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General Info | Investment Deduction | Employment Expense Credit | Investment Cost Credit |
Loan Interest Credit | Employee Wage Credit | Additional Information
Location
A business must have been located in the zone on January 1 of the calendar year or must be a new business in Indiana starting operations or moving into the zone. Businesses outside of the zone can qualify by establishing an additional site in the zone. A business may relocate in the zone and be eligible for zone benefits under special circumstances. If the business exists both inside and outside the zone, it may not substantially relocate its operations to the zone location for enterprise zone benefits. |
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Registration Fee
A business must register with the Indiana Economic Development Corporation and the Michigan City Urban Enterprise Association to claim tax benefits. To register, a business must file a registration from (EZB-R) by June 1 of each year and pay a participation fee. The participation fe is a percentage of the tax benefits claimed. The participation fee for the MCUEA is 20% of the business' total zone tax savings. A business must also pay a percentage (1%) to the IEDC if the zone tax benefits claimed exceed $1,000.
Eligibility
To be eligible for the tax incentives, any registered zone business must pay the local participation fee to the Michigan City Urban Enterprise Association and reinvest the remainder of their tax savings in their business as follows:
- Capital Investment in buildings, equipment or new products
- Increase in wages or benefits, including training, to employees who reside in the zone.
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The Enterprise Zone Investment Deduction [IC 6-1.1-45]
- Establishes a deduction for certain qualified investments made within an existing enterprise zone.
- Deduction is first available for 2006 pay 2007, and can be claimed for up to 10 years.
- "Qualified investment" is defined as any of the following expenditures relating to an enterprise zone location on which a taxpayer's zone business is located:
- The purchase of a building.
- The purchase of new manufacturing or production equipment.
- Costs associated with the repair, rehabilitation, or modernization of an existing building and related improvements.
- Onsite infrastructure improvements.
- The construction of a new building.
- Costs associated with retooling existing machinery.
- The amount of the deduction:
| The total AV of all of taxpayer's real and personal property at the EZ location on the assessment date.
MINUS
The "base assessed value," defined as the total AV of all of taxpayer's real and personal property at the EZ location on the immediately preceding assessment date.
EQUALS
The amount of the deduction. This appears to capture 100% of the increase in AV resulting from the qualified investment. |
- To claim the deduction, taxpayer must file a certified application with the county auditor on or before May 10 of each year.
- The County auditor reviews the application to determine eligibility and is required to notify the applicant of their determination to accept or deny by August 15 of the assessment year.
- If the application is denied, the taxpayer may appeal to a circuit or superior court within 45 days.
- The EZ business is required to reinvest a portion of its tax savings in the zone per IC 5-28-15.
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Employment Expense Credit
What is it?
Zone employers can earn tax credits for employing zone residents. A credit is subtracted from any enterprise zone business state tax liability for wages paid to employees who live in the zone and work at least 50% of the time in the zone on a job related at least 90% of the time in the zone facility.
How to claim it:
The annual tax credit for employment is the lesser of $1,500 multiplied by the number of qualified employees or 10% of the increase in wages paid to qualified employees in the tax year compared to the twelve months preceding January 1, 1984.
Subtract the SMALLER amount from your tax liability on Form IT-20, and attach Schedule EZ, Part II.
Special Notes:
Excess credit may be carried forward or back. For "C" corporations, qualified employees must be issued a Form IT 40 QEC (Enterprise Zone Qualified Employee Certificate).
This exemption applies to regular "S" corporations and other pass-through entities as well as "C" corporations and "SC" corporations.
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Investment Cost Credit
What is it?
Individuals purchasing an ownership interest in a business in the zone may be eligible for a credit of up to 30% of the purchase price on their state tax liability. The exact percentage depends on the following:
- Type of business manufacturer, retail, professional or warehouse)
- Amount of investment in real estate and personal property
- Number of new jobs and % reserved for zone residents
- Equity financing
How to claim it:
Approval from the Indiana Economic Development Corporation must be obtained in advance of the investment. The Indiana Economic Development Corp. will determine the percentage to be applied toward state tax liability.
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Loan Interest Credit
What is it?
An individual or business may take a credit of 5% of the interest income received from a qualified loan made in a business or individual located in the zone. A qualified loan is a loan to a business or individual for purposes directly related to the business or a loan to an individual that increases the assessed value of real property in the zone, including residential property.
How to claim it?
The credit is applied against a number of tax liabilities including gross income tax, adjusted gross income tax (excluding any county income tax), supplemental net income tax, insurance premiums tax and financial institutions franchise tax.
Complete Schedule LIC and attach to the individual or corporate tax return.
Special eligibility note:
Home purchase loans and loans for repair may not qualify.
Requirements:
Location - The investor need not live in the zone or have a place of business in the zone but must be investing in or loaning money to a business or individual in the zone for property improvement or a business related purpose in the zone.
Reinvestment must be within the zone or directly benefit the zone.
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Employee Wage Credit
What is it?
