-119 Penalty for nonpayment (Repealed)
45 IAC 3.1-1-119 Penalty for nonpayment (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-120 45 IAC 3.1-1-120 Penalty for fraudulent nonpayment (Repealed)
45 IAC 3.1-1-120 Penalty for fraudulent nonpayment (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-121 45 IAC 3.1-1-121 Failure to timely file or pay; penalty (Repealed)
45 IAC 3.1-1-121 Failure to timely file or pay; penalty (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-122 45 IAC 3.1-1-122 Jeopardy assessment and collection (Repealed)
45 IAC 3.1-1-122 Jeopardy assessment and collection (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-123 45 IAC 3.1-1-123 Penalty for failure to file information returns (Repealed)
45 IAC 3.1-1-123 Penalty for failure to file information returns (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-124 45 IAC 3.1-1-124 Preparation of return by department; penalty (Repealed)
45 IAC 3.1-1-124 Preparation of return by department; penalty (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-125 45 IAC 3.1-1-125 Time limitation on assessment by department (Repealed)
45 IAC 3.1-1-125 Time limitation on assessment by department (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-126 45 IAC 3.1-1-126 Proposed assessment of additional tax; protest (Repealed)
45 IAC 3.1-1-126 Proposed assessment of additional tax; protest (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-127 45 IAC 3.1-1-127 Hearings on protest of proposed assessment (Repealed)
45 IAC 3.1-1-127 Hearings on protest of proposed assessment (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-128 45 IAC 3.1-1-128 Agreed extension of time for proposed assessment (Repealed)
45 IAC 3.1-1-128 Agreed extension of time for proposed assessment (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-129 45 IAC 3.1-1-129 Automatic extension of time for proposed assessment (Repealed)
45 IAC 3.1-1-129 Automatic extension of time for proposed assessment (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 547)
45 IAC 3.1-1-130 45 IAC 3.1-1-130 Warrants for collection of taxes; execution (Repealed)
45 IAC 3.1-1-130 Warrants for collection of taxes; execution (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-131 45 IAC 3.1-1-131 Collection by civil action by department (Repealed)
45 IAC 3.1-1-131 Collection by civil action by department (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-132 45 IAC 3.1-1-132 Injunction against continuing business (Repealed)
45 IAC 3.1-1-132 Injunction against continuing business (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-133 45 IAC 3.1-1-133 Receivership (Repealed)
45 IAC 3.1-1-133 Receivership (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-134 45 IAC 3.1-1-134 Cumulative remedies (Repealed)
45 IAC 3.1-1-134 Cumulative remedies (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-135 45 IAC 3.1-1-135 List of unsatisfied warrants (Repealed)
45 IAC 3.1-1-135 List of unsatisfied warrants (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-136 45 IAC 3.1-1-136 Employment of collection attorneys (Repealed)
45 IAC 3.1-1-136 Employment of collection attorneys (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-137 45 IAC 3.1-1-137 Time limitation on refund claims; assessment; interest (Repealed)
45 IAC 3.1-1-137 Time limitation on refund claims; assessment; interest (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-138 45 IAC 3.1-1-138 Filing refund claim (Repealed)
45 IAC 3.1-1-138 Filing refund claim (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-139 45 IAC 3.1-1-139 Hearings on refund claims (Repealed)
45 IAC 3.1-1-139 Hearings on refund claims (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-140 45 IAC 3.1-1-140 Suit for refund (Repealed)
45 IAC 3.1-1-140 Suit for refund (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-141 45 IAC 3.1-1-141 Limited confidentiality of taxpayer information (Repealed)
45 IAC 3.1-1-141 Limited confidentiality of taxpayer information (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-142 45 IAC 3.1-1-142 Corporate dissolution and tax payment (Repealed)
45 IAC 3.1-1-142 Corporate dissolution and tax payment (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-143 45 IAC 3.1-1-143 Retention of taxpayer's books and records (Repealed)
45 IAC 3.1-1-143 Retention of taxpayer's books and records (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-144 45 IAC 3.1-1-144 Disclosure of other tax returns and schedules (Repealed)
45 IAC 3.1-1-144 Disclosure of other tax returns and schedules (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-145 45 IAC 3.1-1-145 False records prohibited (Repealed)
45 IAC 3.1-1-145 False records prohibited (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-146 45 IAC 3.1-1-146 Penalties for tax evasion (Repealed)
45 IAC 3.1-1-146 Penalties for tax evasion (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-147 45 IAC 3.1-1-147 Prosecution of violators (Repealed)
