Indiana recently passed two new laws that increase the ability of city and county councils to grant real and personal property tax abatement deductions. Under prior law, the amount of any property tax abatement deduction for a given year was based on (1) the increase in assessed value of the property as a result of rehabilitation (of real property) or installation (of equipment), multiplied by (2) a percentage based on a fixed schedule provided by statute. The schedule provided for an abatement percentage equal to 100 percent for the first year with the percentage decreasing ratably over the abatement period. For example, property with a three-year abatement period would have a 100 percent abatement percentage in year one, a 66 percent abatement percentage in year two and a 33 percent abatement percentage in year three. The abatement could be granted for up to 10 years.
A new law allows city and county councils to deviate from the fixed schedule. The period of the abatement is still up to 10 years, but now, councils can grant up to 100 percent abatement for each of those 10 years. However, when determining whether to provide for a schedule other than the fixed schedule, the city or county council must consider the following factors:
- the total amount of the taxpayer’s investment in real and personal property;
- the number of new full-time equivalent jobs created;
- the average wage of the new employees compared to the state minimum wage; and
- the infrastructure requirements for the taxpayer’s investment.
In certain cases, a second new law allows for the abatement percentage to be multiplied by the entire gross assessed value of the property, not just the increase in assessed value due to the rehabilitation or installation, for up to three years. However, this law is applicable only to:
- a vacant building with at least 50,000 square feet (provided the applicant agrees to use the building for industrial or commercial purposes);
- an applicant who agrees to invest at least $10 million in property that is eligible for a tax abatement deduction;
- a proposed rehabilitation of property located in a “designated downtown area;” or
- property that is or will be located in a county with high employment (as defined by Indiana code).
Several requirements must be met to obtain the deductions described above. If you would like further information, please contact the Bingham McHale Real Estate Department.Go to blog homepage >>