Many Tax Issues Under Consideration in Indiana

The Indiana Department of Revenue has posted the final report (with recommendations arising) from the Governor’s Tax Conference in June. The 70-page document is very comprehensive and interesting, containing a wide range of suggestions being endorsed by the Pence administration. Much is good, but there are also items that will raise some concern.

If you are a tax professional working for or representing an Indiana company, you need to review this report. It covers so many different subject areas that it is nearly certain that you will have a direct interest in something contained in the report. Whether it be the throw-back rule, personal property tax filings or any number of administrative issues, you will find something in this report to note and track, because some will surely serve as the impetus for legislation in the coming session.

Additionally, the Commission on Personal Property and Business Taxation has now met three times and taken a great volume of studies, presentations and testimony under consideration. The committee has taken on so many issues that the chair, Sen. Brandt Hershman (R-Buck Creek), announced that he has scheduled a meeting for November 12 to give commission members ample opportunity to discuss their final report (which was to be submitted prior to November 1).

It is difficult to guess whether the committee will make many detailed recommendations, but its final report will, in any case, include a great volume of information, data and recommendations from those who participated in the fact-finding exercise. It would be worthwhile to scan these documents presented to the commission to determine the matters that could impact your company. Here again, these matters will likewise almost certainly, in some part, serve as the basis of proposed legislation.

Retirement Plan Sponsors: Feeling Out of the Loop?

ProCoursePrince is with ProCourse Fiduciary Advisors, LLC, a registered investment advisor.

Seventy-three percent of human resources professionals said they have needed to become experts on health care and retirement to do their job effectively. When was the last time you were comfortable stating that you understood all of the rules and regulations your job title or position requires you to comply with?

With regard to regulatory matters, one thing is constant: change. As regulators are starting to more closely examine retirement plans, it is important for those individuals who are responsible for overseeing their company’s retirement plan to pursue continuous training and stay up-to-date with industry-related best practices. Fortunately, you do not have to go far to seek this training as the Indiana Chamber of Commerce is hosting, “Best Practices for Retirement Plan Fiduciaries,” which will help you:

  • Learn from the mistakes of others by reviewing recent court cases (with an emphasis on what they should have been doing)
  • Review current trends from the Internal Revenue Service and the Department of Labor and know what to be on the lookout for
  • Identify how you can perform a self-audit of your retirement plan and potentially uncover easy fixes that could otherwise lead to costly errors
  • Hear about what politicians and regulators are considering changing with respect to your role in administering your retirement plan

Our goal is to help retirement plan sponsors obtain a better grasp on their roles and responsibilities and determine areas where they can improve their efforts so to better protect themselves as a fiduciary and, in the end, provide a better retirement plan for their employees.

INVESTIndiana Returns Sept. 23

Leading Indiana companies will participate in the fourth INVESTIndiana Equity Conference on September 23 at the Conrad Indianapolis.

Fund managers, analysts and institutional investors are primary attendees, with the event open to others in the business community. An Executive Roundtable opens the day. The keynote speaker is William Testa of the Federal Reserve Bank of Chicago. Twelve companies, including six financial institutions, are scheduled to make presentations.

They cover the state, including 1st Source Corporation (South Bend), Escalade (Evansville), Hillenbrand (Batesville) and nine others. Full information and registration is available online.

Financial Fitness for Freshmen

The following Money Management column is provided jointly by the American Institute of Certified Public Accountants and the Indiana CPA Society as part of the CPA profession’s nationwide 360 Degrees of Financial Literacy program.

As you get ready to go away to college for the first time, this is a good time to expand your knowledge of day-to-day money management, including smart budgeting and debt management steps. The Indiana CPA Society offers these tips to students who want to get through college with the right financial footing.

Start on a Budget

You may be surprised at the high everyday costs of college, including books and supplies, daily living expenses and travel to and from school. That’s why it’s a good idea to get a sense of what you will spend – outside of tuition costs – before you begin each semester. Include savings you plan to use, any money you may receive from your family and the income you can expect from any jobs.

According to a Nationwide survey, the average student income is about $1,400 a month from part-time jobs and parents. Semesters usually last about four months, so divide your projected total to determine how much you can spend each month, after deducting the amount you can expect to pay for books at the beginning of the semester. It’s also a good idea to track your actual spending throughout the semester, so that you can more accurately project and adjust your budget for the years to come.

Get What You Need

Once you know your income, determine a list of expected expenditures each month. Be sure to remember the difference between wants and needs. Textbooks and supplies are clearly mandatory, but weekend trips, nights out and new clothes are not. Even a car can quickly drain your resources if you’re cash strapped.

Feed the Pig, the AICPA’s financial literacy site aimed at young people, recommends recording every time you make a purchase so that you get a good sense of where your money goes. Then categorize all the items, to see if you’re spending as much on morning coffee as you are on weekend entertainment. These steps allow you to understand where you might need to cut back or reconsider your spending choices. If you’re honest about your real necessities, it will be easier to create a workable budget, and find ways to save.

