May 18 Webinar: FREE for Indiana Chamber Members

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Did you know over 75% of Americans are living paycheck to paycheck? Your employees are likely dealing with financial stresses in one of the following areas:

  • Retirement
  • Health care
  • Student loans
  • Emergency savings

And if they’re stressed, it’s likely their productivity at work is suffering.

But you can help them. Our friend, financial expert Pete the Planner, will tell you how during our FREE webinar for Indiana Chamber members on Wednesday, May 18 at 10 a.m. (EDT).

Register for the FREE webinar now, and dial in on May 18 to receive this Indiana Chamber membership benefit!

How to Extend Your Tax Filing Deadline

19159583The April 18 deadline to file your individual income taxes is right around the corner. If you’ve waited to file, there’s no need to panic. The Indiana Department of Revenue offers resources to help Indiana taxpayers.

If you can’t complete your tax return by the deadline, you can complete an extension of time to file form with either the IRS or the Indiana Department of Revenue. Filing either extension will give you until Nov. 14, 2016 to file your tax return.

Although the extension provides an extension of time to file, you are still responsible for paying any tax owed by April 18, 2016.

If you don’t have a federal extension, you can file for an Indiana extension by following these three steps below:

  1. Download Form IT-9 and mail it to the Indiana Department of Revenue. It must be postmarked by April 18, 2016. This form is available online.
  2. Determine if you owe Indiana taxes. You should pay at least 90 percent of the tax due when you submit the extension. Pay as much as you can to avoid penalty and interest.
  3. If you file and pay the remaining balance by the extension date (Nov. 14, 2016), there will be no penalty.

If you need last-minute assistance or have questions about your return, please contact the department at (317) 232-2240. Spanish support is available.

Protect Your Identity this Tax Season

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It’s tax season! As you prepare to file your taxes, remember to store your personal information such as W-2 forms, bank account summaries and other tax-related documents in secure locations. This time of year, identity thieves are especially prominent and out to steal real taxpayer identities and file fraudulent tax returns to request and steal the victims’ refunds.

Since its inception in 2014, the Indiana Department of Revenue’s Identity Protection Program has identified and stopped more than $100 million in fraudulent refund attempts and helped thousands of legitimate taxpayers realize their identities have been stolen. This year, the department again will be implementing the Identity Protection Program to protect Hoosier taxpayer identities and refunds. This program will look similar to the security measures implemented last year, including the Identity Confirmation Quiz, a two-minute quiz asking some taxpayers to confirm their identities.

Those selected to complete the Identity Confirmation Quiz will receive a letter from the department. The Identity Confirmation Quiz is taken on a secure web site or over the phone and contains four short questions, which only the person asked to complete the quiz would be able to answer.

Through the Identity Protection Program, the department aims to protect taxpayers’ identities and potential refunds and the state of Indiana from potential refund fraud.

For more information about the Identity Protection Program and tips for protecting your tax refund and identity, visit the department’s Stop ID Theft web site.

Corporate Tax Reform Would Benefit Nation, Workers

Abstract View of Urban Scene and Skyscrapers

Lawmakers and candidates on all sides of the political spectrum acknowledge reforming America’s corporate tax rate is overdue. President Obama has even suggested reducing the rate from 35% to 28%. Writing for Reason, Veronique de Rugy of the Mercatus Center sums up the necessity for this, concluding it’s an optimal way to benefit both businesses and the workforce:

Even such high-tax nations as France have lower rates. However, the real competition comes from Canada (26.1 percent), Denmark (25 percent), the United Kingdom (20 percent) and the many countries, such as Ireland (12.5 percent), with rates below 20 percent. Moreover, competition is intensifying. Last June, the U.K. announced that it would cut its rate from 20 percent to 18 percent in the next five years. It’s now saying that it will lower the rate even further, to 17 percent. These reductions are the final stage of drastic cuts implemented since 2007, when the country’s companies faced a 30 percent tax rate. That’s a second wave of reduction since the rate was as high as 54 percent in the 1980s.

Now contrast this with the United States. In the 1980s, policymakers responded to the pressure put on by many countries lowering their corporate rates by decreasing America’s rate from 49.7 percent to 33 percent. However, since then, the U.S. has fallen asleep on the switch (and even raised the rate by 1 percentage point in the 1990s) and is now widely out of sync with internal competition. In 2015, the average corporate rate for countries in the Organisation for Economic Co-operation and Development was 25 percent, down from 48 percent in the early 1980s.

