SB 290 creates a special property tax and local income tax framework for a narrow class of Indiana municipalities. It applies only in counties with at least four municipalities over 40,000 population, and then only to a municipality whose property tax levy is in the lowest 20th percentile statewide relative to assessed value. For a qualifying municipality, the bill allows a one-time petition to the Department of Local Government Finance to raise the municipality’s 2025 maximum property tax levy to include all 2025 debt service levies. That increase is permanent for future levy calculations, with the adjusted 2025 levy carrying forward into 2026 and later years.
The bill also changes how certified shares of county income tax are calculated for qualifying municipalities in the affected counties. For certain years, it reduces the amount used in the certified shares allocation formula, and for 2026 it adds a temporary debt-service and lease-rental adjustment. In addition, it lowers the county trust account threshold percentage over a phase-in period for counties meeting the bill’s population criteria, which affects when supplemental distributions are triggered. The bill further prohibits the use of state general fund money to cover shortfalls in county reserve accounts or certified distributions.
The bill’s impact is concentrated on local finance statutes in IC 6-1.1 and IC 6-3.6. It effectively gives a limited set of municipalities more room under property tax levy limits to account for debt service, while also changing the distribution mechanics for county income tax certified shares and supplemental distributions. Counties and municipalities meeting the population and percentile criteria would be the primary affected parties, along with the Department of Local Government Finance and the state budget agency, which are assigned new calculation and distribution duties.
Overall sentiment appears strongly favorable in the Senate committee and on the floor. The Senate Committee on Tax and Fiscal Policy reported the bill out unanimously, 13-0, and the Senate later passed it 47-0 on third reading. That voting record suggests broad bipartisan support and little public opposition in the available record.
The main point of contention embedded in the bill is fiscal fairness and the targeting of benefits to a very small set of municipalities. Supporters appear to be addressing local debt-service and revenue-distribution pressures in larger counties with multiple sizable municipalities, while the bill’s structure limits relief to qualifying municipalities only. Another notable issue is the explicit prohibition on using state general fund dollars to backfill local shortfalls, which may reflect concern about shifting local fiscal problems onto the state.
Impact
SB 290 amends Indiana’s property tax levy and county income tax distribution statutes to create a special rule for qualifying municipalities in certain large counties. It authorizes a one-time, permanent increase in a qualifying municipality’s maximum property tax levy to include debt service levies for 2025, adjusts certified shares calculations for affected municipalities, changes county trust account threshold percentages for supplemental distributions, and bars state general fund transfers to cover reserve account or certified distribution shortfalls. The bill primarily affects local governments, the Department of Local Government Finance, and the state budget agency.
Sentiment
The available legislative history shows strong support and no recorded opposition. The Senate Tax and Fiscal Policy Committee reported the bill favorably by a 13-0 vote, and the full Senate passed it 47-0 on third reading. That suggests the bill was viewed as a technical but important local finance measure with broad agreement among lawmakers.
Contention
The bill’s narrow applicability is the most likely source of policy debate: it benefits only municipalities in counties with at least four cities or towns over 40,000 population, and only those in the lowest 20th percentile of levy-to-assessed-value comparisons. That targeting could raise fairness concerns from other local governments that do not qualify. The bill also shifts county income tax distribution formulas and lowers trust account thresholds over time, which may concern counties or taxing units that could receive smaller distributions. Finally, the prohibition on using the state general fund to cover local shortfalls reflects a clear boundary against state backstopping of local finances, which may be contentious in principle even though no recorded opposition appears in the vote history.