Indiana lawmakers approve expanding tax refund eligibility

Indiana lawmakers on Thursday approved expanding the number of people eligible for anticipated $125 payments this spring under the state’s automatic taxpayer refund law.

Those payments are being made because of a big jump in state tax collections helped by federal COVID-19 relief funding. That revenue jump pushed up the state government cash reserves to a record $3.9 billion as of June 30, triggering the taxpayer refund law for the first time since 2012.

Indiana House members voted 88-0 to join the Senate in approving a bill modifying the law so that about 450,000 people who don’t earn enough to owe any state income taxes are also eligible for the refund payments. Officials say those residents pay other taxes that are collected by state government.

“Any person who pays any form of sales tax, anything like that, they should be eligible,” Republican House Speaker Todd Huston said.

The bill now goes to Gov. Eric Holcomb, who proposed the eligibility expansion in December.

State officials have said they anticipate the refund payments totaling about $545 million will be made by direct deposit or mailed checks depending on how taxpayers files their state tax returns. Those payments are expected to be sent to an estimated 4.3 million people before May 1.

Approval of the expanded refund eligibility comes as push by House Republicans for major individual business and tax cuts has faced resistance in the Senate. The Senate’s tax committee this week turned down a House proposal that would potentially cut more than $1 billion a year in various business and individual income taxes.

Republican Senate leaders have said they’re worried about uncertainty in the economy. Key parts of the House plan would cut Indiana’s current individual income tax rate of 3.23% to 3% over the next four years, along with reducing several business taxes.