Article Submitted by The Pilot News Managing Editor James Master
Before most of the county was shut down by the snowstorm, members from government municipalities across the county gathered at the county building to hear a presentation about House Bill 1002 and how it could potentially reduce the amount in business personal property (BPP) assessments.
Todd Samuelson from Baker Tilly gave the presentation, starting off by informing those in the room that he was simply stating the facts and not adding any political bias. He also added that anything could happen with House Bill 1002. As of Feb. 1, the bill has been referred to the Senate Committee on Tax and Fiscal Policy. It was passed by the Indiana House of Representatives on Jan. 20 with a vote of 68 yeas and 25 nays.
Samuelson said that HB 1002 provides that BPP purchased after Jan. 1 would be exempt from the 30 percent depreciation floor.
“If you are familiar with how personal property is assessed, it’s very much different than real property. The county assesses real property. Business personal property is self-assessed by the owner of the personal property,” Samuelson said. He used the example of if he owned a piece of machinery in his business, he would provide the county with his BPP tax return so that the assessment can be reported.
Different types of machinery fall into different buckets for IRS purposes and which depreciation schedule that equipment would be on. Samuelson explained that there are different pools ranging from pool 1 to pool 5. He went on to say that most equipment in Indiana is in pool 2.
“Each of those pools have depreciation schedules that, if you set aside what we’re talking about, you can depreciate an asset down to zero in terms of what its value is. The issue, if it is an issue, that is being contemplated is that Indiana has a pool that you cannot depreciate business personal property below 30 percent of original cost,” said Samuelson.
Samuelson gave his opinion on why supporters of HB 1002 might want to lower the depreciation level. “Indiana has this floor, other states don’t. So, are we at a competitive disadvantage because we have, I’m supposing here…but that is the issue of, I believe, are we less competitive than if that floor is eliminated or reduced, we’re more competitive for companies to make investments in Indiana. And under that concept, the more investments that are made, even though it may not be going to the tax base investments bring jobs, it brings all those econometrics that you think about.”
However, HB 1002 doesn’t exempt existing BPP.
“It’s really getting at the aspect of what happens if tax base goes down,” Samuelson said when he got to the part of the presentation that covered how do changes in BPP assessed value impact local governments.
Among those impacts, total net assessed value will decrease eventually, property tax rates will increase, circuit breaker tax credits will increase, cumulative fund net levies will decrease, TIF areas with less BPP could see an increase in Tax Increment Revenues, TIF areas with more BPP could see a decrease in Tax Increment Revenues, and it could be more difficult to make bond payments.
As far as the impact on taxpayers, Samuelson said that due to increased tax rates, the following property owners could pay more in property taxes: Homestead Residential Property Owners, Secondary/Rental Residential Property Owners, apartments, long-term care facilities, agricultural property owners, and business owners with little or no BPP.
Business owners with more BPP could pay less in property taxes if the proposed legislation is passed.
Samuelson provided a breakdown of the 2021 Net Assessed Value in Marshall County. In 2021, the county has a total of $2,705,634,451 in Net Assessed Value. Of that amount, 10.51 percent ($284,433,396) was business personal property. Utility Property accounted for 3.38 percent and 86.11 percent was real property.
“The utility property which we understand, talking with attorneys down in Indianapolis, that this legislation would also include utility personal property,” said Samuelson.
After his presentation, Samuelson answered questions from the government officials that attended.
For more information regarding HB 1002, visit www.iga.in.gov/legislative/2022/bills/house/1002.
