Each year, the maximum amount of property tax revenue (levy) that may be generated by a local civil government unit is adjusted to account for growth and inflation. This article is intended to explain this calculation and the impact on your unit’s 2023 budget.
How is the annual adjustment to the maximum levy calculated?
Legislation stipulates the six-year moving average increase in Indiana, non-farm personal income (as published by the federal Bureau of Economic Analysis) is the factor used to adjust the maximum levy each year.
Will the amount of my local unit’s property tax revenue increase as a result of this annual adjustment?
Not necessarily. Factors such as lost revenue from property tax rate cap credits and delinquencies/non-payment of property tax bills also affect property tax revenue.
Does my local unit have to increase its tax levy each year?
No. A local unit does not have to increase its tax levy each year. However, the maximum amount of tax that may be levied will increase each year, even if it is not fully used.
Are all funds of my local unit affected by the annual adjustment to the maximum levy?
No. The general rule is that the total combined levies for all funds cannot be greater than the maximum levy for the local unit. However, there are several exceptions. For instance, debt and cumulative fund levies usually are not subject to the maximum levy, and other laws/rules dictate how these funds’ levies are adjusted each year.
How does the State make local units aware of the adjustment to the maximum levy?
In past years, the State Budget Agency has released a memo to the Department of Local Government Finance (DLGF) around June/July showing the ensuing year’s maximum levy increase. However, the federal Bureau of Economic Analysis has already published the necessary information to calculate the increase for 2022. We expect 5% will be the 2022 levy increase, but the official factor will be known only when it is announced by DLGF in the summer.
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This article is intended to provide information of general interest to local government officials in Indiana. The information is not guaranteed to be applicable or appropriate in particular circumstances. Local officials should consult competent professionals before acting on any information contained in this article. We are not attorneys. The advice of a legal nature should be sought only from qualified attorneys.
We inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for (I) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Copyright © 2015 C. L. Coonrod & Company, CPA P.C.