45 IAC 3.1-1-147 Prosecution of violators (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-148 45 IAC 3.1-1-148 Rulemaking powers; distribution of rules and forms (Repealed)
45 IAC 3.1-1-148 Rulemaking powers; distribution of rules and forms (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-149 45 IAC 3.1-1-149 Investigations by department; cooperation (Repealed)
45 IAC 3.1-1-149 Investigations by department; cooperation (Repealed)
(Repealed by Department of State Revenue; filed Oct 1, 1987, 1:30 pm: 11 IR 548)
45 IAC 3.1-1-150 45 IAC 3.1-1-150 Exemptions from gross income tax (Repealed)
45 IAC 3.1-1-150 Exemptions from gross income tax (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-1-151 45 IAC 3.1-1-151 Taxation of partnerships with corporate members (Repealed)
45 IAC 3.1-1-151 Taxation of partnerships with corporate members (Repealed)
(Repealed by Department of State Revenue; filed May 13, 1993, 5:00 p.m.: 16 IR 2346)
45 IAC 3.1-1-152 45 IAC 3.1-1-152 Taxation of partners of partnerships with corporate members (Repealed)
45 IAC 3.1-1-152 Taxation of partners of partnerships with corporate members (Repealed)
(Repealed by Department of State Revenue; filed May 13, 1993, 5:00 p.m.: 16 IR 2346)
45 IAC 3.1-1-153 45 IAC 3.1-1-153 Taxation of a corporate partner
45 IAC 3.1-1-153 Taxation of a corporate partner
Authority: IC 6-8.1-3-3
Affected: IC 6-3
Sec. 153. (a) A corporate partner's share of profit or loss from a partnership will be included in its federal taxable income and therefore generally subject to the same rules as any other adjusted gross income.
(b) If the corporate partner's activities and the partnership's activities constitute a unitary business under established standards, disregarding ownership requirements, the business income of the unitary business attributable to Indiana shall be determined by a three (3) factor formula consisting of property, payroll, and sales of the corporate partner and its share of the partnership's factors for any partnership year ending within or with the corporate partner's income year, with the following modifications:
(1) The value of property which is rented or leased by the corporate partner to the partnership or vice versa shall, with respect to the corporate partner, be excluded from the property factor of the partnership or eliminated to the extent of the corporate partner's interest in the partnership, whichever the case may be, in order to avoid duplication.
(2) Intercompany sales between the corporate partner and the partnership shall be eliminated from the corporate partner's sales factor as follows:
(A) Sales by the corporate partner to the partnership to the extent of the corporate partner's interest in the partnership.
(B) Sales by the partnership to the corporate partner not to exceed the corporate partner's interest in all partnership sales.
(c) If the corporate partner's activities and the partnership's activities do not constitute a unitary business under established standards, disregarding ownership requirements, the corporate partner's share of the partnership income attributable to Indiana shall be determined as follows:
(1) If the partnership derives business income from sources within and without Indiana, the business income derived from sources within Indiana shall be determined by a three (3) factor formula consisting of property, payroll, and sales of the partnership.
(2) If the partnership derives business income from sources entirely within Indiana, or entirely without Indiana, such income shall not be subject to formula apportionment.
(d) A partner's distributive share of income will be adjusted by the partner's proportionate share of the partnership's income that is exempt from taxation under the Constitution and statutes of the United States and by the partner's proportionate share of the partnership's deductions allowed or allowable under Section 63 of the Internal Revenue Code for taxes based on or measured by income and levied at the state level by any state of the United States or for taxes on property levied by any subdivision of any state of the United States.
(e) After determining the amount of business income attributable to Indiana under subsection (c), the corporate partner's distributive share of such income shall be added to the corporate partner's other business income apportioned to Indiana and its nonbusiness income, if any, allocable to Indiana, in determining the corporate partner's total taxable income.
(Department of State Revenue; 45 IAC 3.1-1-153; filed May 13, 1993, 5:00 p.m.: 16 IR 2346)
45 IAC 3.1-1-154 45 IAC 3.1-1-154 Airport development zones
45 IAC 3.1-1-154 Airport development zones
Authority: IC 6-8.1-3-3; IC 8-22-3.5-15
Affected: IC 6-3; IC 8-22-3.5-3; IC 36-3-1
Sec. 154. (a) A person who locates and operates a qualified airport development project in an airport development zone in a consolidated city shall not incur any adjusted gross income tax liability or supplemental net income tax liability as a result of the following activities:
(1) Locating the project in the consolidated city.
