Budget & Taxes (Sales Tax)

Provides that the overall local income tax (LIT) rate cap (excluding certain special purpose LIT rates) is 3.75% beginning in 2028.~ (Under current law, the overall rate cap is 3.75% in every county other than Marion County and 4.0% in Marion County and is scheduled to be reduced to 2.9% in all counties in 2028.) Repeals provisions that require counties and municipalities to readopt their LIT rate each year beginning in 2031. Requires LIT revenue from a fire protection and emergency medical services rate adopted by a consolidated county to be distributed to the fire special service district established under the UNIGOV statute. Specifies that an included town that is part of the consolidated city under the UNIGOV statute is not a separate municipality for purposes of the LIT provisions enacted in SEA 1 in the 2025 session. Decouples the special purpose LIT rate for central Indiana public transportation projects from the LIT expenditure rate. (Under current law, the special rate for transportation projects is included in a county's total expenditure rate.) Repeals a provision regarding Marion County's allocation of LIT revenue. Expands the population threshold parameters under which a municipality may elect to be treated as if it were not eligible to adopt a municipal LIT (and instead potentially receive a LIT distribution under a county adopted LIT rate). Requires the population count for purposes of the LIT to include any federal special census count requested by a city or town. Makes changes to LIT distribution provisions. Restores the standard deduction for homestead property in the case of a homestead with an assessed value of $125,000 or less, and retains the supplemental homestead deduction as enacted in SEA 1 in the 2025 session. Amends the calculation of the maximum levy growth quotient (MLGQ) to provide an increased MLGQ for those taxing units with assessed value growth over a three year average that exceeds 20%. Caps the total operating referendum tax that may be levied by a school corporation for referendums approved by the voters after December 31, 2025, to not more than the school corporation's maximum operating referendum tax levy in the immediately preceding year, multiplied by the maximum levy growth quotient. Removes project costs as a determination threshold under the controlled projects statute. Provides for an increase in the tax rate thresholds under the controlled projects statute based on any increase in a political subdivision's tax rate that results solely from the statutory changes to property tax deductions and exemptions enacted in SEA 1 in the 2025 session. Provides a property tax liability credit to freeze the homestead property tax liability for low income seniors. Repeals provisions enacted in SEA 1 in the 2025 session that require a political subdivision to hold a separate public hearing before increasing its tax levy from the preceding year. Reinstates provisions regarding excess tax levies that were repealed in SEA 1 in the 2025 session. Repeals the debt limitation for political subdivisions. Amends revenue distribution provisions for certain debt service levies to include the supplemental homestead credit and the local property tax credits for disabled individuals and seniors added in SEA 1 in the 2025 session for purposes of the distribution determination. Amends provisions added in SEA 1 in the 2025 session that require the department of local government finance to neutralize the effect of certain property tax provisions enacted in that bill. Clarifies provisions added in SEA 1 in the 2025 session that place restrictions on the issuance of certain general obligation bonds. Provides a property tax deduction for permanently disabled veterans based on the percentage of the permanently disabled veteran's service connected disability. Increases the maximum renter's deduction for income tax purposes from $3,000 to $6,000 per taxable year. Provides an income tax credit for first time home buyers with a mortgage applicable for the first taxable year in which the home buyer first takes ownership of a homestead with respect to which a first time home buyer mortgage is granted. Provides that the tax credit is equal to $3,000 for that taxable year and may not be carried forward to a succeeding taxable year, carried back to a preceding taxable year, or refunded. Provides an income tax credit for households whose income is at or below 200% of the federal poverty guidelines for a household of its size. Provides that the tax credit is equal to $3,000 for the taxable year and may not be carried forward to a succeeding taxable year, carried back to a preceding taxable year, or refunded. Provides an income tax credit for small businesses that make contributions to a qualified employee for use toward a qualified employee's cost for child care. Provides that the tax credit may not be carried forward to a succeeding taxable year, carried back to a preceding taxable year, or refunded. Provides an income tax deduction for theft losses that result from certain financial transactions induced by third parties and that cause the individual to incur federal gross income as a result of the theft. Requires the department of state revenue to first certify the theft loss deduction before a taxpayer may claim the deduction in a taxable year.

