IFPI Blog

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  • 27 Apr 2017 4:22 PM | John Ketzenberger (Administrator)

    Indiana’s Supreme Court on Thursday decided not to review a property tax assessment case, which means a lower court’s ruling favoring big-box retailers will stand.


    The case is important because big-box retailers have successfully appealed property tax assessments in several counties. Those appeals mean the retailers pay less property tax and the counties stand to collect less tax revenue.


    The counties were hoping Indiana’s highest court would hear its appeal of the Tax Court decision and reverse the outcome, but the court’s denial of the petition for review essentially ends the case. Chief Justice Loretta Rush and Justice Steven David voted to review the case. Justices Robert Rucker, Mark Massa and Geoffrey Slaughter voted to deny the petition for review.


    The case, Howard County Assessor vs. Kohl’s Indiana LP, involved the property tax assessment of a Kohl’s store in Kokomo between 2010-12. Kohl’s appealed the assessment and the case was heard by the Indiana Board of Tax Review and the Indiana Tax Court. After both of those appeals, it was determined the assessments should be about 20 percent less than the county’s revised assessments.


    The Indiana Board of Tax Review, in its Dec. 31, 2014 determination, said the difference is in the “comparable” properties each used to determine the assessed value. The appraiser for Kohl’s used sales data from nine other midwestern “big-box” stores to help determine the value. The stores were vacant at the time of the sale, also known as “dark boxes.”


    The appraiser for the assessor used data from sales of big box stores with leases to Kohl’s or other retailers like it. The Tax Court noted the appraiser for the assessor “believed that the use of dark boxes by Kohl’s was not appropriate to value the subject property for the following reasons: 1) dark boxes do not have any utility to either the original owner or another owner/user ‘in the same retail tier’ and, 2) the subject property was a special purpose property because Kohl’s built it to its own specifications.”


    As such, the assessor’s appraiser claimed, Kohl’s had reached the property’s market value and not its market value-in-use. This is an important distinction. Relying on previous Tax Court decisions, the Indiana Board of Tax Review sided with Kohl’s. It determined the retailer’s appraisal better reflected the market value-in-use standard found in the state’s assessment manual and interpreted by the Tax Court.


    The Tax Court on Sept. 7, 2016 denied the assessor’s appeal and reiterated its findings in three other cases, which meant the lower assessments were to be used to determine Kohl’s property tax bill.


    The Indiana County Assessors Association, in a friend-of-the-court brief, contended the Tax Court “ceated a new valuation standard which violates the spirit of the landmark valuation standard set forth by (the Indiana Supreme Court),” changing the state’s property tax assessment practices.


    The stakes were high for local governments and for retailers in the state. The state Supreme Court’s decision not to hear the case means the Tax Court’s standard applies to pending cases involving big-box retailers, so local governments will collect less in property taxes across the state. The big-box retailers will see reduced property tax bills under this scenario.  


  • 24 Apr 2017 12:30 PM | Sarah Smith (Administrator)

    Indiana Legislators worked through Friday night and into the early morning hours of Saturday, April 22, to finish up their business and adjourn the 2017 legislative session sine die. Session ended an entire week ahead of the deadline as Legislators had planned.


    In less than four months they successfully passed two very important bills: the next biennial budget and a roads and transportation bill with a 20-year project outlook. These bills await signatures from House and Senate leadership before making their way to Gov. Eric Holcomb’s desk for final approval.


    House Bill 1001, the budget bill, makes plans for approximately $32 billion of state revenue over the next two fiscal years. Increases in funding are notable for Education and the Indiana State Police.


    HB 1002, addressing transportation infrastructure, raises gasoline taxes by 10 cents per gallon, instates a vehicle registration fee and directs revenues for roads and bridges projects, shifts other revenue to roads and bridges projects, and alters tolling capabilities.


    Gov. Holcomb has already signed more than 100 bills and there will likely be about as many more in the next week.


    General Assembly leadership is now looking ahead to the 2018 session and issues they anticipate addressing include outdated liquor laws and the drug epidemic.


