CHAPTER 2. IMPOSITION OF TAX AND DEDUCTIONS
IC 6-3-2
Chapter 2. Imposition of Tax and Deductions
IC 6-3-2-1
Tax rate
Sec. 1. (a) Each taxable year, a tax at the rate of three andfour-tenths percent (3.4%) of adjusted gross income is imposed uponthe adjusted gross income of every resident person, and on that partof the adjusted gross income derived from sources within Indiana ofevery nonresident person.
(b) Except as provided in section 1.5 of this chapter, each taxableyear, a tax at the rate of eight and five-tenths percent (8.5%) ofadjusted gross income is imposed on that part of the adjusted grossincome derived from sources within Indiana of every corporation.
(Formerly: Acts 1963(ss), c.32, s.201; Acts 1973, P.L.50, SEC.1.) Asamended by Acts 1979, P.L.68, SEC.1; Acts 1981, P.L.77, SEC.8;P.L.2-1982(ss), SEC.8; P.L.47-1984, SEC.4; P.L.390-1987(ss),SEC.37; P.L.192-2002(ss), SEC.70; P.L.81-2004, SEC.20.
IC 6-3-2-1.5
"Qualified area" defined; tax rate in qualified area
Sec. 1.5. (a) As used in this section, "qualified area" means:
(1) a military base (as defined in IC 36-7-30-1(c));
(2) a military base reuse area established under IC 36-7-30;
(3) the part of an economic development area established underIC 36-7-14.5-12.5 that is or formerly was a military base (asdefined in IC 36-7-30-1(c));
(4) a military base recovery site designated under IC 6-3.1-11.5;or
(5) a qualified military base enhancement area establishedunder IC 36-7-34.
(b) Except as provided in subsection (e), a tax at the rate of fivepercent (5%) of adjusted gross income is imposed on that part of theadjusted gross income of a corporation that is derived from sourceswithin a qualified area if the corporation locates all or part of itsoperations in a qualified area during the taxable year, as determinedunder subsection (g). The tax rate under this section applies to thetaxable year in which the corporation locates its operations in thequalified area and to the next succeeding four (4) taxable years.
(c) In the case of a corporation that locates all or part of itsoperations in a qualified military base enhancement area establishedunder IC 36-7-34-4(1), the tax rate imposed under this section appliesto the corporation only if the corporation meets at least one (1) of thefollowing criteria:
(1) The corporation is a participant in the technology transferprogram conducted by the qualified military base (as defined inIC 36-7-34-3).
(2) The corporation is a United States Department of Defensecontractor.
(3) The corporation and the qualified military base have a
mutually beneficial relationship evidenced by a memorandumof understanding between the corporation and the United StatesDepartment of Defense.
(d) In the case of a business that uses the services or commoditiesin a qualified military base enhancement area established underIC 36-7-34-4(2), the business must satisfy at least one (1) of thefollowing criteria:
(1) The business is a participant in the technology transferprogram conducted by the qualified military base (as defined inIC 36-7-34-3).
(2) The business and the qualified military base have a mutuallybeneficial relationship evidenced by a memorandum ofunderstanding between the business and the qualified militarybase (as defined in IC 36-7-34-3).
(e) A taxpayer is not entitled to the tax rate described insubsection (b) to the extent that the taxpayer substantially reduces orceases its operations at another location in Indiana in order torelocate its operations within the qualified area, unless:
(1) the taxpayer had existing operations in the qualified area;and
(2) the operations relocated to the qualified area are anexpansion of the taxpayer's operations in the qualified area.
(f) A determination under subsection (e) that a taxpayer is notentitled to the tax rate provided by this section as a result of asubstantial reduction or cessation of operations applies to the taxableyear in which the substantial reduction or cessation occurs and in allsubsequent years. Determinations under this section shall be made bythe department of state revenue.
(g) The department of state revenue:
(1) shall adopt rules under IC 4-22-2 to establish a procedurefor determining the part of a corporation's adjusted grossincome that was derived from sources within a qualified area;and
(2) may adopt other rules that the department considersnecessary for the implementation of this chapter.
As added by P.L.81-2004, SEC.21. Amended by P.L.190-2005,SEC.2; P.L.203-2005, SEC.4; P.L.180-2006, SEC.4.
IC 6-3-2-2
"Adjusted gross income derived from sources within Indiana"defined; apportionment; payroll factor; sales factor; propertyfactor; pass through entities
Sec. 2. (a) With regard to corporations and nonresident persons,"adjusted gross income derived from sources within Indiana", for thepurposes of this article, shall mean and include:
(1) income from real or tangible personal property located inthis state;
(2) income from doing business in this state;
(3) income from a trade or profession conducted in this state;
(4) compensation for labor or services rendered within this
state; and
(5) income from stocks, bonds, notes, bank deposits, patents,copyrights, secret processes and formulas, good will,trademarks, trade brands, franchises, and other intangiblepersonal property if the receipt from the intangible isattributable to Indiana under section 2.2 of this chapter.
Income from a pass through entity shall be characterized in a mannerconsistent with the income's characterization for federal income taxpurposes and shall be considered Indiana source income as if theperson, corporation, or pass through entity that received the incomehad directly engaged in the income producing activity. Income thatis derived from one (1) pass through entity and is considered to passthrough to another pass through entity does not change thesecharacteristics or attribution provisions. In the case of nonbusinessincome described in subsection (g), only so much of such income asis allocated to this state under the provisions of subsections (h)through (k) shall be deemed to be derived from sources withinIndiana. In the case of business income, only so much of such incomeas is apportioned to this state under the provision of subsection (b)shall be deemed to be derived from sources within the state ofIndiana. In the case of compensation of a team member (as definedin section 2.7 of this chapter), only the portion of income determinedto be Indiana income under section 2.7 of this chapter is consideredderived from sources within Indiana. In the case of a corporation thatis a life insurance company (as defined in Section 816(a) of theInternal Revenue Code) or an insurance company that is subject totax under Section 831 of the Internal Revenue Code, only so muchof the income as is apportioned to Indiana under subsection (r) isconsidered derived from sources within Indiana.