(2) The construction or completion of the project.
(3) The employment of personnel or the ownership or rental of property at or in conjunction with the project.
(4) The operation of the project or the activities at or in connection with the project.
In other words, the person's apportionment factor will not change due to the completion or operation of the project. As an example, assume that the project is an airline maintenance facility. At the completion of the project, the facility is worth six hundred million dollars ($600,000,000). The payroll from operating the facility is two hundred million dollars ($200,000,000). The person also realizes fifty million dollars ($50,000,000) in its first year of operations from maintenance performed on airplanes belonging to other parties and from the sale of airplane parts delivered within the airport development zone. These amounts would not appear in either the numerator or the denominator of their respective factors. Also, the person will not be subject to adjusted gross income tax or supplemental net income tax on nonbusiness income earned by the person that is allocable to the airport development zone.
(b) As used in subsection (a), "qualified airport development project" has the same meaning as set forth in IC 8-22-3.5-3.
(c) As used in subsection (a), "airport development zone" means an airport development zone created under IC 8-22-3.5.
(d) As used in subsection (a), "consolidated city" means a city with a population of two hundred fifty thousand (250,000) or more that has become a consolidated city under IC 36-3-1.
(e) The exemption provided by subsection (a) is effective for a period of thirty-five (35) years beginning January 1, 1991.
(Department of State Revenue; 45 IAC 3.1-1-154; filed Feb 25, 1995, 4:30 p.m.: 18 IR 1810)
Rule 2
45 IAC 3.1-2-1 45 IAC 3.1-2-1 Corporations subject to tax (Repealed)
Rule 2. Supplemental Net Income Tax
45 IAC 3.1-2-1 Corporations subject to tax (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-2-2 45 IAC 3.1-2-2 Definition of net income (Repealed)
45 IAC 3.1-2-2 Definition of net income (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-2-3 45 IAC 3.1-2-3 Tax rate (Repealed)
45 IAC 3.1-2-3 Tax rate (Repealed)
(Repealed by Department of State Revenue; filed Feb 18, 1997, 4:00 p.m.: 20 IR 1722)
45 IAC 3.1-2-4 45 IAC 3.1-2-4 Adoption of provisions of adjusted gross income tax; exceptions (Repealed)
45 IAC 3.1-2-4 Adoption of provisions of adjusted gross income tax; exceptions (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
45 IAC 3.1-3 Rule 3. County Adjusted Gross Income Tax (Repealed)
Rule 3. County Adjusted Gross Income Tax (Repealed)
(Repealed by Department of State Revenue; filed Dec 5, 2012, 10:01 a.m.: 20130102-IR-045120429FRA)
Rule 4
45 IAC 3.1-4-1 45 IAC 3.1-4-1 Persons and income subject to tax; administration
Rule 4. Local Income Tax
45 IAC 3.1-4-1 Persons and income subject to tax; administration
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3.6
Sec. 1. (a) The local income tax (LIT) is imposed on individuals who are residents of adopting counties and on individuals who are residents of nonadopting counties but who have their principal place of business or employment in an adopting county.
(b) For residents of adopting counties, the tax is imposed on adjusted gross income as defined in IC 6-3-1-3.5(a).
(c) For residents of nonadopting counties and nonresidents of the state with a principal place of business or employment in an adopting county, the tax is imposed only on the adjusted gross income derived from the principal place of business or employment.
(d) For purposes of determining the adjusted gross income, the adjusted gross income shall be the amount as defined under IC 6-3-1-3.5(a) and shall include all deductions from adjusted gross income permitted under IC 6-3.
(e) For periods ending before January 1, 2017, these rules apply to the county adjusted gross income tax, county option income tax, and county economic development income tax, except as otherwise expressly provided in this rule.
(Department of State Revenue; 45 IAC 3.1-4-1; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-2 45 IAC 3.1-4-2 Tax rates; income subject to tax
45 IAC 3.1-4-2 Tax rates; income subject to tax
Authority: IC 6-8.1-3-3
Affected: IC 6-3.6
Sec. 2. (a) Effective January 1, 2017, the local income tax (LIT) is imposed on residents and nonresidents at the same rate.