    Track bills as they become law with the Governor’s 2017 Bill Watch: https://secure.in.gov/gov/2923.htm


    IFPI Reports dealing with 2017 legislative priorities:

    IFPI Session report No. 1 - Shifting sales tax on gasoline without new revenue
    leaves less for roads and nothing for education, other programs


    IFPI Session report No. 2 - Budgets and transportation bill show Republican fiscal priorities differ between governor, House and Senate


    IFPI Session report No. 3 - Indiana's Regional Cities Program at a Crossroads


    IFPI Session report No. 4 - SALES TAX INCREMENT FINANCING IN INDIANA: PUTTING HB 1144 INTO HISTORICAL PERSPECTIVE


    IFPI Forecasting Brief and Budget Comparison - INDIANA'S REVENUE FORECAST, APRIL 2017 and A COMPARISON OF BUDGET PROPOSALS FROM GOVERNOR HOLCOMB, THE HOUSE AND THE SENATE

  • 18 Apr 2017 1:10 PM | Sarah Smith (Administrator)

    It’s Tuesday of what is anticipated to be the final week of the 2017 convening of the Indiana General Assembly. Legislators aim to close this year’s budget session by Friday, April 21, before firefighters descend on Indianapolis in droves for their annual convention.

     

    More than 70 conference committees may meet between now and then. Because of the supermajorities, these conference committee discussions are ultimately about disagreements regarding priorities of the Republicans in the Senate and House.

     

    Over the past few months we have tracked legislation of interest from a fiscal perspective. Here is the current status of those bills:

     

    HB 1001: State Biennial Budget (awaiting conference committee).

    The mandatory passage of this bill makes it one of the most contested of the session. Spending priorities set by Gov. Eric Holcomb, the House, and the Senate are evident at this point in time from the various budget versions. Whether funding was completely taken away or simply shuffled from one fund to another, the $308 million difference between the versions passed by the Senate and House isn’t so great in the overall $38 billion estimated budget.

     

    Medicaid and Education account for much of the total spending and much of the differences between budget versions. Construction funding is another area showing large differences. Annual surplus estimates bear the brunt of these differences with $50 million and $100 million variances during the biennium.

     

    HB 1002: Transportation Infrastructure Funding (awaiting conference committee).

    The outcome of this bill will greatly influence the budget. Revenues are allocated differently for the House and Senate versions of this bill and impact availability of funds for certain projects. How the revenues are allocated affects how much money will be available for transportation infrastructure funding. The cigarette tax, gasoline tax, and where these revenues are directed are major pieces to determining available funds for critical improvements.

     

    HB 1123: Study Civil Forfeiture Laws (signed by Gov. Holcomb).

    The Legislative Council is urged to form a summer committee to study the state’s civil forfeiture laws. Recommendations for future legislation may then be reported.

     

    HB 1144: South Shore Rail Transit (awaiting conference committee).

    While the Senate made many changes to the original bill, it still fundamentally creates a rail-transit corridor in Northwest Indiana. The bill allows two additional counties, St. Joseph and LaPorte, to participate in the redevelopment of the South Shore Line to Chicago. The plan is to create a Transportation-Oriented Development District to capture the incremental tax growth and use the money to pay off bonds acquired to double-track the railway and establish a western corridor between Dyer and Hammond.

     

    SB 60: State Executive Officer Salaries (signed by Sen. Long).

    This bill establishes the Executive Officers Compensation Advisory Commission to study salaries of state executive officers and make recommendations if adjustments are deemed necessary.

     

    SB 507: Economic Development (awaiting conference committee).

    Legislators originally filed for a concurrence on the amendments to this bill; however, the concurrence was withdrawn and the bill now heads for a conference committee. This legislation proposes to consolidate, rename, or eliminate multiple economic development funds, ultimately streamlining the hierarchy between the IEDC and local authorities.

