May 11, 2015
From KPMG TaxWatch
On May 6, 2015, Senate Bill 441, which makes a number of changes to Indiana’s corporate income tax laws, was signed into law by Governor Pence. All of these changes are effective for tax years beginning after December 31, 2015. Under current Indiana law, business income is defined as "income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitutes integral parts of the taxpayer's regular trade or business operations." Under the revised law, business income is all income that is apportionable under the U.S. Constitution. Another change is that the throwback rule for sale of tangible personal property to a purchaser in a state in which the taxpayer is not taxable is eliminated. Further, Senate Bill 441 clarifies that receipts from sales of computer software will be treated as sales of tangible personal property for purposes of applying the state’s sourcing and apportionment rules. As such, these receipts will be attributed to Indiana if the software is delivered or shipped to a purchaser in Indiana, other than the U.S. government. Another change affecting corporations is an expansion of the state’s related party expense disallowance rules. Under existing law, corporations are required to add back intangible expenses and directly related intangible interest expenses. Senate Bill 441 subjects all directly-related interest expenses to addback. “Directly-related interest expenses” are interest expenses paid to, or accrued or incurred as a liability to, a recipient if: (1) the amounts represent, in the hands of the recipient, income from making one or more loans, and (2) the funds loaned were originally received by the recipient from the payment of expenses by the taxpayer, a member of the taxpayer’s affiliated group, or a foreign corporation. Senate Bill 441 also revises the statutory exceptions to the addback rules to reflect that all intercompany interest is now subject to addback. Please contact Marc Caito at 317-951-2434 with questions on Senate Bill 441.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.