Sometimes taxes cost more to collect than the revenue they generate. Back in 2015, the Indiana General Assembly recognized one example.
Back then, all businesses were required to file forms establishing the value of personal property for property tax payments. Personal property is mostly business equipment, from office furniture to the turbines in electrical power plants. Back then, almost 300,000 Indiana businesses filed forms.
Many of these businesses were small, with only a few thousand dollars of equipment. But the forms were filed and processed by the county assessor. Values could be so small that they probably cost the assessor more to process than they generated in revenue.
So, in 2015, the General Assembly established a $20,000 minimum for personal property taxes. If a business had less than $20,000 in equipment, it would not have to file. According to the Legislative Services Agency, there were 147,300 filers with property valued at less than $20,000. That was about half of the total.
Those taxpayers saved all of $13.5 million from the new exemption. On average, they had paid $92 on their property. And, because eliminating part of the property tax base caused tax rates to tick upward, the total revenue loss to all local governments was $8 million.
This is called a “de minimis” exemption. That’s Latin for “pertaining to minimal things.” Tax bills that small are just not worth collecting.
The General Assembly liked what they saw, so in 2019, it raised the de minimis exemption from $20,000 to $40,000. LSA estimated that 28,300 more taxpayers quit paying, saving them $4.1 million. That’s $145 per taxpayer. Still a “minimal thing,” but not as minimal as before. Local governments lost $2 million in revenue.
In 2021, legislators raised the exemption to $80,000. This exempted 34,000 additional taxpayers who had paid $18 million in taxes, or $529 per taxpayer. Less minimal still. Local revenue losses were $9 million.
Then came this year’s Senate Bill 1. As signed by the governor, the bill would have increased the personal property exemption from $80,000 to $1 million for taxes in 2026, and $2 million for taxes in 2027 and after.
The number of taxpayers wasn’t reported, but we know the tax payment impact of the increase to $1 million for 2026, because of House Bill 1427. That was a “trailer bill” which amends a bill that has already passed. After the governor signed SB 1 into law, HB 1427 amended that law, eliminating the increased exemption for 2026. It will remain at $80,000 for taxes that year, then increase to $2 million in 2027.
LSA’s fiscal note estimates that business personal property owners will pay an extra $130 million, mostly because the exemption was cancelled. The exemption would have saved them that much had it remained on the books. That doesn’t sound minimal at all.
I’ve heard two reasons why the exemption increase was rescinded. One was administrative. Taxes in 2026 are based on assessments in 2025, and the assessment of personal property is already well underway. Starting over under new rules would be confusing to taxpayers and assessors alike.
Another reason is that the exemption is so much bigger. Legislators may want time to study the effect of the increase on local government revenues and other taxpayers before it takes full effect. HB 1427 gives them a year to do that.
There are some advantages to raising the personal property exemption. It’s a tax cut for small and medium-size businesses. It may be a step to eventual elimination of personal property taxes. Most states tax business equipment, but among the few states that don’t are Ohio and Illinois. Indiana has a lot of advantages in business taxation over our neighbors, but not that one. Exempting more equipment from taxes may help attract new investment.
There are disadvantages, too. When a part of the property tax base is exempted, local governments either give up that revenue or raise the same revenue with higher tax rates. Government services may be scaled back, or taxes may be shifted to homeowners, landlords and other owners of land and buildings.
Senate Bill 1 was the final word on property tax reform — for about two weeks. More reforms in 2026 seem like a definite possibility.