     

  • 07 Apr 2017 10:19 AM | John Ketzenberger (Administrator)

    Indiana’s sales tax, by far the state’s largest source of revenue, is the subject of several legislative efforts this session. Aside from nudging the federal government to adopt streamlined sales tax legislation and/or resolution of the issue in court—requiring online retailers to collect and remit the tax on purchases—or establishing similar authority in Indiana, the House Ways and Means Committee adopted a significant resolution last week.


    House Resolution 3, sponsored by Rep. Tim Brown, cleared Ways and Means 21-0 after its scope was broadened by an amendment from Rep. Ed DeLaney. Brown, chair of the Ways and Means Committee, has advocated the studying the state’s sales tax system, specifically whether to expand the tax to additional services.

    Indiana is among the states that taxes relatively few services, and a study by the Indiana Fiscal Policy Institute indicates it’s becoming a problem for the state. Hoosiers are consuming fewer goods and more services, gradually eroding the sales tax base that provides nearly 50 percent of Indiana’s tax revenue, or more than $7 billion a year.


    The IFPI study is a comprehensive look at the tax base, the habits of consumers and the implication for the sales tax, as well as the challenges inherent in expanding the tax to more services.


    Brown’s resolution urges the Legislative Council, of which he’s a member, to assign the sales tax issue to a interim study committee for consideration. The resolution notes “Americans spend an ever-increasing share of their income on services and an ever-decreasing share on goods,” and that “the shift in consumption preferences away from generally taxed goods in favor of generally untaxed services serves to narrow the sales and use tax base.”


    The resolution also notes sound tax policy typically includes the “broadest possible tax base at the lowest possible tax rate. Expanding the sales and use tax base to include services could allow for a substantial reduction in the sales and tax use rate while maintaining revenue neutrality.”


    At 7 percent, Indiana’s sales tax rate is among the nation’s highest. The IFPI study concluded the rate could be reduced by at least 2 percent, depending on how many services were included in the sales tax.


    The resolution is eligible for consideration by the full House.


  • 01 Mar 2017 1:10 PM | Sarah Smith (Administrator)

    The General Assembly has reached its half-way point. The Senate has sent more than 175 bills to the House for consideration and the House has sent more than 160 bills to the Senate. In addition, Senate Joint Resolution 7, a constitutional balanced budget amendment resolution, has also switched houses.

    Some of the major bills coming out of the Senate address workforce development, the opioid epidemic and Pre-K programs and funding. The House pushed through the biennial budget along with a roads and transportation bill, but not much else of note from a fiscal perspective. It has been a fairly quiet first half but is expected to pick up as the Senate works on the budget.


    Below are links to the various caucus’ press releases addressing the switch.


    House Republicans:

    http://www.indianahouserepublicans.com/news/press-releases/house-republican-priorities-on-track-as-session-reaches-halfway-point/

    House Democrats:

    http://indianahousedemocrats.org/house-democratic-leader-pelath-on-2017-sessions-first-half-destined-to-be-little-known-and-long-forgotten/

    http://indianahousedemocrats.org/porter-house-gop-budget-flounders-on-an-ocean-of-blah/

    Senate Republicans:

    http://www.indianasenaterepublicans.com/news/2017/03/01/2017/long-senate-completes-productive-first-half-of-session/

    Senate Democrats:

    http://indianasenatedemocrats.org/mrvan-week-in-review-227-32/

  • 22 Feb 2017 3:50 PM | Sarah Smith (Administrator)

    The budget debate has begun in Indiana. House Republicans presented their version of the Fiscal Year 2018 and FY 2019 budgets last week following nearly two months of presentations by the governor’s office and various state agencies. An amended bill passed the Ways and Means Committee 14-9. House Bill 1001 now waits for action on the House floor.

    The Indiana Fiscal Policy Institute is issuing a series of reports tracking the development of fiscal issues during the General Assembly; the first two reports cover budget priorities for different versions of the bill. John Stafford, IFPI Senior Fellow and interim director of the Community Research Institute at Indiana University Purdue University Fort Wayne, is authoring these reports. 

