MEETING MINUTES
Meeting Date: November 18, 2013
Meeting Time: 9:00 A.M.
Meeting Place: State House, 200 W. Washington
St., Room 431
Meeting City: Indianapolis, Indiana
Meeting Number: 2
Members Present: Sen. Brandt Hershman, Chairperson; Sen. Edward
Charbonneau; Sen. Timothy Skinner; Rep. Eric Turner; Rep.
Greg Porter.
Members Absent: None.
The meeting was called to order at 9:05 A.M.
I. Tax Credits
Scott Drenkard of the Tax Foundation
testified regarding tax preferences. (See Exhibit A, Mr. Drenkard's written
testimony.)
In response to a question from Senator
Hershman about providing tax credits to certain identified business industries,
Mr. Drenkard testified that often the comparative advantage for such industries
is unrelated to tax issues. Mr. Drenkard described the components of the Tax
Foundation's "State Business Tax Climate Index", and he testified
that: (1) the Index is a study of tax structure, not tax burden; (2) offering a
credit hurts a state's score on the Index; (3) income taxes are the most
destructive for economic growth, and sales taxes and then property taxes are
the least destructive; (4) Indiana's best feature for purposes of the Index is
a low, flat income tax rate; and (5) corporate taxes are passed on in the form
of higher prices, lower wages, or lower dividend payouts.
Senator Skinner questioned Mr. Drenkard
regarding the correlation between unemployment and economic growth. Mr.
Drenkard testified that he had not made such an analysis, and that unemployment
is often a structural issue and not a tax issue.
Heath Holloway of the Legislative Services
Agency (LSA) then began presenting the LSA's studies regarding Indiana's state
tax credits. (The LSA studies regarding the various state tax credits are
included in Exhibit B.)
Historic Rehabilitation Tax Credit and the Residential Historic
Rehabilitation Tax Credit
Mr. Holloway provided background information
on the Historic Rehabilitation Tax Credit and the Residential Historic
Rehabilitation Tax Credit.
Representative Ed Clere testified regarding
the Historic Rehabilitation Tax Credit, and he briefly described his HB 1318
from the 2013 Session. He testified that: (1) the biggest issues are the
existing state fiscal year cap on the credit and the lengthy waiting period
before an awarded credit may be claimed; (2) there are community development
benefits associated with the tax credit; and (3) a 2007 study found that each
dollar of tax credit generated multiple additional dollars of spending. Representative
Clere recommended: (1) raising the annual credit cap; (2) transferring
administration of the credit to the Office of Community and Rural Affairs (OCRA); and (3)
using a formula to take into account median income, rurality, and significance
of structure to generate a factor that could enhance the tax credit. The
proposal would also include a small-project set aside, so that major projects
would not consume the entire tax credit.
Marsh Davis, President of Indiana Landmarks,
described how the tax credit works. He testified that: (1) the tax credit
should be relevant to small projects; (2) there are both large and small
projects that need assistance, so he would prefer a tax credit that works for
both types of project; (3) Indiana has one of the lowest tax credits; (4)
increasing the tax credit amount would do the most good; and (5) the state tax
credit and federal tax credit contributions toward a project should be around
50/50. Mr. Davis distributed the executive summary of a 2007 study concerning the
tax credit. (See Exhibit C.)
James C. Kienle, representing the American
Association of Architects (Indiana) stated that he is a practicing architect
who does historic preservation work. He testified that: (1) all of the work on
a project must be done before the tax credit is awarded; (2) because of the
nature of a project for which a tax credit is granted, the project typically
uses local labor and more money is retained locally; and (3) the tax credit is
a tool to retain buildings for both economic and cultural benefits. He
distributed an Issue Brief from the American Association of Architects. (See
Exhibit D.)
Matt Bell, representing the Regional Chamber
of Northeast Indiana, testified that: (1) the Regional Chamber recognizes the
value of the tax credit as a tool to spur economic growth, and it supports
clearing the backlog of credits, using a rurality factor, and transferring
administration of the tax credit; and (2) the annual cap should be around $10
million.
Mayor Steve Croyle of the City of Winchester
testified that: (1) he supports raising the annual cap; (2) the city has an
historic downtown, but what the city can "bring to the table" for
revitalization efforts is not enough; (3) the city has used revenue from a tax
increment financing (TIF) district for these purposes ($60,000 per year for a
$1 - to - $1 match); and (4) the tax credit backlog has meant that some
projects which would have been rehabilitated if the tax credit had been
available are not done.
