Indiana 2023 Legislative Session: Victory for Small Business Owners

May 2, 2023 Last Edit: June 5, 2025

New law will make healthcare more affordable for small businesses

Indiana 2023 Legislative Session: Victory for Small Business Owners

Of the 252 bills approved by Indiana lawmakers in the 2023 legislative session, none of them significantly hurt small business and many helped. Top issues this year included education, health care and taxes. The only issue garnering more attention was the passage of Indiana’s new, $44 billion biennial budget plan. Two-Year State Budget Overall, the biennial budget contains more funding for mental health, public health and K-12 schools, along with a significant expansion of the state’s school choice voucher program. The two-year budget allocates $100 million in state funds for enhanced community mental health services, and also sets aside $225 million for public health departments – about two-thirds of what Gov. Eric Holcomb requested. After receiving pressure from local schools, GOP leaders opted to decrease the amount dedicated to paying down the unfunded liability in pre-1996 Teacher Retirement Fund and shift an additional $312 million to K-12 schools during a chaotic ending to session. The final budget includes an additional $1.2 billion for K-12 school tuition support and has separate funding to eliminate textbook and curriculum fees for public and charter school students. Other budget highlights include:

Gives the Indiana Economic Development Corporation $500 million for READI grants, $500 million for deal closing and $150 million for site acquisition
Expands eligibility for On-My-Way Pre-K Expands to 150% of the federal poverty level
Appropriates $10M for land conservation and $30 million for Next Level Trails
Provides funding to increase starting salaries for state troopers to $70,000 per year
Invests $3.1 billion today in the Pre-1996 Fund, which includes a $700 million supplemental deposit in the coming biennium
Appropriates $1.25 billion to finish the remaining capital projects originally funded in the 2021 budget

Tax Relief Bills Senate Bill 2, one of NFIB’s priority bills in Indiana, was the first to be signed by the Governor this year. This law provides a new federal tax benefit for small businesses without costing a penny to the State of Indiana. The creation of the pass-through entity tax (PTET) law effectively eliminates the $10,000 cap on an individual’s state tax deduction put into place in 2018 by the Federal Tax Cuts and Jobs Act. The Indiana PTET law allows small businesses structured as pass-through entities such as partnerships, LLCs, and S Corps, to elect to pay Indiana income tax at the entity level. The majority of small businesses are structured as pass-through entities and therefore could qualify for this new tax benefit which is optional with a retroactive effective date of Jan. 1, 2022. Property tax bills skyrocketed this year as the pandemic’s high-priced home sales and subsequent rise in assessment values. In response, some lawmakers attempted to provide relief which others raised concerns for caution. House Bill 1499 went through numerous transformations: several dilutions, followed by a final version with several key provisions resuscitated. It expands multiple deductions, and temporarily limits growth in school operating referendum taxes and local unit property tax hauls. Health care Several major health care bills were watered down in their final versions, whether doctor non-compete agreements or site of service language that would ban dishonest billing practices. These bills were among some of NFIB’s top priorities this year. But leaders called it a win, saying that dozens of meetings with stakeholders convinced them more Indiana-focused data was needed, which House Bill 1004 will incentivize moving forward. That language will also require a review of Medicaid reimbursement rates in Indiana, which hospitals say significantly lag behind other states. Another bill that passed but in a weaker version was Senate Bill 8 that requires rebates negotiated by pharmacy benefit managers to be passed on to the employer. One big health care win that NFIB advocated for is a bill which allows employers to receive a tax credit if they offer their employees non-traditional health care plans known as Individual Coverage Heath Reimbursement Arrangements (ICHRAs). ICHRAs will create more competition among insurance providers. NFIB is proud to the Indiana legislature for leading the charge on reforming health care costs, although a stronger stance on the proposals was needed to make a bigger impact. NFIB is hopeful the legislature will continue to build on the framework put forth this session to make a more meaningful impact on lowering costs in the future. Regulatory Reform Indiana lawmakers passed a sweeping administrative rulemaking overhaul bill that would give the General Assembly more power over rulemaking that is currently left to state agencies. Major provisions in the latest draft of House Bill 1623 would change the way state agencies adopt regulations that implement state or federal laws. That includes revisions to the process for adopting emergency rules, and shortening the time period when rules must be readopted. Of greatest concern to some critics is language in the measure that seeks to put lawmakers in charge of new pesticide regulations and prevent state environmental regulators from making stricter coal ash rules than federal ones. Many are calling for the Governor to veto the bill due to those measures. Legislating ‘Anti-Woke’ Pension Investing Indiana’s public retirement system and its external investment managers will begin operating under new scrutiny under the passage of House Bill 1008. This “finances-first” legislation Indiana’s take on the national backlash brewing to “ESG” investing, when environmental, social and governmental factors are considered in investment decisions. Hours of discussion pitted some pension members and finance leaders against industries claiming ESG-based “financial discrimination.” The legislation empowers a supportive state treasurer with investigating asset managers he suspects are engaging in ESG investing, and forces the retirement system to divest from violators unless it can’t find “comparable” replacements. Wetlands Bill Falls Short Controversial language that would have loosened restrictions on Indiana’s wetlands did not advance in the 2023 session, despite a quiet GOP attempt to insert such language in a residential sewage bill. A House environmental committee last month approved an amendment to Senate Bill 414 that tightened restrictions on which wetlands could receive state protections. Republican lawmakers claimed the provision would “clarify” definitions in the state’s wetlands statute. Project Labor Agreements For years, some Republican lawmakers have tried to prohibit Indiana’s local governments from choosing to require project labor agreements (PLAs) on public construction projects. House Bill 1024 contained the sixth attempt since 2019 to limit bids to employers who have a PLA. These agreements typically set workers’ pay and other aspects of their working conditions during the project. Proponents say this law is needed to level the level the playing field and provide opportunities for a lot of small businesses that get shut out on these PLA projects to bid on them. Local Bans on Pet Store Sales Lawmakers this session failed to supersede local ordinances barring pet stores from selling pets like cats and dogs. Stores in those municipalities can only collaborate with animal care or rescue organizations to show adoptable cats and dogs. This is an effort to prevent inhumane sourcing and ease shelter overcrowding. But lawmakers and pet store chains said they should be able to sell animals from reputable breeders. Two such bills expired in legislative deadlines. One author said his proposal had “too many loose ends” – but indicated he’d make edits and try again another session.

Topics:

Taxes

State:

Indiana

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