(b) Except as provided in subsection (l), if business income of acorporation or a nonresident person is derived from sources withinthe state of Indiana and from sources without the state of Indiana, thebusiness income derived from sources within this state shall bedetermined by multiplying the business income derived from sourcesboth within and without the state of Indiana by the following:
(1) For all taxable years that begin after December 31, 2006,and before January 1, 2008, a fraction. The:
(A) numerator of the fraction is the sum of the propertyfactor plus the payroll factor plus the product of the salesfactor multiplied by three (3); and
(B) denominator of the fraction is five (5).
(2) For all taxable years that begin after December 31, 2007,and before January 1, 2009, a fraction. The:
(A) numerator of the fraction is the property factor plus thepayroll factor plus the product of the sales factor multipliedby four and sixty-seven hundredths (4.67); and
(B) denominator of the fraction is six and sixty-sevenhundredths (6.67).
(3) For all taxable years beginning after December 31, 2008,and before January 1, 2010, a fraction. The: (A) numerator of the fraction is the property factor plus thepayroll factor plus the product of the sales factor multipliedby eight (8); and
(B) denominator of the fraction is ten (10).
(4) For all taxable years beginning after December 31, 2009,and before January 1, 2011, a fraction. The:
(A) numerator of the fraction is the property factor plus thepayroll factor plus the product of the sales factor multipliedby eighteen (18); and
(B) denominator of the fraction is twenty (20).
(5) For all taxable years beginning after December 31, 2010, thesales factor.
(c) The property factor is a fraction, the numerator of which is theaverage value of the taxpayer's real and tangible personal propertyowned or rented and used in this state during the taxable year and thedenominator of which is the average value of all the taxpayer's realand tangible personal property owned or rented and used during thetaxable year. However, with respect to a foreign corporation, thedenominator does not include the average value of real or tangiblepersonal property owned or rented and used in a place that is outsidethe United States. Property owned by the taxpayer is valued at itsoriginal cost. Property rented by the taxpayer is valued at eight (8)times the net annual rental rate. Net annual rental rate is the annualrental rate paid by the taxpayer less any annual rental rate receivedby the taxpayer from subrentals. The average of property shall bedetermined by averaging the values at the beginning and ending ofthe taxable year, but the department may require the averaging ofmonthly values during the taxable year if reasonably required toreflect properly the average value of the taxpayer's property.
(d) The payroll factor is a fraction, the numerator of which is thetotal amount paid in this state during the taxable year by the taxpayerfor compensation, and the denominator of which is the totalcompensation paid everywhere during the taxable year. However,with respect to a foreign corporation, the denominator does notinclude compensation paid in a place that is outside the UnitedStates. Compensation is paid in this state if:
(1) the individual's service is performed entirely within thestate;
(2) the individual's service is performed both within and withoutthis state, but the service performed without this state isincidental to the individual's service within this state; or
(3) some of the service is performed in this state and:
(A) the base of operations or, if there is no base ofoperations, the place from which the service is directed orcontrolled is in this state; or
(B) the base of operations or the place from which theservice is directed or controlled is not in any state in whichsome part of the service is performed, but the individual isa resident of this state.
(e) The sales factor is a fraction, the numerator of which is the
total sales of the taxpayer in this state during the taxable year, andthe denominator of which is the total sales of the taxpayereverywhere during the taxable year. Sales include receipts fromintangible property and receipts from the sale or exchange ofintangible property. However, with respect to a foreign corporation,the denominator does not include sales made in a place that is outsidethe United States. Receipts from intangible personal property arederived from sources within Indiana if the receipts from theintangible personal property are attributable to Indiana under section2.2 of this chapter. Regardless of the f.o.b. point or other conditionsof the sale, sales of tangible personal property are in this state if:
(1) the property is delivered or shipped to a purchaser that iswithin Indiana, other than the United States government; or
(2) the property is shipped from an office, a store, a warehouse,a factory, or other place of storage in this state and:
(A) the purchaser is the United States government; or
(B) the taxpayer is not taxable in the state of the purchaser.
Gross receipts derived from commercial printing as described inIC 6-2.5-1-10 shall be treated as sales of tangible personal propertyfor purposes of this chapter.
(f) Sales, other than receipts from intangible property covered bysubsection (e) and sales of tangible personal property, are in thisstate if:
(1) the income-producing activity is performed in this state; or
(2) the income-producing activity is performed both within andwithout this state and a greater proportion of theincome-producing activity is performed in this state than in anyother state, based on costs of performance.
(g) Rents and royalties from real or tangible personal property,capital gains, interest, dividends, or patent or copyright royalties, tothe extent that they constitute nonbusiness income, shall be allocatedas provided in subsections (h) through (k).
(h)(1) Net rents and royalties from real property located in thisstate are allocable to this state.
(2) Net rents and royalties from tangible personal property areallocated to this state:
(i) if and to the extent that the property is utilized in this state;or
(ii) in their entirety if the taxpayer's commercial domicile is inthis state and the taxpayer is not organized under the laws of ortaxable in the state in which the property is utilized.