    The governor’s original budget request focused on five major areas: a strong economy and job growth, a 20-year roads and bridges plan, developing a skilled workforce, attacking the drug epidemic and delivering great state government services. The 20-year roads and bridges plan works in conjunction with HB 1002, which has been referred to the Senate after a 61-36 vote in the House.

    Transportation and infrastructure funding is a major point of contention in the budget process. IFPI’s first report in the series addresses shifting sales tax on gasoline from the General Fund, using anticipated new revenues for road funding, and freezing the budget elsewhere. The policy proposal discussed in the report was made by an influential group outside the Legislature. The IFPI report concludes that the proposal is not fiscally sound, especially with the governor’s desire for maintaining the state’s surplus and promoting a balanced budget.

    The amount of funding necessary to meet the 20-year roads and bridges plan is projected to range from $900 million to $1.2 billion annually. To adequately fund work at such levels, only additional increases to Medicaid and the Teacher’s Retirement obligations are feasible. Any other increases would require drawing on state reserves or cutting funding from other areas. Regardless, gaps are created by this proposal which cannot be remedied without reductions elsewhere.

    A second IFPI report focuses on the recent House-proposed budget and reflects on spending priority differences between the House and Senate. History shows major differences between proposed legislation and approved budgets. A continuation of this pattern should be expected, as evidenced by the changes already seen in the House version of the budget compared with the governor’s budget proposal. The following table outlines those differences.

     

    2017 Budget Deliberations for FY 2018 & FY 2019

     

    Governor’s Version

    House Version

    K-12 Tuition Support

    $7,087B/$7,227B

    $7,011B/$7,130B

    Teacher’s Performance Grants

    $40M

    0

    Higher Education

    Capital Cash

    $67M

    $204M

    Regional Cities Grants

    $4M

    0

    Surplus Funds—Cash

    $84.6M/$197.5M

    $115M/$252M

    Source: Legislative Services Agency Fiscal Notes; IFPI Report No. 2


    The budget will continue to develop and change over the next two months. Updates will be available once the Senate hears testimony and introduces amendments.

  • 15 Feb 2017 12:30 PM | Sarah Smith (Administrator)

    Increasing concern over personal property right violations and claims of “policing for profit” have resulted in bipartisan efforts to better define Indiana’s forfeiture laws. Recent lawsuits against prosecutors, the Indianapolis Mayor, and law enforcement agencies address the timing of asset forfeiture and dispersal of proceeds.

     

    Indiana is one of more than 10 states in recent years working to update forfeiture laws. Ten bills related to civil or criminal forfeiture have been introduced in the General Assembly this year. House Bill 1123, which has already been referred to the Senate after a unanimous vote, recommends a summer study committee on civil forfeiture laws. Since this was the first related bill to be heard and passed through committee, it seems as if the Legislature will take more time to consider this issue before adjusting legislation.

     

    Currently, the Indiana Code requires seized dollars to be used to reimburse law enforcement and associated expenditures through General Fund accounts, with surplus dollars transferred to the Common School Fund. Instead, millions of seized dollars are reportedly shared by government offices and law enforcement agencies, supplementing appropriated monies in excess. The Indianapolis Star has more information on the issue.

     

    Overall fiscal impacts due to forfeiture law changes are unknown, but funds allocated to law enforcement agencies, prosecuting attorneys, and the common school fund would likely decrease under new, stricter regulations. Additionally, if the “policing for profit” claim is accurate, law enforcement agencies will see fewer opportunities to benefit financially from forfeiture.

     

    SB 8

    SB 26

    SB 41

    SB 113

    SB 258

    SB 461

    HB 1217

    HB 1481

    HB 1560

  • 09 Feb 2017 8:14 PM | John Ketzenberger (Administrator)

    For years Sen. Luke Kenley has worked to find a federal solution to a problem most states face: how to collect sales tax from online retailers. For years Congress and others in Washington D.C. have failed to act.


