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A state lawmaker from Noblesville has introduced a bill that would provide tax relief to Indiana’s small businesses.
State Sen. Scott Baldwin, R-Noblesville, filed a lawsuit against Senate Bill 2. He announced that LLCs and S Corps would deduct all state tax payments on their federal tax returns, resulting in what could be $50 million in federal tax savings. Hoosier small businesses.
“One of my main goals in the Senate is to make it easier and less expensive to start and grow a business in Indiana,” Baldwin said. he said. “SB 2 will provide significant tax relief to small businesses by leveling the playing field and making these businesses eligible for tax breaks that other large corporations receive. This legislation has broad support from the business community and I look forward to working with my colleagues to pass it into law.”
Under federal law, businesses can deduct their state tax payments from their federal tax liability. For businesses that pay income taxes as corporations, such as C corporations, typically large businesses, the deduction is unlimited. However, for corporations whose owners or shareholders pay their own income taxes, such as LLCs and S Corps, the deduction is limited to $10,000.
The law allows LLCs and S Corps to get an unlimited federal deduction for their state tax returns, similar to C Corps.
Baldwin’s legislation has been identified as priority legislation by the Indiana Senate Republican Caucus and is supported by several business organizations, including:
- Indiana Chamber of Commerce
- National Federation of Independent Business (NIB)
- Indiana Technology and Innovation Association (ITIA)
- Indiana Manufacturers Association
- Indiana Builders Association
- Main road employers
- Indiana Restaurant and Lodging Association
- Indiana Association of Realtors
- Indiana Liquor Retailers Association
- Indiana State Bar Association
- Indiana CPA Association
- S corporation association
- Indiana/Kentucky Associate Builders and Contractors; And
- Indiana Automobile Dealers Association.
“We are excited to support this proposal because Hoyer will allow business owners to reinvest in their businesses and continue economic growth in our state,” said David Ober, Indiana Chamber of Commerce Vice President of Taxation and Public Finance. “Additionally, this tax break costs the state nothing, making it a win-win for both business owners and the state of Indiana.”
“The Indiana Technology and Innovation Association supports Senator Baldwin’s legislation to provide tax relief to small businesses and ensure Indiana has a competitive tax climate that encourages businesses to start, locate and grow in our state,” said ITIA Executive Director Jennifer Hallowell.
If SB 2 becomes law, Indiana will join at least 29 states that have changed their tax laws so that businesses can reduce their federal taxes.
SB 2 has been referred to the Senate Committee on Taxation and Fiscal Policy and awaits a hearing for further consideration. For more on the bill, visit iga.in.gov/legislative/2023/bills/senate/2.
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