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Senate Bill 2: Taxation of Pass-Through Entities — Status in Indiana

Mar 3, 2023

Real-Time Status Updates

March 3

Indiana PTET Event Recording & FAQs

INCPAS has posted the following new resources . 

February 22

Governor Holcomb signs Senate Enrolled Act 2 (SEA 2)

Effectively immediately, a pass-through entity tax for Indiana has been signed into law by Gov. Holcomb with a retroactive date of Jan. 1, 2022. The bill was fast tracked through the Statehouse to allow CPAs, already midway into tax season, as much time as possible to assist clients during tax season, while allowing taxpayers the greatest opportunity to benefit from the work around. 

  • Access the final bill: SEA 2 — the bill passed unanimously through the Senate and House.
  • Go to INCPAS PTET Resource Hub for tools, resources and answers to your questions.
  • Register for INCPAS In The Know Webinar: Indiana's Pass-Through Entity Tax — Discussing the Pros, Cons & Challenges (1 hour free CPE)
  • The Indiana Department of Revenue is working on providing guidance and implementation information — check back at the resource hub for information as it becomes available. 

FREE FOR MEMBERS INCPAS In The Know Webinar: Indiana's Pass-Through Entity Tax — Discussing the Pros, Cons & Challenges

February 20

SB2 Sent to Governor for Signing

SB2 Taxation of Pass-Through Entities passed out of the House today and goes to Gov. Holcomb's desk for signing on Feb. 21.

February 15

Engrossed Version of SB2 Posted

The engrossed version of SB2 Taxation of Pass-Through Entities was posted Feb. 15. The bill will have a 3rd reading in the House on Feb. 20.

February 14

SB2 Moves to 3rd Reading in the House

The current version of SB2 and revised Fiscal Note. Version 2 (2/1/23) of the bill was introduced by Rep. Snow and heard by the House Ways & Means Committee on Feb. 13. Sen. Scott Baldwin (R-Noblesville) was on hand to testify. Kyle Simmerman, CPA, member of the INCPAS Executive Committee, Board and Tax Resource Advisory Council, testified on behalf of the Society. The bill passed out of committee with a unanimous vote. It will have a 3rd reading in the House (Feb. 20) before heading to the Governor’s office for signature, likely by Feb. 22.

February 6

SB2 Timeline for Moving Through Statehouse

February 6

3rd reading in Senate before it's transmitted to the House. The House will have to put it on a file list that must be read on the floor, where it is assigned to a committee.   

February 8-9
The committee could hear it either of these days, and report will be adopted on Feb. 9. 

February 13
Earliest day for 2nd reading in the House — 3rd reading is 24 hours later.

February 15
If no amendments are made in the in House, SB2 could be on the Governor’s desk on this day. If amendments are made it will add one more day, putting the projected date as Feb. 17.

INCPAS Member Discussions

See recent SB2 posts, questions and answers in the Open Forum (use your login)

February 3

Sample Client Letter Template

This resource includes sample text you can use to notify your clients about SB2.

Sample Client Letter (.docx)

February 2

Indiana Department of Revenue

Those of you following SB2: Taxation of Pass-Through Entities have repeatedly asked: "What about DOR? Do they know this is coming? Are they preparing?"

The short answer is yes and yes, as DOR team members have been working collaboratively with all stakeholders, including INCPAS, on SB2. We understand your concerns as it relates to software vendor preparedness and DOR’s ability to effectively implement this retroactive election after March 31. We want to assure you that DOR's legislative and policy teams have been actively involved with the analysis and drafting of SB2. Stakeholders have sought their feedback and DOR has played an instrumental role in ensuring your ability to implement by deadlines outlined in SB2. DOR is currently working through the timelines and various scenarios to prepare an implementation process. We will continue to work closely with Department leadership to understand and share plans and guidance as it becomes available.