As if that were not enough competition for American companies, the U.S. government burdens them with another layer by taxing them on a worldwide basis. In that system, income from American companies is subject to U.S. taxes whether it’s earned in Seattle, Paris or Singapore. By contrast, most wealthy countries don’t tax foreign business income; about half of OECD nations have “territorial” systems that tax firms only on domestic income. In other words, U.S. exporters face a much less competitive tax system than most of their biggest competitors…

Not everyone would like to reduce taxes on corporations, but everyone should. The data show that most of the corporate tax burden is actually shifted to workers, who end up shouldering the tax in the form of lower wages. With the U.K. taking further measures to reduce its burden on corporations, boosting its workers’ wages and inflicting yet another blow to U.S. competitiveness, Congress should do what’s right by reforming the corporate tax. It may be the one bipartisan issue out there. All we need is leadership.

Usual End of Session Tax Legislation Hodgepodge

19145168A few big bills filled with various tax provisions remain. Ones dealing primarily with property tax are SB 308 and HB 1290, and another affecting sales and income taxes is SB 309. Meanwhile, a couple bills – SB 323 and HB 1215 – call for important issues to be studied during the interim. And another bill cleans up last year’s “de minimus” legislation in HB 1169. All par for the course going into the final leg of the session.

Senate Bill 308, authored by Sen. Brandt Hershman (R-Buck Creek), and HB 1290 authored by Rep. Tim Brown (R-Crawfordsville), are intended to take another shot at the “big box” property assessment issue and will require the Senate Tax and Fiscal Policy Committee chair (Hershman) and the House Ways and Means Committee chair (Brown) to work out some differences in conference committee. There is much agreement on a new approach to incorporate the concept of market segmentation into the process, but disagreement on the need to include a provision concerning actual building construction costs (that was part of the legislation from last year that is being repealed and replaced with the market segmentation provisions).

The two chairmen will also have to sit down and sort through differences in SB 309 that gets into all kinds of other tax matters. This bill is the one that effectively overturns the Tax Court case regarding the taxation of materials used in construction projects (the Lowe’s case.) Senate Bill 323, also a Sen. Hershman bill, directs the Legislative Services Agency to study mandatory unitary combined reporting for apportioning Indiana’s corporate income tax. This is an issue of great significance and concern to the Chamber. The House amended this bill to add transfer pricing, a related issue, to the scope of the study. Transfer pricing was at the heart of the Tax Court cases that spurred Sen. Hershman to promote the idea of combined reporting.

Another bill, HB 1215, authored by Rep. Brown, asks for the study of the personal property audit process. The Chamber welcomes this initiative to take a closer look at how these audits are conducted by private consultants working for the county assessing officials.

And lastly, we are pleased to report the passage of HB 1169, introduced by Rep. Tom Saunders (R-Lewisville) to remove the notarization requirement attached to last year’s “de minimus” personal property tax exemption. Last week, the Senate took out the House’s reduction of the maximum county option fee; Rep. Saunders and the House concurred to that change and the legislation now moves to the Governor for signature.

Senate Needs to Hear from You on Top Issue

36601064Highways and bridges are easily taken for granted. They only come to mind for most of us when something goes wrong: A car hits a large pothole or there is an inconvenient road closure. But if you look around, the inevitable aging of our infrastructure system is happening.

There are three legislative proposals to address a $1 billion a year maintenance shortfall in funding for roads and bridges. Only one, HB 1001, helps meet long-term needs.

Yes, it will cost the average driver $25 more a year in gasoline taxes. But we are all spending much more than that (an average of $366 per year) on automobile repairs due to poor quality roads.

Senators are reluctant to increase taxes in an election year. Employers and voters, however, want a long-term solution. It’s too important to our economy and the time to act is NOW.

Please email your state senator urging passage of HB 1001 and long-term road funding.

Learn more: Read the write-up on the HB 1001 committee hearing and this one-pager which outlines additional infrastructure facts.

Indiana Ranked Top 10 in Retirement Plan Participation

19159583The Pew Trusts recently issued a report showing Indiana has the seventh best participation among employees eligible for employer-sponsored plans of 50 states. Indiana is also in the top twenty in providing access to plans by employers.

Comparatively, Hoosiers are near the top in participation but there is still room to go. In Indiana, 63% of workers have access to an employer-sponsored retirement plan and of these employees, only 57% participate.

Thirty-seven percent of employees in Indiana do not have access to a retirement plan. If you, as an employer, don’t offer a retirement plan, 100% of your employees may have to rely on social security for their sole retirement benefit.

In 2015, the average social security benefit for all retired workers in the United States was $15,936 per year. If the 43% of your employees who are not participating in the retirement plan are planning on being supported solely by social security in retirement, they would be living on less than minimum wage.

If employees cannot retire because of lack of savings and instead continue working, what are the long term costs to employers? Some things to consider might be higher wage costs, higher medical and long term disability costs, to name a few. A recent report from Mercer says, “If 4% of your population is retirement eligible and half of those people choose to delay retirement, 10% of your employee population would experience promotion blockage.” This suggests that for each workers delay in retirement can insight five or more promotion delays.