Avoid Credit Card Debt

College seniors with credit cards graduate with an average of $4,100 in credit card debt, according to the Nationwide survey. The importance of budgeting is clear when you see the consequences of spending beyond your means. Many students use credit cards to stretch their spending money, but given the high interest rates involved that can be a costly choice.

For example, if you have a $4,100 credit card balance, at an 18% interest rate and you make a $200 payment each month, it will take you 25 months to pay off that balance and it will cost you a whopping $836.27 in interest, money you could have spent on other purchases or put aside in savings. That debt is a big burden to carry, especially since so many graduates also have significant outstanding student loan debts.

Debt can make it more difficult to find or afford your own place or to qualify for an auto or other loan. The best advice: If you’re going to reach for the plastic, make sure it’s a debit card. That way you will spend only what you have in your bank account now and avoid overextending yourself.

Your Local CPA Can Help

College is an exciting time that offers many new experiences, including managing your own money. If you or your family has questions about financial topics, be sure to consult your local CPA. He or she can help you address all your important financial concerns.

Gov. Pence Convenes Tax Conference

The Pence administration is looking for big and little ideas regarding taxes. The Governor – through the Department of Revenue and Office of Management and Budget – recently conducted an all-day discussion on ways to simplify Indiana’s tax code and tax administration as a means for making Indiana even more competitive in its quest to attract more business activity to the state.

The day began with comments from Indiana’s own Al Hubbard, former director of the National Economic Council and a longtime Indiana Chamber board member. His insights were followed by a panel of nationally recognized tax experts who discussed – at a high level – tax structure and the impact of taxes and tax reforms. Well-known economist Art Laffer (of the Laffer Curve fame) spoke at lunch.The afternoon consisted of breakout panels of various Indiana tax professionals who addressed different aspects of our tax system. Each session and all the talks were captured on video and most of the panelists also submitted papers or written comments on the topics they discussed (see the Indiana Chamber’s remarks, under the Tax Simplification section at www.in.gov/dor/5122.htm). The video link and other conference materials are available for review at www.in.gov/dor/index.htm. You can also submit your own ideas (up to two weeks post conference) at www.in.gov/dor/5120.htm.

The event was generally intended to generate, collect and consider ideas on how to make Indiana’s system simpler and better. Everything from big picture sweeping changes to down-in-the-weeds process tweaks were put on the table. There were many references to “broadening the base and lowering the rates.” The taxation of business personal property came up in a number of times. And a wide range of suggestions and recommendations on tax policy and procedure in the contexts of sales, income and property tax were brought forth. Indiana Chamber staff and numerous members of the Chamber Tax Policy Committee took part in the panel discussions and otherwise participated.

The question now is how this host of ideas will be digested by the Pence administration and the Legislature. Many members of the tax policy committees in the Legislature participated and were in attendance. And many of the attendees will also be participating in some way with the Legislature’s Blue Ribbon Tax Commission that will get under way later this summer. The Governor indicated that he hopes the commission and ultimately the General Assembly will give consideration to some of the things discussed at the conference. It seems likely that the conference will create momentum for some proposals. Many appear very doable and could be realized in the near term, others may take a much longer course or never pan out. Of course, only time will tell which ones fall into which category.

Chamber’s Bill Waltz: State Budget Holding Steady for Now

There are plenty of ways to parse the revenue collections over the first 10 months of the current (2014) fiscal year. Officially, the general fund numbers are 0.5% below the most recent (December 2013) forecast. But they are 1.7% below the 2013-2015 budget based targets. Neither percentage warrants great concern, representing in dollars $61 million (0.5%) and $194 million (1.7%), respectively. But the last two months of fiscal year 2014 will be worth noting for the purpose of identifying trend lines. The March and April numbers came in very close to the December forecast, but the problem is the December forecast adjusted the predictions downward from the April 2013 forecast on which the budget is based.

Last month’s actual collections were 6.4% below the original forecast. So there is a need for the May and June collections to be close to the revised forecast amounts, or else the budgeting going into the second fiscal year of this biennium will get trickier. If those collections drop off, the forecasters and budget-makers will be looking at less than desired numbers going into the new budget making session next year. Sales tax revenues are the real key since they make up 49% of the collections. The sales tax numbers are not bad, but are very modest, showing 1.5% growth over last year. Corporate revenues remain stalwart, 14.5% above target for the year. On the other end, gaming remains down, 7.1% below target. All in all, the budget is in an alright place, but there is a lot to be determined in the coming months as far as expectations going into the next biennium.

Stay Tuned for Real Interim Action on Tax Issues
Nothing is happening just yet, but things are in the works: This will not be an ordinary interim for tax matters. The Pence administration is currently busy organizing a major event for next month. The initiative, dubbed the Indiana Tax Competitiveness and Simplification Conference, is set for June 24. It will be opened by Gov. Pence and feature a few nationally recognized speakers. There will also be panel sessions on a variety of tax subject areas. Panelists will have a work group type format. This is a “by invitation” conference. More details will be reported next month.