(3) The extent of utilization of tangible personal property in astate is determined by multiplying the rents and royalties by afraction, the numerator of which is the number of days of physicallocation of the property in the state during the rental or royalty periodin the taxable year, and the denominator of which is the number ofdays of physical location of the property everywhere during all rentalor royalty periods in the taxable year. If the physical location of theproperty during the rental or royalty period is unknown orunascertainable by the taxpayer, tangible personal property is utilized
in the state in which the property was located at the time the rentalor royalty payer obtained possession.
(i)(1) Capital gains and losses from sales of real property locatedin this state are allocable to this state.
(2) Capital gains and losses from sales of tangible personalproperty are allocable to this state if:
(i) the property had a situs in this state at the time of the sale; or
(ii) the taxpayer's commercial domicile is in this state and thetaxpayer is not taxable in the state in which the property had asitus.
(3) Capital gains and losses from sales of intangible personalproperty are allocable to this state if the taxpayer's commercialdomicile is in this state.
(j) Interest and dividends are allocable to this state if thetaxpayer's commercial domicile is in this state.
(k)(1) Patent and copyright royalties are allocable to this state:
(i) if and to the extent that the patent or copyright is utilized bythe taxpayer in this state; or
(ii) if and to the extent that the patent or copyright is utilized bythe taxpayer in a state in which the taxpayer is not taxable andthe taxpayer's commercial domicile is in this state.
(2) A patent is utilized in a state to the extent that it is employedin production, fabrication, manufacturing, or other processingin the state or to the extent that a patented product is producedin the state. If the basis of receipts from patent royalties doesnot permit allocation to states or if the accounting proceduresdo not reflect states of utilization, the patent is utilized in thestate in which the taxpayer's commercial domicile is located.
(3) A copyright is utilized in a state to the extent that printingor other publication originates in the state. If the basis ofreceipts from copyright royalties does not permit allocation tostates or if the accounting procedures do not reflect states ofutilization, the copyright is utilized in the state in which thetaxpayer's commercial domicile is located.
(l) If the allocation and apportionment provisions of this article donot fairly represent the taxpayer's income derived from sourceswithin the state of Indiana, the taxpayer may petition for or thedepartment may require, in respect to all or any part of the taxpayer'sbusiness activity, if reasonable:
(1) separate accounting;
(2) for a taxable year beginning before January 1, 2011, theexclusion of any one (1) or more of the factors, except the salesfactor;
(3) the inclusion of one (1) or more additional factors whichwill fairly represent the taxpayer's income derived from sourceswithin the state of Indiana; or
(4) the employment of any other method to effectuate anequitable allocation and apportionment of the taxpayer'sincome.
(m) In the case of two (2) or more organizations, trades, or
businesses owned or controlled directly or indirectly by the sameinterests, the department shall distribute, apportion, or allocate theincome derived from sources within the state of Indiana between andamong those organizations, trades, or businesses in order to fairlyreflect and report the income derived from sources within the stateof Indiana by various taxpayers.
(n) For purposes of allocation and apportionment of income underthis article, a taxpayer is taxable in another state if:
(1) in that state the taxpayer is subject to a net income tax, afranchise tax measured by net income, a franchise tax for theprivilege of doing business, or a corporate stock tax; or
(2) that state has jurisdiction to subject the taxpayer to a netincome tax regardless of whether, in fact, the state does or doesnot.
(o) Notwithstanding subsections (l) and (m), the department maynot, under any circumstances, require that income, deductions, andcredits attributable to a taxpayer and another entity be reported in acombined income tax return for any taxable year, if the other entityis:
(1) a foreign corporation; or
(2) a corporation that is classified as a foreign operatingcorporation for the taxable year by section 2.4 of this chapter.
(p) Notwithstanding subsections (l) and (m), the department maynot require that income, deductions, and credits attributable to ataxpayer and another entity not described in subsection (o)(1) or(o)(2) be reported in a combined income tax return for any taxableyear, unless the department is unable to fairly reflect the taxpayer'sadjusted gross income for the taxable year through use of otherpowers granted to the department by subsections (l) and (m).
(q) Notwithstanding subsections (o) and (p), one (1) or moretaxpayers may petition the department under subsection (l) forpermission to file a combined income tax return for a taxable year.The petition to file a combined income tax return must be completedand filed with the department not more than thirty (30) days after theend of the taxpayer's taxable year. A taxpayer filing a combinedincome tax return must petition the department within thirty (30)days after the end of the taxpayer's taxable year to discontinue filinga combined income tax return.
(r) This subsection applies to a corporation that is a life insurancecompany (as defined in Section 816(a) of the Internal Revenue Code)or an insurance company that is subject to tax under Section 831 ofthe Internal Revenue Code. The corporation's adjusted gross incomethat is derived from sources within Indiana is determined bymultiplying the corporation's adjusted gross income by a fraction:
(1) the numerator of which is the direct premiums and annuityconsiderations received during the taxable year for insuranceupon property or risks in the state; and
(2) the denominator of which is the direct premiums andannuity considerations received during the taxable year forinsurance upon property or risks everywhere.The term "direct premiums and annuity considerations" means thegross premiums received from direct business as reported in thecorporation's annual statement filed with the department ofinsurance.
(Formerly: Acts 1963(ss), c.32, s.204; Acts 1965, c.233, s.13; Acts1971, P.L.64, SEC.4.) As amended by P.L.82-1983, SEC.4;P.L.16-1984, SEC.4; P.L.75-1985, SEC.4; P.L.78-1989, SEC.8;P.L.347-1989(ss), SEC.6; P.L.65-1991, SEC.1; P.L.71-1993,SEC.13; P.L.63-1997, SEC.1; P.L.192-2002(ss), SEC.71;P.L.162-2006, SEC.25; P.L.182-2009(ss), SEC.191.