    Kenley’s frustration is palpable in Senate Bill 545, a measure that would give the Indiana Department of Revenue authority to require online retailers who have 200 transactions a year in Indiana or $100,000 in annual sales here to collect and remit the state’s sales tax. This is the bill’s purpose, but the bill’s fourth section is the truly revealing part.

    First, a little background.


    The federal courts determined long ago—it was so long ago the ruling pertained to catalog sales—that retailers didn’t have to collect and remit state sales taxes unless they had a physical presence in the state. Local retailers have long complained that gave their catalog/online competitors an automatic 7-percent price break, which cost them a lot of money.


    Now Hoosiers who buy things from catalogs or online are supposed to declare those purchases and then pay the 7 percent sales tax. The state collected about $2 million, according to an Indiana Fiscal Policy Institute report from 2011, which seems awfully low since that represents just $29 million in sales.


    In fact, the report estimated the state could be losing some $70 million a year in sales tax revenue for transactions completed online. Hence Kenley’s effort to find a way to collect more of that lost tax revenue.


    The first three sections of Kenley’s bill read like most others. It adds language to outline the reasons and procedures for collecting the tax, the parameters for who must participate and the Department of Revenue’s responsibilities. Standard stuff, until you get to the fourth section and Kenley unloads his frustration.


    The first six paragraphs of the fourth section make Kenley’s case. The lack of a federal solution means Indiana’s loses legitimate sales tax revenue, a diminished state tax base and an advantage for online retailers over those physically in the state.


    Then Kenley calls for action. “The Supreme Court of the United States should reconsider its doctrine that prevents, under certain circumstances, states from requiring remote sellers to collect gross retail tax, and as the findings of this section make clear, this argument has grown stronger, and the cause more urgent, with time,” reads the seventh paragraph of the fourth section of Kenley’s bill.


    Kenley, who chairs the Senate Appropriations Committee, holds a juris doctorate from Harvard. He knows what it means to call out the U.S. Supreme Court. The bill goes on to declare “the state’s immediate intent to require collection of gross retail taxes by remote sellers. Expeditious review is necessary and appropriate because, while it may be reasonable notwithstanding this law for remote sellers to continue to refuse to collect the gross retail tax in light of existing federal constitutional doctrine, such a refusal causes imminent harm to Indiana.


    “It is the intent of the general assembly to apply Indiana's gross retail tax and use tax obligations to the limit of federal and state constitutional doctrines,” Kenley’s bill concludes, “and to specify that Indiana law permits the state to immediately argue in any litigation that such a constitutional doctrine should be changed to permit the obligation to collect state gross retail tax as provided in IC 6-2.5-2-1(c).”


    This language may seem like the usual stilted stuff found in all bills, but I’m hard-pressed to recall any legislation that calls on the U.S. Supreme Court to act. If Kenley was calling into a sports-talk radio show, his take would be considered straight fire.


    The bill cleared the Senate 42-1 on Feb. 2 and moved on to the House for consideration. It’s still so hot it’s smokin’ on the Speaker’s desk.

  • 08 Feb 2017 12:24 PM | John Ketzenberger (Administrator)

    Debates over trade policy may seem remote here in the Midwest, but a recent report by the Brookings Institution shows Indiana’s at the issue’s epicenter.


    Turns out there is a reason Cummins CEO Tom Linebarger worked so hard to gain passage of the Trans-Pacific Partnership the last two years. The Brookings report ranks Columbus, Ind. as the most export-intensive city in the United States. Exports from businesses in the south-central Indiana manufacturing hub account for 50.6 percent of its economic activity. Exports directly support nearly 5,100 jobs in Columbus, according to the report, and more than 15,580 jobs indirectly.


    Not only is Columbus No. 1, three other Indiana cities are ranked in the top 10. Elkhart is fourth on the list, Kokomo is fifth and Lafayette is sixth.


