A BILL FOR AN ACT to amend the Indiana Code concerning taxation.
Summary
HB 1143 changes Indiana’s local option income tax rules for individuals who live in one county but work or operate a principal place of business in another county that also imposes a local income tax. Under the bill, such a taxpayer would owe local income tax in both places: the county of residence and the county of principal employment or business. The bill also revises the definition of “local taxpayer” to reflect this dual-tax structure, with separate effective-date changes for 2027 and 2028.
The bill sets the work-county tax rate at 25% of the sum of the local income tax rates imposed on residents in that county, excluding certain rates under a separate chapter. It then provides a credit against the residence-county tax equal to the amount paid to the work county, so the taxpayer is not fully taxed twice on the same income. The new section applies only to taxable years beginning after December 31, 2026, and is scheduled to expire January 1, 2030.
Impact
HB 1143 would amend Indiana Code chapter 6-3.6-2 governing local option income taxes by expanding when a county may tax a nonresident worker or business owner. It would create a new statutory rule for taxpayers with cross-county residence and employment/business ties, and it would add a credit mechanism to coordinate taxes between the county of residence and the county of employment or business. The bill would affect county income tax administration, taxpayer withholding and filing obligations, and the distribution of local tax burdens between resident and work counties.
Sentiment
Based on the bill text alone, the measure appears to be a technical but meaningful tax policy change rather than a broadly controversial social issue. No committee transcript or recorded votes were provided, so there is no direct evidence of support or opposition from hearings or floor action. The structure of the bill suggests an effort to balance county revenue interests with taxpayer relief through a credit, indicating an intent to avoid full double taxation while still allowing both counties to collect some revenue.
Contention
The main point of contention is likely to be whether workers should pay local income tax in both their home county and their work county, even with a credit against the residence-county tax. Counties that host jobs or businesses may support the added revenue, while resident counties or taxpayers may object to the expanded tax base and added complexity. Another possible issue is the 25% rate formula, which may be viewed as either a limited, compromise approach or an arbitrary allocation of taxing authority. No specific stakeholder comments were provided in the record.