IC 6-3-2-2.2
Interest income, discounts, and receipts attributable to state
Sec. 2.2. (a) Interest income and other receipts from assets in thenature of loans or installment sales contracts that are primarilysecured by or deal with real or tangible personal property areattributable to this state if the security or sale property is located inIndiana.
(b) Interest income and other receipts from consumer loans notsecured by real or tangible personal property are attributable to thisstate if the loan is made to a resident of Indiana, whether at a placeof business, by a traveling loan officer, by mail, by telephone, or byother electronic means.
(c) Interest income and other receipts from commercial loans andinstallment obligations not secured by real or tangible personalproperty are attributable to this state if the proceeds of the loan areto be applied in Indiana. If it cannot be determined where the fundsare to be applied, the income and receipts are attributable to the statein which the business applied for the loan. As used in this section,"applied for" means initial inquiry (including customer assistance inpreparing the loan application) or submission of a completed loanapplication, whichever occurs first.
(d) Interest income, merchant discount, and other receiptsincluding service charges from financial institution credit card andtravel and entertainment credit card receivables and credit cardholders' fees are attributable to the state to which the card chargesand fees are regularly billed.
(e) Receipts from the performance of fiduciary and other servicesare attributable to the state in which the benefits of the services areconsumed. If the benefits are consumed in more than one (1) state,the receipts from those benefits are attributable to this state on a prorata basis according to the portion of the benefits consumed inIndiana.
(f) Receipts from the issuance of traveler's checks, money orders,or United States savings bonds are attributable to the state in whichthe traveler's checks, money orders, or bonds are purchased.
(g) Receipts in the form of dividends from investments areattributable to this state if the taxpayer's commercial domicile is inIndiana.
As added by P.L.347-1989(ss), SEC.7.
IC 6-3-2-2.3
In-state commercial printing for out-of-state customer
Sec. 2.3. Notwithstanding any other provision of this article, withrespect to a person, corporation, or partnership that has contractedwith a commercial printer for printing:
(1) the ownership or leasing by that entity of tangible orintangible property located at the Indiana premises of thecommercial printer;
(2) the sale by that entity of property of any kind produced atand shipped or distributed from the Indiana premises of thecommercial printer;
(3) the activities of any kind performed by or on behalf of thatentity at the Indiana premises of the commercial printer; and
(4) the activities performed by the commercial printer inIndiana for or on behalf of that entity;
shall not cause that entity to have adjusted gross income derivedfrom sources within Indiana for purposes of the taxes imposed bythis chapter, unless that entity engages in other activities in Indianaaway from the premises of the commercial printer that exceed theprotection of 15 U.S.C. 381.
As added by P.L.70-1993, SEC.6. Amended by P.L.192-2002(ss),SEC.72.
IC 6-3-2-2.4
Foreign operating corporations; determination of percentage ofbusiness activity outside United States
Sec. 2.4. (a) For purposes of section 2(o) of this chapter, acorporation is a foreign operating corporation for a particular taxableyear if it has eighty percent (80%) or more of its total businessactivity occurring outside the United States during the taxable year.
(b) For purposes of determining the amount of a corporation'sbusiness activity that occurs within the United States, the departmentshall determine the sum of that corporation's United States propertyfactor and its United States payroll factor and divide that sum by two(2). If the quotient exceeds two-tenths (0.2), then less than eightypercent (80%) of the corporation's business shall be considered tohave occurred outside the United States. If the quotient equals or isless than two-tenths (0.2), then eighty percent (80%) or more of thecorporation's business shall be considered to have occurred outsidethe United States. If a corporation's United States property factor orits United States payroll factor has a denominator of zero (0), thenthe sum of the two (2) factors shall be divided by one (1) and not bytwo (2).
(c) The United States property factor of a corporation is afraction. The numerator of the fraction is the average value of thecorporation's real and tangible personal property owned or rented andused in the United States during the taxable year, and thedenominator of the fraction is the average value of all thecorporation's real and tangible personal property owned or rented andused anywhere in the world during the taxable year. Property owned
by the corporation shall be valued at its original cost. Property rentedby the corporation shall be valued at eight (8) times the net annualrental rate. The corporation's net annual rental rate is the annualrental rate paid by the corporation less any annual rental ratereceived by the corporation from subrentals. The average value ofproperty shall be determined by averaging the values at the beginningand ending of the taxable year, but the department may require theaveraging of monthly values during the taxable year if reasonablyrequired to reflect properly the average value of the corporation'sproperty.
(d) The United States payroll factor of a corporation is a fraction.The numerator of the fraction is the total compensation to individualspaid in the United States during the taxable year by the corporation,and the denominator of the fraction is the total compensation toindividuals paid anywhere in the world during the taxable year by thecorporation. Compensation to an individual is paid in the UnitedStates if:
(1) the individual's service is performed entirely within theUnited States;
(2) the individual's service is performed both within and outsidethe United States, but the service performed outside the UnitedStates is incidental to the individual's service within the UnitedStates; or
(3) the individual is a resident of the United States, some of theservice is performed in the United States, and:
(A) the base of operations or, if there is no base ofoperations, the place from which the service is directed orcontrolled is in the United States; or
(B) the base of operations or, if there is no base ofoperations, the place from which the service is directed orcontrolled is not in a jurisdiction that is outside the UnitedStates and that is where some part of the service isperformed.
