Proposed state tax changes could help some Indiana businesses save on federal taxes.

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Hoosier lawmakers are considering changes to Indiana’s tax laws to allow some businesses to pay less to the federal government.

Under federal law, businesses are entitled to deduct state tax payments from their federal tax liability—a deduction that is not limited to businesses that pay income taxes like corporations, which are large companies.

But for LLCs and S Corps whose owners or shareholders pay their own individual income taxes, the federal government limits the deduction for state and local taxes to $10,000.

Indiana Governor Eric Holcomb will deliver his annual “State of the State” address on January 10, 2023 to members of the Indiana House and Senate in the state of Indianapolis.

Senate Bill 2, sponsored by Sen. Scott Baldwin, R-Noblesville, would change how the latter corporations are penalized at the state level, allowing them to claim an unlimited deduction for state tax payments on their federal tax returns.

“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. “

Baldwin estimates $50 million in annual federal tax savings for Hoosier small businesses.

A nonpartisan legal services agency is evaluating the measure’s financial impact on state and local income tax revenue, saying the measure could reduce how many businesses benefit from a new pass-through entity tax and credit created by the law.

However, Senate Republicans have made it a top priority for the GOP-led chamber during the 2023 Indiana legislative session, which runs through April 29.

The proposal enjoys support from several state trade organizations, including the Indiana Chamber of Commerce, National Federation of Free Trade, Indiana Association of Manufacturers, Indiana Builders Association, Indiana Restaurant and Lodging Association, Indiana Association of Realtors and Automobile Dealers Association. Indiana

“We are excited to support this proposal as it allows Hoyer business owners to invest in their businesses and continue economic growth in our state,” said David Ober, vice president of taxation and public finance for the Indiana Chamber of Commerce.

“Wow man. What a scene. You can’t fix what we see here on any given day,” said Hobart Patrol Officer Tommy Tatum.

Jerry Davich, The Times

“Additionally, this tax break costs the state nothing, making it a win-win for business owners and the state of Indiana,” Ober said.

According to Baldwin, at least 29 other states have made changes to their tax laws to help businesses reduce their federal tax liability. If passed in Indiana, the bill would be retroactive to January 1, 2023.

A hearing on the proposal by the Senate Taxation and Fiscal Policy Committee has not yet been scheduled.