    City

    Exports

    GDP Share

    Direct Jobs

    Indirect Jobs

    Columbus, IN

    $2.8B

    50.6%

    5,092

    15,589

    Beaumont, TX

    $23.6B

    40.0%

    8,698

    33,197

    Lake Charles, LA

    $6.5B

    36.9%

    4,361

    16,583

    Elkhart, IN

    $5.0B

    34.5%

    12,002

    30,326

    Kokomo, IN

    $1.5B

    34.1%

    2,364

    7,718

    Lafayette, IN

    $3.2B

    30.9%

    6,313

    17,986

    Decatur, AL

    $1.7B

    29.1%

    2,602

    7,868

    Fond du Lac, WI

    $1.2B

    25.1%

    2,628

    7,258

    Baton Rouge, LA

    $12.9B

    24.3%

    13,309

    42,306

    Spartanburg, SC

    $3.3B

    24.1%

    8,013

    19,080

    Source: Brookings Institution


    This shows global trade isn’t a simple issue, but the report went a step further. “No clean political divide separates trade-oriented counties from others,” the report noted. “A look at the nation’s aggregate 2015 export volume shows that, while 58 percent of exports emanated from counties that voted for Hillary Clinton, fully 42 percent shipped out of counties won by Trump.”


    In fact, the counties that voted for Trump tended to be more export-intensive than those that voted for Clinton. “The clear takeaway,” the Brookings report concludes, “President Trump’s campaign to remake the nation’s global trade relationships will not be a remote or academic affair—it will have real implications for regional economies. And while the benefits or disruptions of change will affect some places more than others, all of America—big-city metros and small-town or rural; red and blue; coastal or in-between—has a stake in what happens.”


  • 06 Feb 2017 12:46 PM | Sarah Smith (Administrator)

    Across the country it is recognized that jails and prisons are increasingly overcrowded and costly to taxpayers. Indiana’s Senate Bill 52 is an opportunity to improve the state’s statistics.

     

    As state and law enforcement officials attempt to reduce the prison and jail populations, they can often miss some of the subtle ways of preventing the growing numbers of inmates in favor of building more facilities and adding space to existing ones, both of which are costly. Sen. Ron Grooms, R-Jeffersonville, has proposed a bill promoting a more selective approach to who ultimately enters the criminal justice system.

     

    Data provided by the Bureau of Justice Statistics show a disproportionate number of incarcerated individuals suffer from at least one serious mental illness. Co-occurring disorders, and substance abuse and addiction are especially common among these individuals. It is rare that adequate treatment services are available or implemented during periods of incarceration. Diversion services before booking present alternative opportunities to keep individuals with serious mental illnesses out of jails and prisons when they really need accessible community resources.

     

    Senate Bill 52, which was assigned to the Tax and Fiscal Policy Committee, provides for the establishment of a fund for the Indiana Criminal Justice Institute. This fund, pending appropriation or gifts, donations, etc., would be used to supply grants to law enforcement entities to develop and operate Crisis Intervention Teams. An exact appropriation is not provided in the bill and it has not yet been assigned a hearing.

     

    Independently, Sen. Crider, R-Greenfield, has proposed Senate Bill 231, also dealing with Crisis Intervention Teams, which transfers administrative duties of the associated technical assistance center from ICJI to the Law Enforcement Training Board. The bill cleared its initial committee on Jan. 24 and was reassigned to Appropriations. Senate Bill 231 requests a $300,000 annual appropriation to carry out the duties of the technical assistance center.

     

    In some instances, individuals have been taken into custody due to behaviors associated with mental illnesses. The Bureau of Justice Assistance’s report, Improving Responses to People with Mental Illnesses, explains some of the issues complicating interactions between law enforcement personnel and those with serious mental illness.

     

    In effect, more effort is being put forth in some jurisdictions to address communication issues between individuals with serious mental illness and the police. Crisis Intervention Team officers are trained to identify and assess situations in the context of mental health issues. Trained officers are mobilized to deal particularly with communication, deescalation techniques, and providing referrals to community resources in lieu of police custody.

     

    Crisis Intervention Team officers gain knowledge, skills, and awareness which helps them assist individuals with serious mental illness who would otherwise become part of the criminal justice system.

     

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