As added by P.L.75-1985, SEC.5.
IC 6-3-2-2.5
Resident persons; net operating loss; adjusted gross income
Sec. 2.5. (a) This section applies to a resident person.
(b) Resident persons are entitled to a net operating loss deduction.The amount of the deduction taken in a taxable year may not exceedthe taxpayer's unused Indiana net operating losses carried back orcarried over to that year.
(c) An Indiana net operating loss equals the taxpayer's federal netoperating loss for a taxable year as calculated under Section 172 ofthe Internal Revenue Code, adjusted for the modifications requiredby IC 6-3-1-3.5.
(d) The following provisions apply for purposes of subsection (c):
(1) The modifications that are to be applied are thosemodifications required under IC 6-3-1-3.5 for the same taxableyear in which each net operating loss was incurred. (2) An Indiana net operating loss includes a net operating lossthat arises when the modifications required by IC 6-3-1-3.5exceed the taxpayer's federal adjusted gross income (as definedin Section 62 of the Internal Revenue Code) for the taxable yearin which the Indiana net operating loss is determined.
(e) Subject to the limitations contained in subsection (g), anIndiana net operating loss carryback or carryover shall be availableas a deduction from the taxpayer's adjusted gross income (as definedin IC 6-3-1-3.5) in the carryback or carryover year provided insubsection (f).
(f) Carrybacks and carryovers shall be determined under thissubsection as follows:
(1) An Indiana net operating loss shall be an Indiana netoperating loss carryback to each of the carryback yearspreceding the taxable year of the loss.
(2) An Indiana net operating loss shall be an Indiana netoperating loss carryover to each of the carryover yearsfollowing the taxable year of the loss.
(3) Carryback years shall be determined by reference to thenumber of years allowed for carrying back a net operating lossunder Section 172(b) of the Internal Revenue Code. However,with respect to the carryback period for a net operating loss:
(A) for which a taxpayer made an election to use five (5)years instead of two (2) years under Section 172(b)(1)(H) ofthe Internal Revenue Code, two (2) years shall be usedinstead of five (5) years; or
(B) that is a qualified disaster loss for which the taxpayerelected to have the net operating loss carryback period withrespect to the loss year determined without regard to Section172(b)(1)(J) of the Internal Revenue Code, five (5) yearsshall be used.
(4) Carryover years shall be determined by reference to thenumber of years allowed for carrying over net operating lossesunder Section 172(b) of the Internal Revenue Code.
(5) A taxpayer who makes an election under Section 172(b)(3)of the Internal Revenue Code to relinquish the carryback periodwith respect to a net operating loss for any taxable year shall beconsidered to have also relinquished the carryback of theIndiana net operating loss for purposes of this section.
(g) The entire amount of the Indiana net operating loss for anytaxable year shall be carried to the earliest of the taxable years towhich (as determined under subsection (f)) the loss may be carried.The amount of the Indiana net operating loss remaining after thededuction is taken under this section in a taxable year may be carriedback or carried over as provided in subsection (f). The amount of theIndiana net operating loss carried back or carried over from year toyear shall be reduced to the extent that the Indiana net operating losscarryback or carryover is used by the taxpayer to obtain a deductionin a taxable year until the occurrence of the earlier of the following:
(1) The entire amount of the Indiana net operating loss has been
used as a deduction.
(2) The Indiana net operating loss has been carried over to eachof the carryover years provided by subsection (f).
As added by P.L.91-1987, SEC.3. Amended by P.L.81-2004, SEC.10;P.L.182-2009(ss), SEC.192; P.L.113-2010, SEC.55.
IC 6-3-2-2.6
Corporations and nonresident persons; net operating losses
Sec. 2.6. (a) This section applies to a corporation or a nonresidentperson.
(b) Corporations and nonresident persons are entitled to a netoperating loss deduction. The amount of the deduction taken in ataxable year may not exceed the taxpayer's unused Indiana netoperating losses carried back or carried over to that year.
(c) An Indiana net operating loss equals the taxpayer's federal netoperating loss for a taxable year as calculated under Section 172 ofthe Internal Revenue Code, derived from sources within Indiana andadjusted for the modifications required by IC 6-3-1-3.5.
(d) The following provisions apply for purposes of subsection (c):
(1) The modifications that are to be applied are thosemodifications required under IC 6-3-1-3.5 for the same taxableyear in which each net operating loss was incurred.
(2) The amount of the taxpayer's net operating loss that isderived from sources within Indiana shall be determined in thesame manner that the amount of the taxpayer's adjusted incomederived from sources within Indiana is determined under section2 of this chapter for the same taxable year during which eachloss was incurred.
(3) An Indiana net operating loss includes a net operating lossthat arises when the modifications required by IC 6-3-1-3.5exceed the taxpayer's federal taxable income (as defined inSection 63 of the Internal Revenue Code), if the taxpayer is acorporation, or when the modifications required by IC 6-3-1-3.5exceed the taxpayer's federal adjusted gross income (as definedby Section 62 of the Internal Revenue Code), if the taxpayer isa nonresident person, for the taxable year in which the Indiananet operating loss is determined.
(e) Subject to the limitations contained in subsection (g), anIndiana net operating loss carryback or carryover shall be availableas a deduction from the taxpayer's adjusted gross income derivedfrom sources within Indiana (as defined in section 2 of this chapter)in the carryback or carryover year provided in subsection (f).
(f) Carrybacks and carryovers shall be determined under thissubsection as follows:
(1) An Indiana net operating loss shall be an Indiana netoperating loss carryback to each of the carryback yearspreceding the taxable year of the loss.
