May 24, 1999
and Enhancements for
Enterprise Zone Tax Incentives/Inventory Tax Reform
Legislation Helps Enterprise Zone Redevelopment Efforts____
Although only 1 0% of all bills enrolled during the 1999 Legislative
Session passed both houses to the Governor's desk, State Enterprise
Zones managed to win a package of legislation that will enhance
and attract new investment for all enterprise zones and urban cities.
For Lafayette, small businesses and residents in the enterprise
zone are the big winners this session.
The passage of HB 1983, HB 1909 and HB 1001 enhances the zone's
ability to renovate vacant property, to encourage more zone businesses
to hire zone residents and to enable businesses to more easily reinvest
in their operations. HB 1983 became law with the Governor's signature
Monday, May 24th.
The state trade association of enterprise zones, the Association
of Indiana Enterprise Zones (AIEZ), gave enterprise zones across
the state a forum to advocate for much needed change to enhance
redevelopment efforts as well as to facilitate zone business investment
State enterprise zones are geographic areas designated by local
city councils and the State of Indiana specifically targeted for
revitalization. These inner city areas have the characteristics
of higher unemployment older more dilapidated buildings and infrastructure
and a higher incidence of poverty. Businesses located in enterprise
zones can take certain tax incentives in return for reinvesting
in their business in the form of new jobs, new equipment or redevelopment
of their real property. In addition, businesses taking tax incentives
must also give back to the community by making a contribution to
the local Urban Enterprise Zone Association.
Currently, all businesses are eligible to take the Inventory Tax
Exemption. Other tax credits include:
Employee Wage Deduction: Residents of the zone can take a tax
deduction from their taxable salary and wages and lower their
individual state tax if they are employed by a qualified zone
Employer Expense Credit: If a zone business hires a zone resident,
that business can take a credit on their state tax liability.
Gross Income Tax Exemption: Qualified zone businesses may exempt
increases in gross income from state tax.
Investment Cost Credit: Individuals making new investments in
enterprise zone companies may receive up to a 30% tax credit against
their personal state tax liability.
Loan Interest Credit: Any Indiana taxpayer, whether individual
or business, may receive a state tax credit of 5% of the interest
income earned on loans made to enterprise zone businesses or on
loans for improvements to real property, including residential
HB 1983 redefines what types of businesses can take zone tax incentives.
HB 1983 now explicitly permits all for-profit businesses to take
the Loan Interest Credit and the Employer Expense Credit.
HB 1983 also adds new members to the State Urban Enterprise Zone
Board. These are: Indiana Workforce Development, Business Modernization
and Technology, Indiana Department of Environmental Management,
Indiana Development Finance Authority, State Board of Tax Commissioners
and the Indiana Department of Revenue. "Having these new members
as part of the enterprise zone team and bringing their expertise
to the program will have a very positive impact and will bring more
resources to address the needs of inner cities," says Dennis Carson,
Lafayette Director and AIEZ President.
Other bills affecting Enterprise Zones help Zone Associations squarely
address revitalizing their areas. HB 1909 sets aside a pool of money
specifically to help zones associations revitalize property that
could be environmentally contaminated, property otherwise known
as "brownfields." "Knowing that resources are available will give
a real boost for brownfield redevelopment. HB 1909 gives us a real
tool in our arsenal to get these properties productive and on the
tax rolls," says Carson.
Other elements of this session's tax reform will help small business'
bottom line with inventory tax relief. HB 1001 exempts the first
$12,500 of assessed value of inventory. Depending on how the State
chooses to administer the credit, many enterprise zone small businesses
and others across the state will no longer have inventory tax liability.
For those businesses located in the zone with over $12,500 in assessed
valuation, the enterprise zone inventory tax exemption still applies
The Lafayette UEA and the Association of Indiana Enterprise Zones
are already working on the next round of legislative reforms to
the zone program. Lafayette UEA through AIEZ will be working closely
with the Indiana Department of Commerce over the summer and fall
on two key studies leading to additional legislative changes next
- Updating guidelines to the Investment Cost Credit to better
meet today's business needs.
- Identifying new or revised tax incentives applicable to enterprise
zones that not only serve as enhancements to redevelopment efforts
in older urban areas but also enable zone association to continue
offering meaningful programs for zone residents and businesses.
The Lafayette Zone will loose 20% of its revenues due to inventory
tax reform. Identifying other tax incentives that would be more
meaningful in helping businesses grow and create jobs could replace
the inventory tax credit as a key zone incentive.
"As enterprise zone directors, we welcome inventory tax reform.
However, this clearly points to the need to update the enterprise
zone program with incentives that address the redevelopment issues
of cities and support the direction our Indiana's economy is heading,"