As if income taxes weren’t enough, small businesses in Indiana (along with other states across the country) feel the additional financial pinch of business personal property taxes. However, this year state legislators could be considering a proposal that would provide relief to roughly 50 percent of this tax’s filers.
Currently the business personal property tax is levied on businesses with equipment used in the production of income, including manufacturing tools but not land and buildings. The complexity of this tax code often forces small businesses with limited resources and manpower to seek filing help from tax and accounting professionals, thereby increasing their overall costs. For a small operation, the amount paid in filing fees can exceed the actual tax burden.
State Bill 436 would provide a property tax exemption for taxpayers with less than $20,000 of total business personal property in a county. This is referred to as the “Di Minimis” provision because tax returns at this level cost more to process and complete than the actual tax amount collected, and this common-sense solution would directly benefit about half of the state’s small businesses by eliminating this tax for them.
Chuck Hockema, owner of several businesses in the Lafayette area, is one of the business owners who would benefit. Hockema’s businesses are centered on land development and multifamily rental, involving real property (like land and buildings) rather than personal property to operate effectively. Because of this, he has considered options to avoid filing the tax, including disposing of equipment and hiring independent contractors.
“We have avoided providing services that could be of benefit to homeowners and tenants because we do not want to deal with additional reporting,” he says. “The bill would eliminate any need to file, and we could make our business decisions based on what best serves our clients and company, rather than worrying about how much time we are going to have to spend dealing with filing requirements.”
The bill has now passed the Senate and the House. Next, the legislature will have
to reconcile the changes by concurrence or conference committee.
