The 2021 Indiana legislative session nearly snuck under the radar this year as our news cycle continues to be dominated by the COVID-19 pandemic. But there is much to unpack from this year’s session, including what tools the Indiana General Assembly made available for continued pandemic recovery.
While a few new programs were created, legislators spent much of the state’s $37 billion budget to fund and expand existing programs. Indiana’s two-year budget – bolstered by $3 billion in funding from federal coronavirus relief packages – increases school funding, replenishes much of the state’s unemployment insurance trust fund, and restores aid to Indiana higher education programs. Beyond that, developers, investors, business owners, and others were pleased to see that the budget also made plenty of room for economic development initiatives.
Ultimately, the budget bill received near unanimous support from both parties, passing the House and Senate with wide margins: 96-2 and 46-3, respectively. The grant programs and tax breaks signed into law will not only help Hoosier businesses survive, they have the potential to change the trajectory of economic development across the state for years to come.
One of the most talked-about programs that came out of this year’s session was the Small Business Restart Grant. This grant was established in June 2020 with federal funding provided through the CARES Act, but Indiana House Bill 1004 infused the program with an additional $60 million. This program promotes fiscal recovery by providing working capital to small businesses who have suffered an economic loss from the pandemic. While the program was created with hospitality businesses in mind, almost any small business can qualify for the program if they can demonstrate they lost revenues compared to pre-pandemic levels. Qualified businesses include those that:
Qualified businesses may receive up to $10,000 for each month they were harmed by the pandemic month with a maximum total grant amount of $50,000. This income can be used to cover 100% of payroll expenses and 80% of non-payroll business expenses. While applications are due by Dec. 31, 2021, grants will be allocated on a first-come-first-served basis until the fund is exhausted. Additional information related to this program can be found at backontrack.in.gov.
It is important to note that the Small Business Restart Program is separate and varies from the Indiana Hospitality & Entertainment Grant program, which was introduced in April 2021. The Indiana Hospitality & Entertainment Grant program includes $30 million in federal funding for businesses that have been significantly impacted over the last year and largely excluded from other government assistance programs. It focuses on entertainment venues, promoters, or hospitality business as defined by several specific NAICS Codes. Additionally, the parameters vary based on who qualifies (fewer than 500 employees and between $10 million and $35 million in revenue) as well as the amount of funding that can be received by a business.
Indiana also showed its support of small business through tax credits. The Venture Capital Investment (VCI) tax credit program, administered by the Indiana Economic Development Corp. (IEDC), provides a nonrefundable tax credit to individual and corporate investors who provide qualified debt or equity capital to Indiana companies. House Bill 1001 was passed during the 2021 legislative session and expands the VCI program by encouraging investments in minority and women-owned Indiana businesses, expanding eligibility, and increasing the total amount of credits awarded by IEDC. Effective Jan. 1, 2022, the following changes to the VCI program will be enacted:
New to the budget this year is the $500 million Regional Economic Acceleration and Development Initiative (READI) fund, a program that encourages neighboring towns, cities, and counties to create a unified economic development region with shared initiatives that will attract new investment and retain existing talent. The fund will be administered by the IEDC and is expected to attract a 4:1 match of local public and private funding. Counties, cities, and towns will collaborate to identify their regions by July 1, 2021, and submit regional development plans by August 31. The plan must demonstrate how the region will leverage its unique opportunities and remove barriers to growth and advance economic activity. A review committee will evaluate the plans and make recommendations to the IEDC board of directors. Based on those recommendations, the IEDC may award up to $50 million per region that can be used to support implementation of strategies focused on quality of place and life, innovation, entrepreneurship, and talent attraction and development. The IEDC will determine which regions to invest in by the end of 2021.
In addition to the much-needed infusion of cash into Indiana’s economic regions, the governor’s hope is that this program will encourage businesses to work together to accomplish a shared goal: To help build an even stronger future for Hoosiers across the state.
This year, Indiana Senator Aaron Freeman authored Senate Bill 336, increasing the business personal property taxable asset exemption limit. The current business personal property exemption threshold is $40,000 of taxable acquisition cost. Senate Bill 336 increases this limit to $80,000. Any business whose taxable assets are below $80,000 in a particular county will qualify for this exemption. When a business qualifies, they will be required to file a personal property tax return with the local jurisdiction but will be exempt from business personal property taxation. This new legislation goes into effect January 1, 2022.
The highlight of this provision? It saves approximately 35,000 Indiana businesses the compliance cost associated with filing a return when only a small amount of tax is owed.
While not new to the funding scene, it is worth noting the various programs administered by the IEDC in support of ongoing Indiana economic development. Funding is as follows:
|SEF (Skills Enhancement Fund)
|21st Century Research and Tech Fund
|Office of Small Business and Entrepreneurship
|Industrial Development Grant Program
|Next Level Regional Recovery Grants
|Manufacturing Readiness Grants