Carolyn Elliot, representing the Indiana
Economic Development Association (IEDA), testified that: (1) the IEDA supports
the tax credit as an economic development tool; and (2) the tax credit is not
functioning properly. She offered the IDEA's assistance in improving the tax
credit.
Andy Frazier of the Indiana Association for
Community Economic Development (IACED) testified that the IACED supports
eliminating the backlog of the tax credits which may be claimed and also
supports increasing the amount of the annual cap on the tax credit. Mr. Frazier
distributed a news article describing a rehabilitation project that was done in
Elkhart. (See Exhibit E.)
Gina Leckron, State Director of Habitat for
Humanity, testified that: (1) in certain cases where Habitat for Humanity is
acting as a developer, the tax credit will help bring in other developers to
participate; and (2) Habitat for Humanity supports correcting problems with the
tax credit.
Individual Development Account Tax Credit
Heath Holloway of LSA provided background
information on the Individual Development Account (IDA) Tax Credit.
Kathy Williams, representing the Indiana
Community Action Agencies (INCAA), testified that: (1) the IDA program
encourages low-income people to save and it is a good way of leveraging private
donations; and (2) she encourages the continuation of the program. Andy Frazier
of the IACED testified in support of the IDA tax credit. (See Exhibit F.)
Neighborhood Assistance Program Tax Credit
Heath Holloway of LSA provided background
information on the Neighborhood Assistance Program (NAP) Tax Credit.
Kathy Williams, representing the INCAA and
the Indiana Coalition Against Domestic Violation (ICADV), testified in support
of the NAP tax credit.
Emily Bryant, representing Feeding Indiana's
Hungry, testified in support of the NAP tax credit. She noted that more than
half of the food banks that her organization serves use the tax credit, and she
testified that these tax credits help fill gaps in funding.
Andy Frazier of the IACED testified in
support of the NAP tax credit. (See Exhibits G and H.) He recommended
increasing the cap on the tax credit and returning to a competitive process to
award the credit.
Rebecca Seifert, Executive Director of the
Gennesaret Free Clinic, testified in support of the tax credit. She explained
that there had been a competitive process used to award the tax credits, but it
is no longer used. There are now more recipients of the tax credit, so there is
a lower allocation of tax credits per taxpayer. She supported increasing the
cap on the tax credit.
Glenna Shelby, representing the Indiana
Association of Rehabilitation Facilities, testified that the tax credit
supports funding for programs serving individuals with physical and
intellectual disabilities, and she urged continuation of the tax credit.
Lucinda Nord of the Indiana Association of
United Ways testified that the United Way does not directly use the tax credit,
but supports it on behalf of various community groups that do use the tax
credit.
Jacob Sipe of the Indiana Housing and
Community Development Authority described the tax credit and the award process,
and he noted that it is an extremely popular tax credit. He explained that the
tax credit is used to leverage money for various community projects in
economically disadvantaged areas, and that of 217 applications in 2013, 210
were approved.
Gina Leckron, State Director of Habitat for
Humanity, testified in support of the tax credit and noted that they use the
tax credit in their program. She supports a return to a competitive process to
award the tax credit.
Indiana 529 College Savings Contribution Tax Credit
Heath Holloway of LSA provided background
information on the Indiana 529 College Savings Contribution Tax Credit.
Brian Burdick, representing the Indiana
Education Savings Authority, testified that: (1) some states have a pre-paid
tuition plan for state universities; and (2) there have been relatively few
accounts for which the account owner makes a contribution, claims the tax
credit in the same year, and then keeps the account open with only a small
balance. John Grew of Indiana University testified that the university supports
the tax credit.
Senator Hershman recessed the meeting at
noon.
College Contribution Tax Credit
When the Commission reconvened at 1:25 P.M.,
Heath Holloway of LSA provided background information on the College
Contribution Tax Credit.
John Grew of Indiana University testified
that: (1) the amount of the tax credit is relatively small, but it does benefit
higher education; (2) there is a broad base of individuals claiming the tax
credit; and (3) contributors can claim this tax credit even if they do not
itemize on their federal tax returns, which can also help establish a pattern
of giving for younger taxpayers. He encouraged the continuation of the tax
credit.
School Scholarship Contribution Tax Credit
Heath Holloway of LSA provided background
information on the School Scholarship Contribution Tax Credit. Senator Skinner
asked LSA to provide information regarding what portion of the donations went
to public schools and what portion went to private schools.
21st Century Scholars Tax Credit
Heath Holloway of LSA provided background
information on the 21st Century Scholars Tax Credit.
Research Expense Income Tax Credit
Randhir Jha of LSA provided background
information on the Research Expense Income Tax Credit. Senator Hershman asked
LSA to examine the extent to which the corporate income tax could be lowered if
the tax credit were eliminated.