(2) An Indiana net operating loss shall be an Indiana netoperating loss carryover to each of the carryover yearsfollowing the taxable year of the loss. (3) Carryback years shall be determined by reference to thenumber of years allowed for carrying back a net operating lossunder Section 172(b) of the Internal Revenue Code. However,with respect to the carryback period for a net operating loss:
(A) for which a taxpayer made an election to use five (5)years instead of two (2) years under Section 172(b)(1)(H) ofthe Internal Revenue Code, two (2) years shall be usedinstead of five (5) years; or
(B) that is a qualified disaster loss for which the taxpayerelected to have the net operating loss carryback period withrespect to the loss year determined without regard to Section172(b)(1)(J) of the Internal Revenue Code, five (5) yearsshall be used.
(4) Carryover years shall be determined by reference to thenumber of years allowed for carrying over net operating lossesunder Section 172(b) of the Internal Revenue Code.
(5) A taxpayer who makes an election under Section 172(b)(3)of the Internal Revenue Code to relinquish the carryback periodwith respect to a net operating loss for any taxable year shall beconsidered to have also relinquished the carryback of theIndiana net operating loss for purposes of this section.
(g) The entire amount of the Indiana net operating loss for anytaxable year shall be carried to the earliest of the taxable years towhich (as determined under subsection (f)) the loss may be carried.The amount of the Indiana net operating loss remaining after thededuction is taken under this section in a taxable year may be carriedback or carried over as provided in subsection (f). The amount of theIndiana net operating loss carried back or carried over from year toyear shall be reduced to the extent that the Indiana net operating losscarryback or carryover is used by the taxpayer to obtain a deductionin a taxable year until the occurrence of the earlier of the following:
(1) The entire amount of the Indiana net operating loss has beenused as a deduction.
(2) The Indiana net operating loss has been carried over to eachof the carryover years provided by subsection (f).
(h) An Indiana net operating loss deduction determined under thissection shall be allowed notwithstanding the fact that in the year thetaxpayer incurred the net operating loss the taxpayer was not subjectto the tax imposed under section 1 of this chapter because thetaxpayer was:
(1) a life insurance company (as defined in Section 816(a) ofthe Internal Revenue Code); or
(2) an insurance company subject to tax under Section 831 ofthe Internal Revenue Code.
(i) In the case of a life insurance company that claims anoperations loss deduction under Section 810 of the Internal RevenueCode, this section shall be applied by:
(1) substituting the corresponding provisions of Section 810 ofthe Internal Revenue Code in place of references to Section 172of the Internal Revenue Code; and (2) substituting life insurance company taxable income (asdefined in Section 801 the Internal Revenue Code) in place ofreferences to taxable income (as defined in Section 63 of theInternal Revenue Code).
(j) For purposes of an amended return filed to carry back anIndiana net operating loss:
(1) the term "due date of the return", as used inIC 6-8.1-9-1(a)(1), means the due date of the return for thetaxable year in which the net operating loss was incurred; and
(2) the term "date the payment was due", as used inIC 6-8.1-9-2(c), means the due date of the return for the taxableyear in which the net operating loss was incurred.
As added by P.L.91-1987, SEC.4. Amended by P.L.192-2002(ss),SEC.73; P.L.81-2004, SEC.11; P.L.2-2005, SEC.21;P.L.182-2009(ss), SEC.193; P.L.113-2010, SEC.56.
IC 6-3-2-2.7
Team members; Indiana income; rules
Sec. 2.7. (a) As used in this section:
(1) "Bonus for services rendered as a team member" includes:
(A) a bonus earned as a result of play during the season,such as a performance bonus, including a bonus paid for achampionship, playoff, or bowl game played by a team, orfor selection to an all-star league or other honorary position;and
(B) a bonus paid for signing a contract, unless all of thefollowing conditions are met:
(i) The payment of the signing bonus is not conditionalupon the signee playing any games for the team,performing any subsequent services for the team, ormaking the team.
(ii) The signing bonus is payable separately from thesalary and any other compensation.
(iii) The signing bonus is nonrefundable.
(2) "Indiana duty days" means the number of total duty daysspent by a team member within Indiana rendering a service forthe team in any manner during the taxable year, except:
(A) travel days spent in Indiana that do not involve either agame, practice, team meeting, promotional caravan, or othersimilar team event; and
(B) those days spent in Indiana for which a team member ison the disabled list.
(3) "Team" includes a professional baseball, basketball,football, hockey, or soccer team that played games in Indiana orthat had services rendered in Indiana by a team member.
(4) "Team member" includes employees who are active players,players on the disabled list, and any other individuals requiredto travel and who do travel with and perform services on behalfof a team on a regular basis. The term includes coaches,managers, and trainers. (5) "Total duty days" means all days during the taxable yearthat a team member renders a service for the team, beginningwith the team's official preseason training period through thelast game in which the team competes or is scheduled tocompete. The term includes days on which a team memberrenders a service for the team on a date that does not fall withinthis period. The term includes:
(A) game days, practice days, days spent at team meetings,days spent with a promotional caravan and at preseasontraining camps, and days served with the team through allpostseason games in which the team competes or isscheduled to compete;
(B) days spent conducting training and rehabilitationactivities, but only if the service is conducted at the facilitiesof the team;
(C) travel days that do not involve either a game, practice,team meeting, promotional caravan, or other similar teamevent;
(D) days spent participating in instructional leagues andall-star or pro bowl games; and
(E) days for which a team member is on the disabled list.
