HB 1397

                                                           Introduced Version
          HOUSE BILL No. 1397
                _____
              DIGEST OF INTRODUCED BILL
Citations Affected: IC 5-28-6-9; IC 6-3.1-34-24.
Synopsis: Redevelopment tax credits. Provides that $50,000,000 of
the $300,000,000 of the Indiana economic development corporation's
annual certifiable tax credit amount must be allocated to the small town
opportunity initiative (initiative). Establishes the initiative. Provides
that the purpose of the initiative is to undertake qualified community
projects within local government units that have a project budget of at
least $15,000,000 per project to do the following: (1) Advance historic
preservation. (2) Redevelop or rehabilitate distressed buildings or
underutilized property. (3) Redevelop or rehabilitate sites where
distressed buildings once stood. Allows a redevelopment tax credit for:
(1) a for-profit taxpayer undertaking a qualified community project
under the initiative equal to 20% of the taxpayer's cost of the project;
and (2) a nonprofit taxpayer undertaking a qualified community project
under the initiative equal to 30% of the taxpayer's cost of the project.
Provides that initiative projects are not subject to any statutory or
administrative repayment obligation. Provides for certain items that are
included in a nonprofit taxpayer's qualified investment.
Effective: July 1, 2026.
                                Lopez
   January 8, 2026, read first time and referred to Committee on Ways and Means.
2026  IN 1397—LS 6495/DI 134
                                                                                       Introduced
            Second Regular Session of the 124th General Assembly (2026)
 PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
 Constitution) is being amended, the text of the existing provision will appear in this style type,
 additions will appear in this style type, and deletions will appear in this style type.
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 provision adopted), the text of the new provision will appear in this style type. Also, the
 word NEW will appear in that style type in the introductory clause of each SECTION that adds
 a new provision to the Indiana Code or the Indiana Constitution.
  Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
 between statutes enacted by the 2025 Regular Session of the General Assembly.
                   HOUSE BILL No. 1397
    A BILL FOR AN ACT to amend the Indiana Code concerning
 taxation.
     Be it enacted by the General Assembly of the State of Indiana:
1    SECTION 1. IC 5-28-6-9, AS AMENDED BY P.L.213-2025,
2 SECTION 69, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
3 JULY 1, 2026]: Sec. 9. (a) Subject to subsection (c), the aggregate
4 amount of applicable tax credits that the corporation may certify:
5(1) for each state fiscal year ending on or before June 30, 2025,
6for all taxpayers is two hundred fifty million dollars
7($250,000,000); and
8(2) for each state fiscal year ending on or after July 1, 2025, for all
9taxpayers is three hundred million dollars ($300,000,000), fifty
10million dollars ($50,000,000) of which must be allocated to
11fund qualified community projects within local government
12units under IC 6-3.1-34-24. Each certification under this
13subdivision is subject to budget committee review.
14    (b) For purposes of determining the amount of applicable tax credits
15 that have been certified for a state fiscal year, the following apply:
16(1) An applicable tax credit is considered awarded in the state
17fiscal year in which the taxpayer can first claim the credit,
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1determined without regard to any carryforward period or
2carryback period.
3(2) An applicable tax credit awarded by the corporation before
4July 1, 2022, shall be counted toward the aggregate credit
5limitation under this section.
6(3) If an accelerated credit is awarded under IC 6-3.1-26-15, the
7amount counted toward the aggregate credit limitation under this
8section for a state fiscal year shall be the amount of the credit for
9the taxable year described in subdivision (1) prior to any discount.
10    (c) Notwithstanding subsection (a), if the corporation determines
11 that:
12(1) an applicable tax credit should be certified in a state fiscal
13year; and
14(2) certification of the applicable tax credit will result in an
15aggregate amount of applicable tax credits certified for that state
16fiscal year that exceeds the maximum amount provided in
17subsection (a);
18 the corporation may, after review by the budget committee, certify the
19 applicable tax credit to the taxpayer.
20    (d) This section expires December 31, 2032.
21    SECTION 2. IC 6-3.1-34-24 IS ADDED TO THE INDIANA CODE
22 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
23 1, 2026]: Sec. 24. (a) As used in this section, "downtown area"
24 means:
25(1) the central business district of a city or town; or
26(2) any commercial or mixed use area within a neighborhood
27of a city or town that has traditionally served, since the
28founding of the community, as the retail service and
29communal focal point within the community.
30    (b) As used in this section, "initiative" means the small town
31 opportunity initiative established by subsection (f).
32    (c) As used in this section, "nonprofit taxpayer" means a
33 taxpayer:
34(1) that is tax exempt under Section 501 of the Internal
35Revenue Code;
36(2) for which some or all of its mission is to revitalize the
37community it serves; and
38(3) whose leadership includes primarily members of the
39community it serves.
40    (d) As used in this section, "qualified community project"
41 means a project that:
42(1) is located in the:
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1(A) downtown area of a city or a town with a population of
2less than thirty thousand (30,000);
3(B) downtown area of a city or a town that is located in a
4county with a population of less than seventy-five thousand
5(75,000); or
6(C) unincorporated territory of a county with a population
7of less than seventy-five thousand (75,000) if the site of the
8project is an area of the unincorporated territory that
9serves as the retail service and communal focal point
10within the unincorporated territory;
11(2) involves the:
12(A) historic preservation;
13(B) redevelopment; or
14(C) rehabilitation;
15of real property; and
16(3) has a total project budget of at least fifteen million dollars
17($15,000,000).
18    (e) As used in this section, "qualified investment" means the
19 amount of the taxpayer's expenditures that are:
20(1) for the redevelopment or rehabilitation of real property as
21part of a qualified community project; and
22(2) approved by the corporation before the expenditure is
23made.
24    (f) The small town opportunity initiative is established.
25    (g) The corporation shall administer the initiative.
26    (h) The purpose of the initiative is to undertake qualified
27 community projects within local government units to do the
28 following:
29(1) Advance historic preservation.
30(2) Redevelop or rehabilitate distressed buildings or
31underutilized property.
32(3) Redevelop or rehabilitate sites where distressed buildings
33once stood.
34    (i) A for-profit taxpayer undertaking a qualified community
35 project under the initiative is entitled to a redevelopment tax credit
36 under this chapter equal to twenty percent (20%) of the taxpayer's
37 cost of the project.
38    (j) A nonprofit taxpayer undertaking a qualified community
39 project under the initiative is entitled to a redevelopment tax credit
40 under this chapter equal to thirty percent (30%) of the taxpayer's
41 cost of the project.
42    (k) Qualified community projects undertaken under this section
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1 are not subject to any statutory or administrative repayment
2 obligation.
3    (l) Notwithstanding any other provision of this section, for a
4 nonprofit taxpayer undertaking a qualified community project
5 under this section, expenditures incurred to acquire, hold, or
6 prepare real property for redevelopment or rehabilitation before
7 the date the taxpayer's initial application or application for
8 certification is approved by the corporation shall be included in the
9 taxpayer's qualified investment if:
10(1) the expenditures were incurred for the primary purpose
11of future redevelopment consistent with subsection (h);
12(2) the nonprofit taxpayer obtained site control in furtherance
13of a locally supported redevelopment effort; and
14(3) the corporation determines, as part of the application or
15certification process, that inclusion of such expenditures is in
16the public interest and supportive of early stage community
17redevelopment efforts.
18    (m) For purposes of determining whether an expenditure is
19 included as part of a qualified investment under subsection (l), an
20 expenditure shall be treated as if it were approved by the
21 corporation as of the date the expenditure was originally incurred.
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