Biodiesel Income Tax Credit
Lauren Sewell of LSA provided background
information on the Biodiesel Income Tax Credit.
Coal Gasification Income Tax Credit
Randhir Jha of LSA provided background
information on the Coal Gasification Income Tax Credit. Lisa Kobe of Duke
Energy testified in support of continuing the tax credit.
Ethanol Production Income Tax Credit
Lauren Sewell of LSA provided background
information on the Ethanol Production Income Tax Credit.
Lake County Residential Property Income Tax Credit
Randhir Jha of LSA provided background
information on the Lake County Residential Property Income Tax Credit.
Uniform Income Tax Credit For the Elderly
Heath Holloway of LSA provided background
information on the Uniform Income Tax Credit For the Elderly.
Kristen LaEace of the Indiana Association of
Area Agencies on Aging testified in support of this tax credit and suggested
indexing the income thresholds and credit amounts to inflation.
Lucinda Nord of the Indiana Association of
United Ways testified that she supports the tax credit and indexing the tax
credit. She commented that a $40 tax credit means a great deal to seniors with
incomes less than $10,000 per year.
Representative Porter commented that given
the water and sewer bill increases coming in Marion County, it is important to
maintain (and possibly increase) this amount.
Insurance Guaranty Association Income Tax Credit
Randhir Jha of LSA provided background
information on the Insurance Guaranty
Association Income Tax Credit.
Trent Hahn, representing the Association of
Indiana Life Insurance Companies, supported the tax credit, and he testified
that: (1) the tax credit allows insurance companies to recoup assessments that
are made to cover for failing insurance companies; (2) 44 states have a similar
program; and (3) assessments are recouped over five years at 20% per year.
Prison Investment Income Tax Credit
Heath Holloway of LSA provided background
information on the Prison Investment Income Tax Credit.
Riverboat Building Income Tax Credit
Randhir Jha of LSA provided background
information on the Riverboat Building Income Tax Credit.
II. Providing State Tax Credits to Taxpayers
that Hire Ex-Felons
William Alexander of Beyond the Bridges
testified in favor of establishing a tax credit for hiring individuals who are
ex-felons, and he commented that such an incentive is important to convince
employers to these individuals. He stated that providing employment for these
individuals will allow them to become productive members of society.
Nick Rush testified regarding a non-profit
organization that serves homeless individuals and substance abusers, including
individuals who are ex-felons. He testified that: (1) he supports establishing
a tax credit for hiring ex-felons; (2) such a tax credit would provide a
meaningful incentive to employers; (3) individuals who are turning their lives
around become frustrated when they are unable to get a job; and (4) the new
expungement law has helped.
John Hawkins testified that he works with the
homeless and with individuals leaving prison.
He stated that finding a job is the biggest
obstacle. He testified that ex-felons have difficulty getting get past an
initial review for a job offer, and that he supports the "Ban the
Box" proposals.
Senator Skinner commented on sentence reform
and the importance of incentives to hire individuals who are ex-felons. Representative
Turner commented that individuals who return to society from prison need help
in finding a job, and that this would reduce recidivism.
Representative Shackleford described HB
1216-2013 (which did not pass in the 2013 legislative session), and she
testified that: (1) it costs $20,000 to house each offender; (2) a tax credit
of $3,000 per offender is better economically; and (3) she would consider the
possibility of including veterans under such a proposed tax credit, because
they also often have trouble finding jobs.
Heath Holloway of LSA provided a memorandum
to the Commission concerning state tax credits for hiring ex-felons. (See
Exhibit I.)
III. Use of Tax Increment Financing
Bob Sigalow of LSA provided four memoranda
regarding tax increment financing (TIF) to the Commission (See Exhibits J, K,
L, and M.)
Andrew Berger of the Association of Indiana
Counties (AIC) testified that: (1) the issue of TIF is important; (2) there is
a need for greater transparency; (3) TIF can be a good economic development
tool; (4) counties with a high percentage of assessed value allocated to TIF
districts are usually rural counties; and (5) there may be some gaps in the data.
Mark Fisher of the Indianapolis Chamber of
Commerce testified that: (1) a study has been done of TIF in Marion County; and
(2) there is a need for more transparency, including online resources for
citizens to use.
Rhonda Cook of the Indiana Association of
Cities and Towns (IACT) gave an example of a TIF project, and she testified
that: (1) TIF does work; (2) the process to amend a TIF plan is too cumbersome;
and (3) IACT will work with the General Assembly to keep TIF as an economic
development tool.
The
meeting was adjourned at 3:35 P.M.