Total duty days for an individual who joins a team during theseason begin on the day the individual joins the team, and, foran individual who leaves a team, end on the day the individualleaves the team. When an individual changes teams during ataxable year, a separate duty day calculation must be made forthe period the individual was with each team. Total duty daysdo not include those days for which a team member is notcompensated and is not rendering a service for the team in anymanner, including days when the team member has beensuspended without pay and prohibited from performing anyservices for the team.
(6) "Total income" means the total compensation receivedduring the taxable year for services rendered:
(A) from the beginning of the official preseason trainingperiod through the last game in which the team competes oris scheduled to compete during that taxable year; and
(B) on a date during the taxable year that does not fall withinthe period described in clause (A), such as participation ininstructional leagues, an all-star or pro bowl game, or witha promotional caravan.
The term includes salaries, wages, bonuses, and any other typeof compensation paid during the taxable year to a team memberfor services rendered in that year. The term does not includestrike benefits, severance pay, termination pay, contract oroption year buy-out payments, expansion or relocationpayments, or any other payments not related to servicesrendered to the team.
(b) For purposes of IC 6-3, Indiana income is the individual's totalincome during the taxable year multiplied by the following fraction: (1) The numerator of the fraction is the individual's Indianaduty days for the taxable year.
(2) The denominator of the fraction is the individual's total dutydays for the taxable year.
(c) It is presumed that this section results in a fair and equitableapportionment of the team member's compensation. However, if thedepartment demonstrates that the method provided under this sectiondoes not fairly and equitably apportion a team member'scompensation, the department may require the team member toapportion the team member's compensation under another methodthat the department prescribes. The prescribed method must result ina fair and equitable apportionment. A team member may submit aproposal for an alternative method to apportion the team member'scompensation if the team member demonstrates that the methodprovided under this section does not fairly and equitably apportionthe team member's compensation. If approved by the department, theproposed method must be fully explained in the team member'snonresident personal income tax return.
(d) The department may adopt rules under IC 4-22-2 to establisheither of the following methods of simplifying return filing for teammembers of a team, if the team is not based in Indiana:
(1) A withholding system requiring a team to withhold adjustedgross income tax for each team member and to remit thewithheld taxes to Indiana on an annual basis. The departmentmay require each team to submit information for each teammember regarding total income, Indiana income subject to taxunder this section, and the amount of tax withheld. Remittanceof the withholding and submission of the required informationsatisfies the team member's tax liability and return filingresponsibilities under this article. A team that is required towithhold and remit shall provide all participating team memberswith a Form W-2 evidencing the amount of tax withheld andremitted to Indiana. Even though a team is required to withholdand remit, a team member may file an individual income taxreturn to claim a refund if the amount remitted exceeds theamount otherwise owed using the methodology under thissection. However, if the team member files an individualincome tax return to claim such a refund, the team member isrequired to notify the team member's state of residence of thefiling.
(2) A composite return method that permits the filing of acomposite tax return by the team on behalf of each teammember. Other department rules concerning composite returnsapply to the extent these rules are not inconsistent with thissubsection. The team must obtain approval from the departmentbefore filing a composite return. The team must obtain writtenauthorization each taxable year from each team member whoelects to participate in the composite return. The participatingteam members must acknowledge through their elections thatthe composite return constitutes an irrevocable filing and that
they may not file an individual income tax return in Indiana.The team must maintain a power of attorney from eachparticipating team member that authorizes the team to representthem in a protest or other appeal. The team and participatingteam members must agree that the team is responsible for anydeficiencies, including penalties. The team shall withhold taxfrom each participating team member's compensation and remitit to the state of Indiana. The return must contain informationfor each participating team member regarding total income,Indiana income subject to tax using the methodology under thissection, and the amount of tax due. Filing of the return andremittance of the tax satisfy the participating team member's taxliability and return filing responsibilities under IC 6-3-4-1.
If the method under subdivision (1) or the method under subdivision(2) is required, a team member's Indiana adjusted gross income maynot be reduced by using a deduction, an exemption, or an exclusion.For a team member to participate in either method, a team member'scompensation from the team must be the only source of incomeattributable to Indiana. If a team member leaves the team during ataxable year, the team remains responsible for remitting theappropriate tax and may either collect the tax paid from the teammember or absorb the cost itself.
As added by P.L.63-1997, SEC.2.
IC 6-3-2-2.8
Exemption; nonprofit entities; Subchapter S corporations;financial institutions; insurance companies; international bankingfacilities
Sec. 2.8. Notwithstanding any provision of IC 6-3-1 throughIC 6-3-7, there shall be no tax on the adjusted gross income of thefollowing:
(1) Any organization described in Section 501(a) of the InternalRevenue Code, except that any income of such organizationwhich is subject to income tax under the Internal Revenue Codeshall be subject to the tax under IC 6-3-1 through IC 6-3-7.
(2) Any corporation which is exempt from income tax underSection 1363 of the Internal Revenue Code and which complieswith the requirements of IC 6-3-4-13. However, income of acorporation described under this subdivision that is subject toincome tax under the Internal Revenue Code is subject to thetax under IC 6-3-1 through IC 6-3-7. A corporation will not loseits exemption under this section because it fails to comply withIC 6-3-4-13 but it will be subject to the penalties provided byIC 6-8.1-10.
(3) Banks and trust companies, national banking associations,savings banks, building and loan associations, and savings andloan associations.
(4) Insurance companies subject to tax under IC 27-1-18-2,including a domestic insurance company that elects to be taxedunder IC 27-1-18-2. (5) International banking facilities (as defined in Regulation Dof the Board of Governors of the Federal Reserve System (12CFR 204)).
