Indiana Legislature Backtracks – Offers Property Tax Relief

by Leslie Bonilla Muñiz, Indiana Capital Chronicle
April 28, 2023

Indiana’s Senate stripped out the House’s solution to high property tax bills more than two weeks ago. But on Thursday, lawmakers reversed course, offering up what they said was more than $100 million of dollars of property tax relief in compromise provisions.

They also — late Thursday and early into Friday — finalized several more proposals: a tax study, career education, septic systems, administrative interpretations of laws, floodplain maps and alcohol.

Revived property tax changes

House lawmakers resuscitated several provisions meant to help homeowners struggling with high tax bills — after Senators removed them earlier this month — in a finalized compromise bill.

“We know in our data that we’re going to see, more than likely, a repeat [of elevated bills] again in 2024,” said bill author Rep. Jeff Thompson, R-Lizton. “This is the time to take care of homeowners in the following years.”

Thompson said homeowners would save $109 million in the legislation’s first year. An updated fiscal analysis was not available early Friday.

Not all lawmakers were satisfied — but said something was better than nothing.

“I’m supporting this because we really have not done anything significant to help homeowners. This is one step in that direction,” said Rep. Cherrish Pryor, D-Indianapolis. “I quite frankly wish that we had done more, or could have done more, but right now, homeowners are hurting.”

Tax bills statewide averaged 18% higher than last year, according to an analysis by the Association of Indiana Counties and Policy Analytics. The legislation largely doesn’t help with this year’s bills, due May 10.

House Bill 1499 would expand a supplemental deduction that’s currently set to a flat 25%.

Homeowners with properties worth less than $600,00 would see assessed value deductions of 35% for taxes this year, 40% for 2024, 37.5% for 2025, and 35% for those due afterward. Those with properties worth more than $600,00 would get deductions ten percentage points lower each year.

The bill would also raise income eligibility for senior citizen property tax deductions by linking the caps to the cost of living increases applied to Social Security benefits.

And it would limit school corporation operating referendum tax levies approved before this year that are payable in 2024 — to a 3% increase of this year’s maximum tax, or to the 2024 maximum.

Other provisions would make it easier for property owners to contest their property tax assessments and let counties choose to provide their own property tax relief — which could take effect as early as this fall. But counties would take the financial hit without state aid.

Homeowners could also soon see receipts from the state explaining — “in a way that is easy to read and understand” — how general fund money and potentially other tax revenues were used.

The bill originally would’ve temporarily lowered the property tax caps enshrined in Indiana’s constitution — which cap residential bills at 1% of property value.

The House voted to approve the bill unanimously, 98-0. Meanwhile, the Senate approved it 49-1, with on-the-outs Republican Mike Young of Indianapolis voting in opposition.

Tax commission overcomes brief discord

The two chambers also struck a popular agreement on a Senate priority bill: a commission examining Indiana’s tax system.

Senate Bill 3 author Rep. Travis Holdman, R-Markle, said the body could study the efficacy of the current property tax system — including a look at the tax caps, 20 years on — and the possibility of ditching the income tax. Smaller taxes could also land on the agenda.

House lawmakers had edited the commission into a one-year gig and swapped out its leader in a tiff over chamber control, but the final version of the bill restored the two-year length and created a power-sharing structure.

Both chambers passed it unanimously: the House 96-0 and the Senate 50-0.

Big win for career education

After a holdup, the House and Senate compromised on a massive Republican-backed plan to graduate Hoosier students who are better prepared for the workforce — and increase the likelihood they will stay in Indiana.

At its core, the career education measure, House Bill 1002, seeks to expand work-based learning in Indiana high schools, like apprenticeships and internships. 

Paramount to the wide-ranging bill is a provision that would establish accounts for students in grades 10-12 to pay for career training outside their schools. The new framework is intended to enable students to earn a post-secondary credential before leaving the K-12 system. 

Republican budget writers approved $15 million over the biennium for career scholarship accounts (CSAs), which will be similar to Indiana’s ESAs. Participating students can use the $5,000 CSAs to pay for apprenticeships, coursework, or certification.

Lawmakers have said they were adamant this session to “reinvent” Hoosier high school curriculum as the state tries to reverse its dismal college-going and credentialing rates, stymie other academic impacts following the COVID-19 pandemic and help fill open jobs around the state.