Dovetailing the Governor’s conference to some degree will be the Blue Ribbon Commission established by SEA 1-2014. It is expected that his body will begin to take shape in the coming weeks.

The Legislative Council has recognized the commission (referenced as the Commission on Business Personal Property and Business Taxation) in conjunction with the other interim committees sanctioned for interim activity (via Council Resolution 14-01). Senate Pro Tem David Long will name one of his Senate colleagues as the chair and Speaker Brian Bosma will name one of his House colleagues as the vice chair. Four other legislators will likewise be appointed, while the Governor will have a designee. And the remaining seven members will be laypersons representing various interested parties, including the Indiana Chamber, the Indiana Manufacturers Association, the Realtors Association, agriculture and local governments.

Indiana Climbing in the Rankings

Yesterday’s post highlighted some very promising jobs numbers in Indiana. It’s no coincidence that others are recognizing the state’s continually improving business climate.

The Small Business & Entrepreneurship Council released its Small Business Tax Index 2014, rating states on 21 measures. Indiana placed 11th. And with personal income tax rates (positively impacting capital gains and dividends) and corporate income taxes decreasing further, the ranking just might improve.

Even more promising, the American Legislative Exchange Council unveiled its annual Rich States, Poor States report. Fifteen state policy variables are used to forecast economic outlook. The theory: states that spend less and tax less (particularly on productive activities such as working or investing) experience higher growth rates than states that spend and tax more. Indiana ranks third (14th in 2013 and 24th a year earlier), behind Utah and South Dakota.

We’ll take the good news, but won’t rest on any laurels or allow others to do the same. There are still too many challenges and too many goals to be reached in our Indiana Vision 2025 plan. But it’s nice to be moving in the right direction.

Don’t Squander That Tax Refund!

Taxes aren’t all bad – especially this time of year when refunds are doled out to the tune of (on average) approximately $3,000. But don’t be fooled. Before you embark on an extravagant shopping spree, there’s something I have to say: Halt! Stop! Wait!

Kiplinger offers 10 tips for spending (and saving) your refund. Paying off credit card debt, rebuilding your emergency fund and boosting retirement savings are great ways to protect – and pad – your pocketbook.

I know what you’re thinking: That’s no fun! Point taken. But heeding some of these suggestions might help you avoid a serious case of buyer’s remorse. Who wants to deal with that?

So What’s the Deal with Bitcoin?

If you’re like me, you’ve pondered what exactly Bitcoin is. And you’re possibly uneasy about the thought of a “virtual currency.” Or maybe that’s just me.

Elaine Bedel of Bedel Financial Consulting is widely thought of as one of Indiana’s top financial experts (and we’re proud to say she serves on the Indiana Chamber’s finance/audit committee). She recently offered a useful summary of Bitcoin for Inside INdiana Business:

Bitcoin is a “virtual” currency. There is no physical paper or coins that you can touch or feel. It is an online currency. There is no centralized authority controlling bitcoin like other currencies such as the U.S. Dollar, Euro, and Yen.

How Do You Get Bitcoin?

Bitcoin can be purchased through an exchange or received in return for the sale of products and services. Once received, bitcoin can in turn be spent for other products or services. Today, there are almost 2,400 online businesses that accept bitcoin.

What is the Appeal of Bitcoin?

There are several reasons why bitcoin has appeal to some individuals. They include both good and not so good reasons:

-Limited Supply. The amount of bitcoin that can be created is capped at 21,000,000. For individuals concerned that governments are printing too much money, having a type of currency with a limited amount of supply is appealing.

-Privacy. Bitcoin provides a certain amount of privacy for its users. The ownership and recording of transactions with bitcoin is essentially a numerical code; therefore, there is no personal information attached when a person uses it. However, depending on where the bitcoin is used or stored this may be changing and some privacy may be given up. Several stories regarding bitcoin being used for online illegal activity has raised issues concerning the level of anonymity.

-Speculation. The value of bitcoin has skyrocketed in the past year. It has ranged from $100 to over $1,100 over the past twelve months and is now valued at approximately $500. This volatility in value is not appealing for a currency. To be widely accepted and used, the value of a legitimate currency needs to remain relatively stable.

What Does the IRS Say?

The IRS announced last week that bitcoin will be treated as property and not as currency. This ruling will likely make it more difficult for bitcoin users. Every time someone uses bitcoin to purchase a good or service, they will be required to keep track of their cost basis on those bitcoin for tax purposes. If the bitcoin was purchased or received a long time ago, it has likely gone up in value. Therefore, the individual will pay either capital gain or ordinary income tax on the increase in value when he/she files income taxes for that year. When the tax impact is included, a purchase may cost more when bitcoin is used than when dollars are spent.

The tax impact may cause some bitcoin holders to treat it more like an investment and less like a currency. If investors hold on to their bitcoin as a long term investment, it will limit the bitcoin in everyday circulation. A currency cannot exist if the everyday supply is too limited.