Qualified employees who live and work in the Michigan City Urban Enterprise Association are entitled to a State tax credit. One half of the adjusted gross income earned from a zone business up to $7,500 may be deducted before taxes are calculated. At the current rate of .034%, this credit could be worth u to $255. Wages up to $15,000 receive the benefit.
Because businesses receive benefits from employing zone residents, zone residents should benefit from increased employment opportunities.
Residents should also receive indirect benefits from the incentive received by individuals and businesses. Since all tax savings must be reinvested in the zone business or the zone community, residents will benefit from an enhanced quality of life.
How to claim it:
Obtain Form IT-40 QEC from your employer and attach it to your tax return. Enter the amount as "Other Indiana Deductions" on Line F of the Form IT-40.
Requirements:
Location - Individuals must live and work in the zone to be eligible for most benefits. The employee must work in the zone at least 50% of the time and a least 90% of the job must be directly related to the zone business facility.
Registration - Residents do not have to register or pay a participation fee to the Michigan City Urban Enterprise Association or Indiana Economic Development Corp.
Special eligibility note:
For tax years beginning after 12/31/01, an eligible enterprise zone employer for purposes of this deduction may be a governmental agency or not-for-profit organization. Qualified employees working for "C", "S" and "SC" corporations or sale proprietorships are eligible.
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Additional Information
For more information (and Enterprise Zone tax benefit forms), please contact:
Michigan City Urban Enterprise Association, Inc.
2601 E. Michigan Blvd., Suite 200
Michigan City, IN 46360-5369
(219) 873-2300
(219) 873-2305 fax
Industrial Recovery Site (Dinosaur Building) - Much like the dinosaurs, many large buildings that were once used for mills, foundries and large manufacturers are obsolete for today's new production methods and technologies. Because of this, these buildings now stand vacant. This program offers special tax benefits to offset the cost of adaptive reuse.
To be designated as an Industrial Recovery Site, a building must meet several parameters. The building or complex of buildings must be at least 300,000 square feet in size; the building or 50% of the complex of buildings must be at least 20 years old; and at least 75% of the floor space must have been vacant for at least two years.
A county or municipality with a planned project for reuse of a "dinosaur" building may apply to the Indiana Enterprise Zone Board for designation and eligible tax benefits.
Tax benefits are available for 10 years from date of project approval and include the following:
- Investment Tax Credit - A credit against the cost of remodeling, repair or betterment of the building or complex of buildings, awarded on the following scale:
- At least 20 years, but less than 30 years old - 15%
- At least 30 years, but less than 40 years old - 20%
- At least 40 years old - 25%
- Local Option Inventory Tax Credit - A municipality or county has the option of awarding an Inventory Tax Credit to tenants of "dinosaur" buildings.
Tax Increment Financing - Tax Increment Financing (TIF) provides for the temporary allocation to redevelopment or economic districts of increased tax proceeds in an allocation area generated by increases in assessed value. Thus, TIF permits cities, towns or counties to use increased tax revenues stimulated by redevelopment or economic development to pay for the capital improvements needed to induce the redevelopment or economic development.
The use of TIF is initiated by the declaration of a tax allocation area by a county, city or town redevelopment commission. Property tax assessments are frozen at predevelopment levels in the allocation area. Municipal bonds are then issued to finance the public improvements. As property values in the allocation area increase as a result of new development, the increment in tax revenues is used to meet debt service on issued bonds. Once the bonds have been paid off, the taxes collected from the allocation area are distributed to the remaining taxing districts. Bonds payable from TIF may be used to finance the cost of redevelopment and the construction of public improvements in the redevelopment area or for projects that directly serve or benefit that area. Proceeds may also be used for training.
Bond amounts are determined by the size of the project and the amount of the increment available. The 1992 General Assembly passed legislation allowing depreciable personal property (machinery and equipment) to be used in addition to real property in computing the increment.
Maritime Opportunity District - Maritime Opportunity District is a geographical territory designated at Indiana ports by the Indiana Port Commission. Companies located in a designated district are eligible for tax benefits through the authority of the commission.
The Indiana Port Commission may designate an area as a Maritime Opportunity District if the commission determines that:
- The territory is located adjacent to a state-owned port on state-owned land.
- There will be redevelopment or rehabilitation of property within the territory.
- The redevelopment or rehabilitation will require a substantial investment relative to the size of the business making the investment.
- The business making the investment will be manufacturing goods.
- More than 90% of the goods manufactured are to be shipped through a port operated by the stated of Indiana and are destined for international markets.
- The business is making a long-term commitment.
- There will be an increase in the revenue of the port.
Tax benefits available to companies through a Maritime Opportunity District include:
- Ten-year tax abatement for new manufacturing equipment.
- Ten-year property tax abatement for all inventory produced for export according to a specific
schedule.
- A reduction in the adjusted gross income tax according to a schedule ranging from 100% in the
first year to 20% in the eighth year.
For a Maritime Opportunity District, the abatement schedule for new manufacturing equipment is
as follows:
Years 1-6: 100%
Year 7: 95%
Year 8: 80%
Year 9: 65%
Year 10: 0%
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