The plan is headed to the governor after a 74-23 vote in the House and a 35-15 vote in the Senate. Democrats were largely opposed to the bill. They questioned its effectiveness for students and cited concerns about oversight, especially in regards to intermediaries that will be entitled to state dollars for helping connect students with employers and training opportunities.

“This is the most complicated jury-rigged thing I’ve ever seen,” said Rep. Ed Delaney, D-Indianapolis.

Less stringent septic system rules

State lawmakers additionally gave the greenlight to a bill that would  “overhaul” Indiana’s septic system laws and make it easier for new residential sewage disposal mechanisms to be installed or replaced.

House Bill 1402, authored by Rep. Jim Pressel, R-Rolling Prairie, intends to transfer authority over residential onsite sewage systems from the state health department to a Technical Review Panel, or TRP, made up of various state officials, scientists, academics and industry professionals.

That panel would then be “in total control of Indiana’s septic code,” Pressel said, making it responsible for amending the existing state requirements and authorizing new sewage system technology.

Any local health department ordinances that are stricter the state’s would be void unless approved by the TRP.

The final version of the bill also includes language formerly in a separate measure, House Bill 1647, that grants Hoosier property owners the ability to override local health department decisions about new septic system installations and existing systems that have failed — as long as they have a paid consultant who agrees with them.

The bill unanimously passed the House but saw some bipartisan opposition from the Senate, which voted 45-5 in favor of its passage.

Lawmakers get more say

Another bill giving lawmakers more power over rulemaking that is currently left to state agencies advanced to the governor 29-19 from the Senate and 65-28 from the House.

Language in the final draft of House Bill 1623 would change the way state agencies adopt regulations that implement state or federal laws. That includes revisions to the process for adopting emergency rules, and shortening the time period when rules must be readopted.

Of greatest concern to Democrats and environmental advocates critics is a provision in the measure to prevent state environmental regulators from making stricter coal ash rules than federal ones. Another provision in the measure seeks to put lawmakers in charge of new pesticide regulations. Sen. Chris Garten, R-Charlestown.

Bill sponsor Sen. Chris Garten, R-Charlestown, maintained the bill seeks to improve transparency, increase oversight, and simplify the rulemaking process.

Fewer floodplain restrictions

A bill changing how Indiana’s floodplains are mapped also passed both the House and Senate, sending it to the governor.

Senate Bill 242 seeks to nix a provision in current state law that requires floodplain administrators to use the “best floodplain mapping data available” when reviewing an application for a construction permit in or near a floodplain. 

“Restricting what floodplain mapping data local governments use is a property rights issue, as it greatly impacts property value and whether residents can build on their own land,” Leising said. “This bill simply provides flexibility for local floodplain administrators to make better-informed decisions on whether someone can develop their property without harming the environment.”

Although the original bill deleted the map mandate flat-out, the final version of the measure allows those applying for a permit to use either those maps or an engineering study.

Democrats were largely opposed to the earlier version of the bill, but after conference committee negotiations, minority caucuses in both chambers were on board. Instead, it was several Republicans — one in the House and nine in the Senate — who voted against the bill.

Some said in public testimony that the most recent maps, which were created by the Indiana Department of Natural Resources, are not accurate and make it harder to sell or build homes.

Critics of the bill said it could increase the risks and potential damage that could be caused by future flooding. New language added to the bill requires sellers to disclose whether a property is located within the less-detailed floodplain maps maintained by the Federal Emergency Management Agency, however.

Not a dry session

Several alcohol bills moved Thursday.

One proposal began life as sewage legislation, but within a matter of weeks, lawmakers recast it as an alcohol bill, a pet store bill and settled on it as an athletics bill. Instead, legislators gutted a government reform task force bill to use it for alcohol.

The final version of House Bill 1200 now houses more than a dozen alcohol provisions. The House approved it 90-4, and the Senate 40-10.

Lawmakers also approved a finalized Senate Bill 20, which would let cities and towns designate outdoor locations as “refreshment areas” with Alcohol and Tobacco Commission approval. Retailers there could get permits to sell alcoholic beverages within the zone.

Controversial language banning grocery, convenience and drug stores from selling chilled liquor or mixed drinks — previously edited into the bill — was removed. Indiana is the only state that regulates the sale of alcohol based on temperature.

The House approved 92-3, and the Senate 37-11.

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