As Hoosier employers, here is what you can do to improve retirement savings:

  • If you do not have a plan, consider sponsoring a plan.
  • If you do have a plan, encourage participation and realistic savings rates. You can do this by implementing changes in the administration of your plan to automate participation and deferral increases, essentially putting these choices on autopilot for your employees.

Great job, Indiana on being one of the leaders in the country with retirement plan participation. Now is the time to get to work on helping more employees save for retirement. – Indiana a State that Works.

Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.

Paving the Way for Good Roads

PollQuestion

We’ve got a new poll question (top right) asking about a strategy to pay for long-term infrastructure funding. The current House Republican plan calls for a modest gasoline tax increase and higher cigarette taxes (that would go toward Medicaid spending, with sales tax funds currently used in that area shifting to transportation).

More details on the legislation: HB 1001

The most recent poll asked for your top legislative priority. Civil rights expansion (36%) topped the list, followed by increased transportation funding (28%) and education testing reform (16%).

Protecting the 401(k) Plan Sponsor

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According to Groom Law Group, since 2007 there have been nearly 40 lawsuits about fees and expenses paid by employees in 401(k) plans. Of the 40 fee and expense lawsuits filed since 2007, a few have actually been adjudicated through the courts, some have been dismissed and several have been settled out of court. For the lawsuits that have been settled or adjudicated, the amounts have been in the tens of millions, not to mention the legal fees that are incurred.

What should companies do?

Below are items that we believe are prudent processes that plan sponsors should follow:

  1. There should be a clear governance structure that delineates who appoints retirement plan committee members and also a process to monitor the plan’s fiduciary committee.
  2. Fiduciaries should look, at least annually, for lower cost investment options for the plan. The same investment option may have several ways it can charge fees which come with different requirements that can change over time. This makes the process of conducting a regular review so very important.
  3. A review of service providers on a regular basis helps keep costs and services in line with industry changes.
    a. Service provider fees should be benchmarked on a regular basis.
    b. Requests for Proposals should be conducted at least every five years to make sure that fees and services are in line with industry standards.
    c. Service providers should be skilled and have adequate experience in providing the needed services.
    d. Service providers would include (but are not limited to) record keepers, advisors, trustees, custodians, and plan auditors.
  4. A regular review of the investment options and categories offered to participants should be conducted.

A 401(k) plan is a great vehicle to help employees prepare for retirement and, for most employees, it is one of the only vehicles available to them (other than social security). In my opinion, the 401(k) is one of the most successful wealth accumulation vehicles created in history. Americans have accumulated trillions of dollars toward retirement simply by taking money from their paychecks on a regular basis and putting it away for their retirement years.

Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.

Speculations on Tax Matters for the 2016 Session

What’s in store for 2016 relating to tax issues? Nothing is too clear just yet, but there are a couple significant areas of speculation:

Revisiting “Big Box” Commercial Assessment: This issue was addressed last session in SB 436. But most expect it to be brought back up again in some fashion in 2016. The Indiana Board of Tax Review (IBTR) has raised several legitimate questions about exactly how the changes in SB 436 should be interpreted. Ambiguities will make application of the new laws difficult for the IBTR. This has led some to conclude that a different approach may be better than what was passed last year.

The focus has remained on what is properly considered a “comparable sale” for appraisal/assessment purposes when evaluating a special-built commercial structure. The discussion has turned to an appraisal concept referred to as “market segmentation”, essentially a method for narrowing the field of sales that should be considered reflective of the value of these more limited purpose buildings. Other ideas revolve more around how the IBTR goes about its adjudicatory work and whether some additional procedural adjustment and guidance from the Legislature would be beneficial.

Push for Combined Reporting: Sen. Brandt Hershman (R-Buck Creek), chairman of the Tax and Fiscal Policy Committee, is apparently entertaining the idea of changing the requirements relating to how a corporation must report its income. Under current law, a corporation files its return based on the separate, independent status of each corporate entity, without regard to its affiliation or business relationship with other entities. Nevertheless, the Department of Revenue (DOR) is authorized to require a corporation to combine its income with that of an affiliated/related company in a “combined reporting” if there is such a connection between the companies that the DOR views them as having a unitary business purpose and believes they should be treated as one for taxation.

A good number of states make such combined reporting mandatory in all cases, and the speculation is that Sen. Hershman is thinking about putting Indiana in that category. But this would be a very controversial move and is fraught with a myriad of economic, political and practical issues. Not the kind of matter typically taken on in a non-budget year; perhaps he wants to float it this year to spur discussion. The Indiana Chamber has a long-standing position against combined reporting.