Hendrick County Economic Development Partnership

Guidelines

What is Property Tax Abatement?

Property tax abatement is a tool for local government to use to encourage new investment in the community.  New investment may come in the form of improvements to real estate (real property) or new manufacturing equipment (personal property).  Tax abatement is one of the primary incentives available to local government to encourage economic development. 

Tax abatement does not mean that no taxes are paid.  In fact, property taxes on the increased assessed value of property due to a new investment are phased in.  Property taxes cannot be lower that the prior year taxes due to tax abatement.

Who is Eligible for Tax Abatement?

Property owners in Economic Revitalization Areas (ERA) who make improvements to real property or install new manufacturing equipment are eligible to apply for property tax abatement.  Tenants in leased facilities can benefit from tax abatement on real and personal property if the property owner applies for abatement and all other requirements are met. 

What is an ERA?

Tax abatement can only occur in an area that has been designated an Economic Revitalization Area (ERA).  Generally speaking, an ERA is an area which has become undesirable for normal development and occupancy because of:

·         lack of development

·         cessation of growth

·         deterioration of improvements or character of occupancy

·         age

·         obsolescence

·         substandard buildings

or other factors which have impaired values or prevent a normal development or use of property.

An ERA may also include an area where a facility or group of facilities are technologically, economically, or energy obsolete.  This obsolescence may lead to a decline in employment and tax revenues.

The Hendricks County Council may grant the ERA designation.  Usually this designation is granted when a company requesting tax abatement submits an application.  However, the County Council can establish an ERA at their discretion to encourage development in designated parts of the county.      

What is Eligible for Tax Abatement?

Tax Abatement may be granted for real property or personal property. 

Real Property includes any new structure, building addition or other improvement that increases the assessed value of a facility.  Land is not included.  Taxes may not be abated on existing buildings on which no improvements are made. 

Personal Property includes any new or used equipment which is used in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of other tangible personal property.  Used equipment is not eligible for abatement if it has been previously taxed in the state of Indiana. 

Tax abatement generally may not be granted for

·         Equipment that is not used in direct manufacturing.  For example, office equipment, warehouse racking, and other warehouse equipment are not eligible for abatement.

·         Manufacturing equipment previously taxed in Indiana, regardless of owner.

·         Land

·         Inventory

·         Retail (unless certain circumstances are met)

·         Residential (unless certain circumstances are met)

·         Package liquor store, golf course, country club, massage parlor, tennis club, skating facility, racquet sport facility, hot tub facility, suntan facility, racetrack, retail food and beverage service, automobile sales or service.   

How does Tax Abatement Work?

Property taxes are phased in on the increased value the results from a new investment.  The new investment may be made by a company already doing business in the community or by a new business starting operations in the community.  Property taxes are phased in over a period of time determined by the County Council using the guidelines established by state law. 

·         For investments in real property (buildings), the period may be up to10 years.

·         For investments in personal property (manufacturing equipment), the period may be up to the life of the equipment or 10 years whichever is less.