Establishes the housing down payment assistance fund. Establishes a transfer tax equal to 50% of the fair market value of a single family residence for each single family residence acquired by an applicable taxpayer after the applicable date. Establishes a maximum number of single family residences that may be owned by an applicable taxpayer after the applicable date for purposes of calculating an annual excise tax on any excess single family residences.

Creates a uniform municipal innkeeper's tax that may be imposed at a flat rate that does not exceed $5 per night and includes provisions similar to the uniform county innkeeper's tax. Makes corresponding changes to statutes concerning innkeeper's tax administration.

Provides that a transaction involving the sale of utility service, as reflected in the total amount billed by a utility in a customer bill that is issued after December 31, 2026, is exempt from the state gross retail tax. Provides that this exemption applies to: (1) the sale of electric, natural gas, water, or wastewater service; and (2) a customer bill issued by a utility after December 31, 2026, regardless of whether the bill includes any fees or charges for utility service provided to the customer before January 1, 2027. Repeals the sales and use tax exemption for certain data centers enacted in the 2025 session in HEA 1601. Provides that after March 14, 2026, the Indiana utility regulatory commission (IURC) may not issue a final order in a base rate case filed by an electricity supplier if the final order, once fully implemented, would result in an average increase of 3% or greater in the total monthly bill of a residential customer of the electricity supplier. Specifies that a municipality includes a consolidated city for purposes of the existing statute authorizing a municipality to purchase, condemn, and operate a utility in the municipality for the purpose of providing utility service to the municipality or the public: (1) without the consent of the IURC; and (2) even if a public utility is engaged in a similar service in the municipality. Provides that the existing statute prohibiting a municipality, public utility, or rural electric membership corporation from bringing an action against a public utility for the condemnation of the public utility's electric utility property does not apply to a municipality that seeks to purchase the electric utility property of a public utility for use of the property in providing electric utility service if: (1) the municipality and the public utility are unable to agree upon a price to be paid for the electric utility property; and (2) the municipality by ordinance declares that a public necessity exists for the condemnation of the electric utility property. Provides that a municipality that adopts such an ordinance may: (1) bring an action in the circuit or superior court of the county where the municipality is located against the public utility for the condemnation of the electric utility property; and (2) exercise the power of eminent domain in accordance with the existing eminent domain statute. Prohibits the IURC from issuing before July 1, 2028, a final order in a base rate case filed by an electricity supplier with the IURC, regardless of the date of filing of the electricity supplier's base rate case with the IURC. Provides that this provision expires July 1, 2028. Provides that existing law providing that the rates and charges of a municipally owned utility may include a reasonable return on the utility plant of the municipality if the legislative body of the municipality so elects does not apply to rates and charges established or amended by a municipal legislative body after March 14, 2026.

Allows the Delaware County executive to adopt an ordinance to consolidate the functions of a board, bureau, commission, authority, or any other similar entity (former entity) authorized to administer funds received from the Delaware County: (1) innkeeper's tax; or (2) food and beverage tax; into a single, consolidated entity as designated in the consolidating ordinance. Specifies that if a consolidating ordinance is adopted, each former entity is abolished on the date the ordinance is adopted, the term of a member serving on each former entity ends on the date the ordinance is adopted, and a subsequent ordinance may not be adopted to restore a former entity and transfer the powers, duties, and responsibilities of innkeeper's tax and food and beverage tax administration back to the former entity. Sets forth transitional provisions that must be included in the ordinance.

SB 117 would exempt menstrual discharge collection devices (commonly known as period products like tampons and menstrual cups) from state sales tax. This means consumers purchasing these essential health items would pay no sales tax at checkout, directly reducing costs for people who use them. The bill’s key provision is a specific tax exemption, shifting the financial burden from buyers to the state treasury for these products. It does not alter product availability, safety standards, or existing health coverage.