(b) Prior to January 1, 2017:
(1) if a county has a county adjusted gross income tax, the nonresident rate is twenty-five hundredths percent (0.25%);
(2) if a county has a county option income tax, the nonresident rate is twenty-five percent (25%) of the rate imposed on residents; and
(3) if a county has a county economic development income tax, the nonresident rate is the same rate imposed on residents.
If a county has a combination of subdivisions (1) and (3) or subdivisions (2) and (3), the resident rates and nonresident rates for each tax type are added together to determine the aggregate resident and nonresident tax rates.
(Department of State Revenue; 45 IAC 3.1-4-2; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; errata filed May 17, 2017, 10:11 a.m.: 20170607-IR-045160491ACA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-3 45 IAC 3.1-4-3 Income subject to LIT
45 IAC 3.1-4-3 Income subject to LIT
Authority: IC 6-8.1-3-3
Affected: IC 6-3.5-7; IC 6-3.6
Sec. 3. (a) For a resident of an adopting county, the following applies:
(1) If an individual's county of residence adopts or has adopted the local income tax (LIT), his or her entire adjusted gross income will be subject to the tax rate adopted in the individual's county of residence.
(2) Notwithstanding subdivision (1), Perry County residents are not subject to tax on income earned in a contiguous county outside Indiana and subject to local income tax in that county. Prior to 2017, this exemption only applies to taxes imposed under IC 6-3.5-7.
(b) For a resident of a nonadopting county and out-of-state residents, if an individual resides in a nonadopting county or outside the state of Indiana, but his or her principal place of business or employment is in an Indiana adopting county, only the adjusted gross income derived from his or her principal place of business or employment in Indiana will be subject to LIT.
(c) For purposes of determining what income is subject to LIT, all income derived from an Indiana county in which the principal place of business or employment is located is subject to LIT as follows:
(1) The income subject to tax includes compensation and self-employment income, as well as net income derived from ownership or beneficial interest in a pass-through entity.
(2) In the case of income derived from the operation of a business (profits from a business but not compensation), only such income derived from the conduct of business in the county of principal place of business or employment will be subject to LIT.
(Department of State Revenue; 45 IAC 3.1-4-3; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-4 45 IAC 3.1-4-4 Persons and income subject to tax; exemptions; joint returns
45 IAC 3.1-4-4 Persons and income subject to tax; exemptions; joint returns
Authority: IC 6-8.1-3-3
Affected: IC 6-3-1-3.5; IC 6-3.6
Sec. 4. (a) An individual is subject to county tax if he or she lives or works in an adopting county on January 1 of the tax year as follows:
(1) A taxpayer's county of residence and principal place of business or employment on this date alone determine whether he or she is subject to local income tax (LIT) for the entire year.
(2) If a taxpayer lives in an adopting county on January 1 and later in the year moves to a nonadopting county, he or she is subject to county tax on his or her adjusted gross income for the entire year.
(3) If a taxpayer lives in a nonadopting county on January 1 and later in the year moves to an adopting county, he or she is not subject to county tax for that year except as provided in subsection (b).
(b) If, on January 1, a taxpayer's county of residence is a nonadopting county, but his or her county of principal place of business or employment is an adopting county, he or she must pay LIT on the income derived from his or her principal place of business or employment for the entire year. Even though he or she may later begin working in a nonadopting county, he or she must pay county tax for the entire year on the income earned from his or her principal activity, even if the principal activity is later conducted in another county.
(c) However, if an individual neither lived nor maintained his or her principal place of business or employment in an adopting county on January 1, he or she is not subject to LIT on any part of his or her income even though his or her county of residence or principal place of business or employment changes to an adopting county during the year.
(d) An individual who as of January 1 maintains his or her principal place of business or employment in an adopting county but is a nonresident of Indiana, or is a resident of Indiana on January 1 but moves out of Indiana during the tax year, is subject to LIT only on income derived from Indiana sources. An individual who as of January 1 had his or her county of residence in an adopting Indiana county is not liable for LIT on income earned outside the state while not a resident of the state.
(e) An individual who as of January 1 lives in an adopting county and moves out-of-state to a reciprocal state, while maintaining his or her Indiana principal place of business or employment, will not owe adjusted gross income tax on the wage income earned after moving out of Indiana. However, LIT will be due on the wage income earned after moving out of Indiana. It should be reported in the county tax schedule of the appropriate tax return.
(f) If an individual is subject to LIT on income from his or her principal place of business or employment, the tax rate shall apply to the taxpayer's adjusted gross income derived from his or her principal place of business or employment for the entire year. Adjusted gross income derived from principal place of business or employment is defined as federal adjusted gross income from that activity after modifications required under IC 6-3-1-3.5(a) against such income.