As added by P.L.47-1984, SEC.5. Amended by P.L.42-1993, SEC.3;P.L.18-1994, SEC.8; P.L.192-2002(ss), SEC.74.
IC 6-3-2-2.9
Repealed
(Repealed by P.L.47-1984, SEC.7(c).)
IC 6-3-2-3
Repealed
(Repealed, as amended by P.L.79-1983, SEC.2, and as amendedby P.L.82-1983, SEC.5, by P.L.47-1984, SEC.7(b).)
IC 6-3-2-3.1
Taxation; nonprofit entities; unrelated business income
Sec. 3.1. (a) Except as otherwise provided in subsection (b),income is not exempt from the adjusted gross income tax undersection 2.8(1) of this chapter if the income is derived by the exemptorganization from an unrelated trade or business, as defined inSection 513 of the Internal Revenue Code.
(b) This section does not apply to:
(1) the United States government;
(2) an agency or instrumentality of the United Statesgovernment;
(3) this state;
(4) a state agency, as defined in IC 34-6-2-141;
(5) a political subdivision, as defined in IC 34-6-2-110; or
(6) a county solid waste management district or a joint solidwaste management district established under IC 13-21 orIC 13-9.5-2 (before its repeal).
As added by Acts 1978, P.L.32, SEC.3. Amended by P.L.25-1991,SEC.4; P.L.1-1994, SEC.28; P.L.1-1996, SEC.46; P.L.1-1998,SEC.78; P.L.192-2002(ss), SEC.75.
IC 6-3-2-3.5
Exemption; fares for public transportation services
Sec. 3.5. (a) For purposes of this section, "public transportationservices" means the transportation of individuals for hire.
(b) All fares collected for public transportation services areexempt from the income taxes imposed by this article if the fares arereceived by a:
(1) public transportation corporation established underIC 36-9-4;
(2) public transit department established by ordinance underIC 36; or
(3) lessee common carrier that provides public transportationservices under IC 36.
(c) Fares collected for public transportation services by a private
corporation are exempt from income taxes imposed by this article ifduring the tax year at least eighty percent (80%) of the corporation'stotal regularly scheduled bus passenger vehicle route miles are withinthe corporation's designated regional service area. A privatecorporation's designated regional service area may not be greaterthan:
(1) the county that the private corporation designates as itsprincipal place of business; and
(2) all counties contiguous to the county designated by theprivate corporation as its principal place of business.
A private corporation may choose a smaller area as its regionalservice area.
(Formerly: Acts 1975, P.L.58, SEC.3.) As amended by P.L.19-1986,SEC.14; P.L.192-2002(ss), SEC.76.
IC 6-3-2-3.7
Remainder of federal civil service annuity minus certainretirement benefits; deduction
Sec. 3.7. Each taxable year, an individual is entitled to an adjustedgross income tax deduction equal to the remainder of:
(1) the first two thousand dollars ($2,000) which is received bythe individual during the taxable year from a federal civilservice annuity, and which is included in adjusted gross incomeunder Section 62 of the Internal Revenue Code; minus
(2) the total amount of social security benefits and railroadretirement benefits received by the individual during the taxableyear.
However, the individual is only entitled to the deduction provided bythis section if the individual is at least sixty-two (62) years of agebefore the end of the taxable year.
As added by Acts 1977, P.L.79, SEC.1. Amended by Acts 1980,P.L.54, SEC.2; P.L.76-1985, SEC.1.
IC 6-3-2-4
Military service deduction; retirement income or survivor'sbenefits; age limit of 60
Sec. 4. (a) Each taxable year, an individual, or the individual'ssurviving spouse, is entitled to an adjusted gross income taxdeduction for the first five thousand dollars ($5,000) of income,including retirement or survivor's benefits, received during thetaxable year by the individual, or the individual's surviving spouse,for the individual's service in an active or reserve component of thearmed forces of the United States, including the army, navy, airforce, coast guard, marine corps, merchant marine, Indiana armynational guard, or Indiana air national guard. However, a person whois less than sixty (60) years of age on the last day of the person'staxable year, is not, for that taxable year, entitled to a deductionunder this section for retirement or survivor's benefits.
(b) An individual whose qualified military income is subtractedfrom the individual's federal adjusted gross income under
IC 6-3-1-3.5(a)(23) for Indiana individual income tax purposes is not,for that taxable year, entitled to a deduction under this section for theindividual's qualified military income.
As added by Acts 1977, P.L.78, SEC.3. Amended by P.L.76-1985,SEC.2; P.L.144-2007, SEC.5.
IC 6-3-2-5
Insulation; installation; deduction; amount; filing of proof
Sec. 5. (a) For purposes of this section, "insulation" means anymaterial, commonly used in the building industry, which is installedfor the sole purpose of retarding the passage of heat energy into orout of a building.
(b) A resident individual taxpayer is entitled to a deduction fromhis adjusted gross income for a particular taxable year if, during thattaxable year, he installs in his residence new, but not replacement,insulation, weather stripping, double pane windows, storm doors, orstorm windows. However, a taxpayer does not qualify for thisdeduction unless the part of his residence in which he makes theinstallation was constructed at least three (3) years before the taxableyear for which the deduction is claimed.
(c) The amount of the deduction to which a taxpayer is entitled ina particular taxable year is the lesser of:
(1) the amount the taxpayer pays for labor and materials for theinstallation that is made during the taxable year; or
(2) one thousand dollars ($1,000).
(d) To obtain the deduction provi