“The DOR team truly appreciates the collaboration and teamwork with everyone involved, including our INCPAS partners, in determining how best to address the many complexities associated with SB2. This work has been active over the past 8 months and has been in hyper-mode the last two weeks. We still have a lot of work to do, and we will continue to do it together. Changes in legislation, especially when retroactive and in the middle of filing season, always create unique challenges for implementation, communication, and ongoing administration. Our team is working diligently to ensure that DOR will be ready to administer the pass-through entity tax once passed by the General Assembly and signed by Governor Holcomb. The complexities of SB2 will continue to require positive collaboration and teamwork with all impacted parties – and we will stay committed to that success ingredient." –DOR Commissioner, Bob Grennes

Fast tracking this bill has been a critical part of our advocacy as it relates to SB2. We know you need answers as quickly as possible in order to give you and your clients clarity on the details of the bill. The speed and clarity will give you the opportunity to strategize your implementation approach in a way that is mutually beneficial to your firm and clients. As we move forward in implementation, there will be unforeseen challenges. We will work through these issues together, as partners, as we always have.

"We will continue to keep a focus on CPAs best interests as we work to implement this complex change mid-season. I know many of you are worried about the uncertainty – as you make decisions on how to proceed, trying to keep clients’ best interests in mind, know that we’re working hard too. Stay in contact with us, share your needs; we’ll get through this together." INCPAS President & CEO, Courtney Kincaid, CAE

January 30

The INCPAS advocacy team is working with elected officials and multiple stakeholders to ensure clear guidance and a timely implementation for Senate Bill 2: Taxation of Pass-Through Entities, which seeks a retroactive effective date of 1/1/2022. 

Message from INCPAS President & CEO Courtney Kincaid, CAE

I want to ensure you have the most up-to-date information as it relates to Senate Bill 2: Taxation of Pass-Through Entities (SB2). A Senate Tax and Fiscal Policy hearing is scheduled for 9 a.m. on Jan. 31. The committee will review an amended version of the bill, which has significant improvements. We will provide a link as soon as it becomes available. 

SB2 will impact a significant number of members. As such, I know your primary concern is the retroactive implementation date of 1/1/2022. A retroactive bill is generally not considered good tax policy, but in this case the tax benefit for Indiana's business community proved too attractive and negated our objections to being retroactive to 1/1/2022. Instead, INCPAS leadership pivoted to focus on ensuring the bill — as enacted — is clear, implementable, and timely.

As we move toward implementation our advocacy will not end. We will provide tools and resources to help lessen any burden the retroactivity put on your firm. 

  1. There are 29 states (and 1 locality) that have enacted a PTE tax — all of which are effective in 2022 or earlier. 
  2. There is a strong desire among the Indiana business community and legislature to enact Indiana PTE legislation with a retroactive effective date of Jan. 1, 2022.
  3. The election is optional, unlike CT where the election is mandated.
  4. DOR will issue guidance; for 2022, DOR will begin accepting elections after March 31, 2023, utilizing the composite return which will be repurposed to include residents, vs. non-resident only.
  5. There are Safe Harbor provisions that waive penalties during the initial implementation.
  6. The bill is being fast tracked. What does that mean?

Fast tracking this bill gives CPAs time to make decisions about how to advise clients prior to the March 15 filing deadline. 

What that means for Indiana CPAs:

  1. If a retroactive date of 1/1/2022 passes, firms with clients who wish to take the PTE election will need to either (a) file an extension on behalf of the client or (b) file an amended 2022 return.
  2. Firms will need tools to help advise clients on options. INCPAS has already begun exploring partners to help provide said tools.
  3. The Society will work with DOR to provide Information Bulletins and FAQs that aim to guide firms in advising their clients which we know will be required.

We are working on FAQ documents as the bill moves through the chambers and heads to the Governor’s desk. If you have a question or concerns as it relates to implementation of SB2, please contact Vice President - Advocacy Sherrill Rude, CAE.

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