MEMORANDUM
TO: All County Auditors and
Assessors
FROM: Micah G. Vincent,
Commissioner
RE: Changes Affecting the 1%
Tax Cap and Homestead Deduction Non-Reverting Fund
DATE: June 20, 2013
On May 11, 2013, Governor Mike Pence signed into
law Senate Enrolled Act 517 (“SEA 517”). Sections 28 and 31 make changes
affecting the 1% tax cap and the non-reverting fund used to hold taxes and
penalties resulting from improper homestead deductions or credits. Please note
that this memorandum is intended to be an informative bulletin; it is not a
substitute for reading the law.
Section 28 amends IC 6-1.1-20.6-2 so that for
purposes of the tax caps, “homestead” refers to a homestead that has been
granted a homestead deduction under IC 6-1.1-12-37. This amendment overturns
a recent Indiana Board of Tax Review decision holding that property merely
eligible for a homestead deduction is entitled to the 1% tax cap. This
amendment was effective upon passage of SEA 517.
Section 31 amends IC 6-1.1-36-17 so that upon
collection of the adjustment in tax due (and any interest and civil penalties on
that amount) after the termination of a homestead deduction or credit, the
county treasurer must deposit that amount in a non-reverting fund if the county
contains a consolidated city or, if the county does not contain a consolidated
city:
(A) in the
nonreverting fund, to the extent that the amount collected, after deducting the
direct cost of any contract, including contract related expenses, under which
the contractor is required to identify homestead deduction eligibility, does not
cause the total amount deposited in the nonreverting fund for the year during
which the amount is collected to exceed $100,000; or
(B) in the county
general fund, to the extent that the amount collected exceeds the amount that
may be deposited in the nonreverting fund under paragraph (A) above.
Any part of the amount that is not collected by
the due date must be placed on the tax duplicate for the affected property and
collected in the same manner as other property taxes. The adjustment in tax due
(and any interest and civil penalties on that amount) after the termination of a
deduction or credit must be deposited as specified only in the first year in
which that amount is collected. The amount to be deposited in the nonreverting
fund or the county general fund includes adjustments in the tax due as a result
of the termination of deductions or credits available only for property that
satisfies the eligibility for a standard deduction under IC 6-1.1-12-37 or a
homestead credit under IC 6-1.1-20.9, including the following:
(1) Supplemental
deductions under IC 6-1.1-12-37.5;
(2) Homestead
credits under IC 6-1.1-20.4, IC 6-3.5-1.1-26, IC 6-3.5-6-13, IC 6-3.5-6-32,
IC 6-3.5-7-13.1, or IC 6-3.5-7-26, or any other law;
(3) Circuit breaker
credits under IC 6-1.1-20.6-7.5 or IC 6-1.1-20.6-8.5.
Any amount paid that exceeds the amount required
to be deposited must be distributed as property taxes. Money that is deposited
must be treated as miscellaneous revenue. Distributions must be made from the
nonreverting fund upon appropriation by the county fiscal body and must be made
only for the following purposes:
(1) Fees and other
costs incurred by the county auditor to discover property that is eligible for a
standard homestead deduction or a homestead credit.
(2) Other expenses
of the office of the county auditor.
(3) The cost of
preparing, sending, and processing notices described in IC
6-1.1-22-8.1(b)(9).
The amount of deposits in a reverting fund, the
balance of a non-reverting fund, and expenditures from a reverting fund may not
be considered in establishing the budget of the office of the county auditor or
in setting property tax levies that will be used in any part to fund the office
of the county auditor.
The Department of Local Government Finance notes
that nothing in Section 31 prohibits carrying forward a balance in the
non-reverting fund. However, there is a limitation on receipts to be deposited
in the fund each year for counties that do not contain a consolidated city. In
order to properly deposit and comply with this limit, if applicable, the county
should review the receipt amount for the calendar year each time a deposit to
the non-reverting fund is to be made. The annual receipt amount net of contract
costs to identify homestead deduction eligibility must not exceed $100,000. Any
additional collections in a calendar year must be deposited into the county
general fund. As the effective date for this statutory change is July 1, 2013,
at the point in time after June 30, 2013 that this net receipt amount equals
$100,000 for the year, any additional collections that calendar year must be
deposited into the county general fund.
Questions may be directed to Staff Attorney Mike
Duffy at (317) 233-9219 or mduffy@dlgf.in.gov.
