Local Incentives

Each local governmental entity with taxing authority also offers tax abatement incentives for new businesses and expansion of existing businesses. The individual project's new job creation and value of new real property and equipment are important factors.

Various other programs are used including Tax Increment Financing (TIF) and participation with the state on their infrastructure program.

Tax Abatement

Tax abatement is offered by the local governmental taxing unit on real property and equipment. Real property can qualify for a three year, seven year or ten year abatement on new buildings and improvements or increases in assessed value on remodeled or renovated structures. Land does not qualify. Manufacturing equipment (new to the State of Indiana) qualifies for a deduction from assessed value over a ten year period. Equipment not used in direct production, such as office equipment, does not qualify.

The following exemptions or abatements may be available from the local governmental taxing unit:

I. Real Property
New buildings and improvements or increases in assessed value on remodeled or renovated structures can be abated over a period of ten (10) years. Land does not qualify for abatement. The amount of deduction is determined by the following table:

Year of Deduction	Percentage

1st	100%
2nd	95%
3rd	80%
4th	65%
5th	50%
6th	40%
7th	30%
8th	20%
9th	10%
10th	5%
11th (and thereafter)	0%

II. Equipment and Machinery
Manufacturing equipment, new to the State of Indiana, installed in an approved economic revitalization area qualifies for a deduction from assessed value over a ten (10) year period. Equipment not used in direct production, such as office equipment, does not qualify for abatement. The amount of deduction is determined by the following table:

Year of Deduction	Percentage

1st	100%
2nd	95%
3rd	90%
4th	85%
5th	80%
6th	70%
7th	55%
8th	40%
9th	30%
10th	25%
11th (and thereafter)	0%

Tax Incremental Financing

Tax Increment Financing (TIF) provides for the temporary allocation to redevelopment or economic districts of increased tax proceeds in an allocation area generated by increases in assessed value. Thus, TIF permits cities, towns or counties to use increased tax revenues stimulated by redevelopment or economic development to pay for the capital improvements needed to induce the redevelopment or economic development.

The use of TIF is initiated by the declaration of a tax allocation area by a county, city or town redevelopment commission. Property tax assessments are frozen at predevelopment levels in the allocation area. Municipal bonds are then issued to finance the public improvements. As property values in the allocation area increase as a result of new development, the increment in tax revenues is used to meet debt service on issued bonds. Once the bonds have been paid off, the taxes collected from the allocation area are distributed to the remaining taxing districts.

Bonds payable from TIF may be used to finance the cost of redevelopment and the construction of public improvements in the redevelopment area or for projects that directly serve or benefit that area. Proceeds may also be used for training.

Bond amounts are determined by the size of the project and the amount of the increment available. The 1992 General Assembly passed legislation allowing depreciable personal property (machinery and equipment) to be used in addition to real property in computing the increment.