(g) For purposes of determining whether a deduction is allowable against the adjusted gross income from a principal place of business or employment, the deduction shall be allocated in a manner consistent with the allocation used on the state income tax form filed by the individual. In the case of a filer permitted to complete a return reporting only income derived from activities covered by a reciprocal agreement, the allocation of modifications shall be done in a manner consistent with individuals who otherwise would file a nonresident or part-year resident tax return. For purposes of the county tax portion of a return required for a taxpayer with only income derived from activities covered by a reciprocal agreement, no exemptions shall be permitted on the return.
(Department of State Revenue; 45 IAC 3.1-4-4; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-5 45 IAC 3.1-4-5 Treatment of married individuals filing jointly
45 IAC 3.1-4-5 Treatment of married individuals filing jointly
Authority: IC 6-8.1-3-3
Affected: IC 6-3.6
Sec. 5. (a) Each individual spouse is treated separately under local income tax (LIT). Accordingly, each spouse must determine his or her respective county of residence and county of principal place of business or employment as of January 1 and will compute his or her respective county tax due, based on his or her separate adjusted gross income.
(1) However, for purposes of calculating LIT on a return of a married couple filing jointly, if one (1) spouse has a negative adjusted gross income and the other spouse has a positive adjusted gross income, the negative income may be used to offset the other spouse's positive income.
(2) If one (1) spouse uses the other spouse's negative adjusted gross income to offset the spouse's positive adjusted gross income, the other spouse shall report zero (0) adjusted gross income and shall not be permitted to carry forward any negative adjusted gross income used by the spouse to succeeding tax years.
(b) Except as permitted in subsection (a), if a person files a joint return with his or her spouse and only the person or the person's spouse is taxable for LIT, then the person who is taxable may take all the exemptions claimed on the joint return except the exemptions attributable to the other spouse (for instance, the personal exemption for the spouse and the exemption for taxpayers over sixty-five (65) years of age or blind, or both, for that spouse).
(c) If a person files a joint return and the person is taxable at one (1) rate on his or her income and the person's spouse is taxable at another rate on the spouse's income, then the spouses may allocate each whole exemption taken on the joint return between themselves except for the exemptions attributable to the other spouse. The other spouse should then use the exemptions attributable to that spouse.
(d) The computation of LIT is to be completed on the county tax schedule, which is an attachment to the individual income tax return. The county tax computed on the county tax schedule is to be carried to the designated area on the applicable state income tax form.
(Department of State Revenue; 45 IAC 3.1-4-5; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-6 45 IAC 3.1-4-6 Duration of tax
45 IAC 3.1-4-6 Duration of tax
Authority: IC 6-8.1-3-3
Affected: IC 6-3.6
Sec. 6. (a) The local income tax (LIT) is in effect until affirmatively changed by the adopting body for the county, the date otherwise specified in the ordinance, or the date mandated by the appropriate provision of Indiana law.
(b) This subsection applies only to a LIT rate change as follows:
(1) If a LIT is changed between January 1 of a calendar year and August 31 of a calendar year, inclusive, the new LIT is effective on October 1 of that same calendar year. For purposes of computing an individual's LIT for that calendar year, the rate shall be equal to seventy-five percent (75%) of the LIT prior to change plus twenty-five percent (25%) of the LIT after the change.
(2) If a LIT is changed between September 1 of a calendar year and October 31 of a calendar year, inclusive, the new LIT is effective on January 1 of the following calendar year.
(3) If a LIT is changed between November 1 of a calendar year and December 31 of a calendar year, inclusive, the new LIT is effective on October 1 of the following calendar year. The LIT for the following calendar year is computed in a manner similar to subdivision (1).
(Department of State Revenue; 45 IAC 3.1-4-6; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-7 45 IAC 3.1-4-7 Determination of county of residence
45 IAC 3.1-4-7 Determination of county of residence
Authority: IC 6-8.1-3-3
Affected: IC 6-3.6
Sec. 7. (a) A person's county of residence is determined based on the following criteria:
(1) The county in which he or she maintains his or her home, if he or she has one (1) and only one (1).
(2) If subdivision (1) does not apply, the county in which he or she is registered to vote.
(3) If subdivisions (1) and (2) do not apply, the county in which he or she registers his or her personal automobile.
