SB 316 creates a new set of Indiana income tax rules for “investment partnerships,” effective January 1, 2026. It defines what qualifies as an investment partnership and what counts as qualifying investment securities and qualifying investment partnership income. In general, the bill targets partnerships whose assets and income are overwhelmingly tied to passive investment activity, such as stocks, bonds, derivatives, currencies, commodities, and interests in other investment partnerships.
The bill then changes how income from those partnerships is sourced and taxed for nonresident partners. Qualifying investment partnership income distributable to a nonresident partner is generally allocated to the partner’s state of residence or commercial domicile, but it is treated as apportionable business income in certain cases where the investment activity is directly related to, operationally connected with, or funded by in-state business activity. The bill also adjusts sales-factor treatment for receipts tied to these partnerships and provides penalty relief if a taxpayer reasonably reports income as qualifying investment partnership income but the partnership is later found not to meet the definition.
Impact
SB 316 amends Indiana Code Title 6, Article 3 by adding new definitions and a new sourcing/apportionment section for investment partnerships. Its practical effect is to clarify when income from investment partnerships is taxed to nonresident partners as allocated income versus apportionable business income, and to specify how related receipts affect the sales factor. The bill is aimed at high-finance and investment entities, including partnerships with significant holdings in securities, derivatives, and similar instruments, as well as their partners and tax preparers.
Sentiment
The bill appears to have been received favorably in committee and on the Senate floor. The Senate Committee on Tax and Fiscal Policy reported it out unanimously, 12-0, after amending it, and the Senate later passed it 47-2 on third reading. That voting pattern suggests broad support for the bill’s tax-clarification approach and limited partisan or policy resistance.
Contention
The main points of potential contention are technical rather than ideological. The bill draws a detailed line between passive investment income and income that should be treated as business income, which can affect tax liability for nonresident partners and unitary business groups. The amended language also expands and refines the treatment of entities that are unitary with a partner, the sales-factor denominator rules, and penalty relief when a partnership is later determined not to qualify. These provisions may matter most to investment partnerships, corporate partners, multistate taxpayers, and tax practitioners concerned with sourcing and apportionment rules.