The COVID-19 Pandemic will Affect Township Income Tax Revenue in Some Strange Ways.

January 5, 2017
Townships May Accept Charitable Contributions
June 18, 2020

It is obvious the shut-downs prompted by the pandemic will cut incomes and therefore reduce income tax revenue to townships.

However, the timing of the effect is not obvious.

For example, in 2020, the pandemic should not affect township income tax revenue at all.  That is because 2020 local income tax (LIT) has already been certified for 2020. Townships will continue to receive 2020 LIT distributions as if there had been no pandemic.

Also, surprisingly, 2021 LIT distributions should not be affected either.  Under current law, the 2021 LIT distributions will be certified based on 2019 tax returns processed by the Indiana Department of Revenue through June 30, 2020.  Since these returns are for 2019, before any shut-downs, the 2021 certified LIT distribution should not be affected by the pandemic.

However, there is one open question about the 2021 LIT certified distributions:  Since the Governor extended the deadline for filing 2019 tax returns from April 15 to July 15, there will be fewer returns processed by June 30, 2020.  That could cause the 2021 LIT certified distribution to be lower than normal.  However, the Governor could fix that problem with another executive order.

It is practically certain the 2022 LIT certified distribution will be affected by the pandemic.  The 2022 certified distribution will be based on 2020 returns filed in 2021, so income tax revenue is sure to be depressed.  Hopefully, income will return to normal after that.

The pandemic will also have unexpected effects on LIT supplemental distributions (which are in addition to the regular certified distributions). We will discuss that effect in a future message.


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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.

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