(4) If subdivisions (1), (2), and (3) do not apply, the county in which he or she spends the majority of his or her time during the taxable year.
(b) The local income tax (LIT) applies against the entire adjusted gross income of an employee whose county of residence adopts the LIT. If the employee resides in a nonadopting county but has his or her principal place of business or employment in an adopting county, the LIT applies only to that adjusted gross income earned from the principal place of business or employment.
(Department of State Revenue; 45 IAC 3.1-4-7; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-8 45 IAC 3.1-4-8 Determination of county of principal place of business or employment
45 IAC 3.1-4-8 Determination of county of principal place of business or employment
Authority: IC 6-8.1-3-3
Affected: IC 6-3.6
Sec. 8. (a) An individual's county of principal (nontemporary) place of business or employment is that county where the taxpayer receives the greatest percentage of his or her gross income from salaries, wages, commissions, fees, and similar income.
(b) If an individual is self-employed, the county of principal place of business or employment is that county where the individual's principal place of business is located as follows:
(1) If an individual has two (2) or more sources of income from two (2) or more different counties, the principal source is the location from which the individual receives the greatest percentage of income.
(2) If an individual resides outside Indiana, but his or her principal place of business or employment is in an Indiana adopting county, only the adjusted gross income derived from the principal place of business or employment is subject to local income tax (LIT). Reciprocal agreements between Indiana and other states do not affect a taxpayer's liability under LIT.
(c) An individual is not considered to have a principal place of business or employment in an Indiana county solely based on ownership of a partnership or corporation or beneficial interest in a trust that conducts business in Indiana.
(Department of State Revenue; 45 IAC 3.1-4-8; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-9 45 IAC 3.1-4-9 Reciprocity agreements with out-of-state authorities
45 IAC 3.1-4-9 Reciprocity agreements with out-of-state authorities
Authority: IC 6-8.1-3-3
Affected: IC 6-3.6
Sec. 9. County fiscal bodies of adopting counties may enter into reciprocity agreements with taxing authorities outside Indiana to exempt the income from the residents of out-of-state localities from local income tax (LIT) and likewise exempt county residents from that locality's local income tax. Reciprocity agreements must coincide with calendar years, and a certified copy of the agreement must be sent to the department. To be valid, the agreement must be approved by the other government entity and must have been previously approved by the department.
(Department of State Revenue; 45 IAC 3.1-4-9; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
45 IAC 3.1-4-10 45 IAC 3.1-4-10 Credit for taxes paid to out-of-state local governments
45 IAC 3.1-4-10 Credit for taxes paid to out-of-state local governments
Authority: IC 6-8.1-3-3
Affected: IC 6-3-3-3; IC 6-3.6
Sec. 10. (a) Taxpayers subject to county tax at the resident rate may take a credit against local income tax (LIT) liability for taxes paid to localities outside of Indiana.
(b) The credit is limited to:
(1) the amount of tax paid to the out-of-state locality;
(2) the county rate times the amount of adjusted gross income that was taxed by the other locality; or
(3) the amount of LIT due, whichever is the least. This does not apply to income taxed by any state but only to income taxed by any subdivision of any state, such as a city or county, outside of Indiana.
(c) For each locality, the credit and the limitations under subsection (b) shall be computed separately.
(d) To claim the credit under subsection (b), the tax must actually be paid. If the tax is reduced by any credit, other than a credit for taxes withheld, the tax paid will be reduced by such credit.
(e) The credit is limited only to taxes for which the individual is personally liable or for taxes reported by a pass-through entity on behalf of the individual by inclusion in a composite tax return filed by the entity. If the individual owns an interest in a partnership, S corporation, trust, or similar entity for which the entity is subject to a local income tax but the individual is not subject to local income tax on that income, the tax paid by the entity is not eligible for this credit. To claim the credit, the taxpayer must provide evidence of payment of the claimed tax to the out-of-state subdivision. A copy of the tax return filed with the other locality or a tax statement indicating such payment, such as a Form W-2 or Form 1099, must be attached to the Indiana return.
(f) The credit will not be allowed if the laws of such city or county provide for a credit to the taxpayer for the amount of LIT payable.
(g) The credit is not permitted for any state-level taxes paid in excess of the amount permitted under IC 6-3-3-3.
(Department of State Revenue; 45 IAC 3.1-4-10; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)
Continue sua pesquisa no ChatGPT ou Claude
Conecte o Omnilex para pesquisar o corpus jurídico pelo seu assistente de IA.