Tax Incentive Evaluation Law: Indiana

Fact Sheet January 21, 2015 Read time:

Projects: Economic Development

This page is no longer being updated. As of June 15, 2017, newer tax incentive evaluation fact sheets are available here.

To ensure that economic development tax incentives are achieving their goals effectively, many states have approved laws requiring regular, rigorous, independent evaluations of these programs. For a list of states that have passed evaluation laws since the start of 2012, click here.

Indiana

H.B. 1020, enacted March 25, 2014

What it does

Requires evaluation of all major tax incentives
An evaluation of each tax incentive is required every five years. Nonpartisan legislative staff — with experience studying incentives — is responsible for the evaluations.
Connects reviews to policymaking
A legislative commission is assigned to oversee evaluations. The commission holds public hearings and makes recommendations to the General Assembly on programs up for review.

Requires evaluation of all major tax incentives

An evaluation of each tax incentive is required every five years.

Nonpartisan legislative staff — with experience studying incentives — is responsible for the evaluations.

Connects reviews to policymaking

A legislative commission is assigned to oversee evaluations.

The commission holds public hearings and makes recommendations to the General Assembly on programs up for review.

Excerpt from Indiana’s law: Legislative staff measures economic impact

The review, analysis, and evaluation must include information about each tax incentive that is necessary to achieve the goals described in subsection (b), such as any of the following:

...

(6) An estimate of the economic impact of the tax incentive, including the following:

(A) A return on investment calculation for the tax incentive. For purposes of this clause, "return on investment calculation" means analyzing the cost to the state or political subdivision of providing the tax incentive, analyzing the benefits realized by the state or political subdivision from providing the tax incentive.

(B) A cost benefit comparison of the state and local revenue foregone and property taxes shifted to other taxpayers as a result of allowing the tax incentive, compared to tax revenue generated by the taxpayer receiving the incentive, including direct taxes applied to the taxpayer and taxes applied to the taxpayer's employees.

(D) For any tax incentive that is reviewed or approved by the Indiana economic development corporation, a statement by the chief executive officer of the Indiana economic development corporation as to whether the statutory and programmatic goals of the tax incentive are being met, with obstacles to these goals identified, if possible.

(7) The methodology and assumptions used in carrying out the reviews, analyses, and evaluations required under this [law].

(8) The estimated cost to the state to administer the tax incentive.

(9) An estimate of the extent to which benefits of the tax incentive remained in Indiana or flowed outside Indiana.