The bill laying out Gov. Mike Braun’s plan for property tax cuts passed out of committee Tuesday, but it included amendments for school referendums, property tax levy calculations and credits for veterans, seniors and first-time home buyers.
Senate Bill 1 would address rising property taxes with the system Braun campaigned on. The bill would change the homestead standard deduction amount to 60% of the homestead’s assessed value if the value is more than $125,000 or $48,000 plus 60% of the remaining assessed value if the homestead has an assessed value of $125,000 or less.
The bill states a controlled project or a school tax levy referendum can be held only at a general election in an even-numbered year. It also requires the Department of Local Government to Finance to develop and maintain a property tax transparency portal.
The amendments are pulled from Senate Bills 6, 8 and 9, which Senate Republicans signaled would also impact property taxes on the first day of session.
The bill was authored by Sen. Travis Holdman, R-Markle, who is the chairman of the Senate Tax and Fiscal Policy Committee. Holdman said in committee Tuesday the legislature and Braun’s administration have worked extensively on the bill.
“We just think there’s a fine line that we have to walk to make sure that we are careful to be responsible to the local units of government and at the same time provide some relief to taxpayers,” Holdman said.
The fiscal impact of the amended bill, Holdman said, would be about $300 million in the first year and grow to $800 million in the third year. The fiscal note attached to the bill wasn’t available online Tuesday morning.
The previous fiscal note said the plan would cut $4.1 billion across the state between 2026 and 2028, including $1.9 billion from schools, $254 million from libraries, $890 million from cities and towns, and $765 million from counties.
Braun issued a statement Tuesday reiterating his commitment to property tax reform. Braun will “carefully review” amended Senate Bill 1, he said, and work with the legislature to ensure the bill includes “broad based and immediate” property tax relief.
“The Senate Committee on Tax and Fiscal Policy has taken steps in the right direction by proposing strong caps on future bill growth, reforms to the referendum process, and targeted relief for veterans, retirees and first-time homebuyers, but Hoosier homeowners need a solution that includes broad and immediate reductions in their tax bills,” Braun said.
Michael Hicks, Director of the Center for Business and Economic Research at Ball State University, said Senate Bill 1 faced a challenging road because it would cut about $1 billion for local governments at a time when local government is operating “leaner now than it has been anytime that we’ve been keeping data, at least since the late 1960s.”
Local governments use property tax funds on paving roads, providing police and fire service, and maintaining parks and recreation facilities, Hicks said.
Under the original bill, Hicks said all school corporations, which receive the biggest portion of property tax revenue, would feel the impact, but about 60% to 80% — particularly growing suburban districts — would see a “stiff reduction in service.”
Sen. Brian Buchanan, R-Lebanon, said parts of Senate Bill 8 will be folded into Senate Bill 1. Senate Bill 8 addresses school referendum votes, and under Senate Bill 1, the referendum process will be expanded to all units of government, he said.
The referendums would have to be held in even-year general elections, which is when the largest number of voters cast a ballot, Buchanan said. The referendum would have to be levy-based, he said, meaning the unit of government requesting the referendum would have to include the rate and the amount of money being raised. Most operating referenda last for eight years and can be renewed by voters.
Referendums couldn’t be renewed back-to-back to offer residents a “cooling off period” on their property taxes, Buchanan said. The exception would be school operating and school safety referendums, he said, which could be held back-to-back if needed.
Sen. Scott Baldwin, R-Noblesville, said portions of Senate Bill 9 have been amended into Senate Bill 1. The amendment would cap the maximum levy growth quotient at 0% pay in 2026, 1% pay in 2027 and 2% pay in 2028 and then the remaining calculation goes into what Senate Bill 9 proposed, he said.
Senate Bill 9 added tax calculation indexes to include Indiana personal consumption expenditures, average annual pay for all industries and establishments and county nonfarm personal income, he said.
With the start of the new tax calculation indexes, it would provide a new levy growth formula to limit big year-to-year swings in levy growth, Baldwin said.
With this amendment, Senate Bill 1 would limit local governments’ ability to go above the annual maximum operating levy growth cap and require a referendum, during an even-year general election, for voters to decide on a potential levy increase, Baldwin said.
“This mirrors the process to adopt referenda in school operating and school safety referenda statutes,” Baldwin said. “The levy may be imposed for only one year.”
Sen. Fady Qaddoura, D-Indianapolis, said the impact of the Senate Bill 9 amendment would have a state-wide impact of $687 million in the first three years. Qaddoura said he was hopeful that the Legislative Services Agency could soon provide the public with an updated specific calculated impact to school districts and counties under amended Senate Bill 1.
Sen. Linda Rogers, R-Granger, presented an amendment for veterans and senior citizens. Under the amendment, a veteran with either a total disability or 62 years of age with a partial disability would see an increase in deduction from $14,000 to $20,000 with a change in the assessed value limit from $240,000 to $300,000, she said.
For those 65 years or older, the income limit for deduction and credit shifts to $60,000 from $30,000 for a single filer and to $70,000 from $40,000 for a joint filer, Rogers said. It also changes the assessed value limit from $240,000 to $300,000, she said.
Senate Bill 1 also now includes language from Senate Bill 6, which allows counties the option to set up a process for a homeowner to defer up to $500 of their property taxes annually, Rogers said. The total amount that could be deferred is $10,000, she said.
All deferred property taxes would become a lien on the property, she said, and would have to be paid off before the home could be sold.
“This is an opportunity for (counties) to be able to help a homeowner who may be going through some very difficult times or maybe a senior who is on a fixed income that just doesn’t have the means based on the increased assessment. I do think there will be counties that will want to take advantage of this,” Rogers said.
Hicks, who is a disabled veteran, said veterans and senior citizens already receive property tax relief. That means other homeowners have to pay high property taxes, he said.
Sen. Tyler Johson, R-Leo, shared an amendment that would create a property tax credit for first-time home buyers. The credit would be $2,500 annually for five years, for a total tax credit of $12,500, he said.
To receive the first-time home buyer tax credit, the household would need an annual income of $75,000 as well as purchasing a homestead with an assessed value limit of $250,000, Johnson said. The tax credit doesn’t have an age limit or dependent requirement, he said.
The amended bill passed out of committee in a 10-3 vote, with Sen. Lonnie Randolph, D-East Chicago, and all Republican Senators on the committee voting in favor of the bill.
The amendments improve Senate Bill 1, Randolph said, but he still has “major concerns.”
“The very fact that it’s an improvement I’ll say yes at this point in time, with the understanding that on second reading I might consider changing my mind,” Randolph said.
Qaddoura said he was pleased Senate Bill 1 was amended, but he still had concerns about its impact on schools.
“As of now we don’t have the full understanding of the impact to our schools,” Qaddoura said. “Until we have the fiscal, I can’t make a conscious decision to take money away from the locals.”
With committee approval, the bill moves on to the Senate for consideration.
Lake County Finance Director Scott Schmal sent legislators an email Monday about the proposed property tax reform, which would cut Lake County’s revenues by $25.4 million between 2026 and 2028.
From 2019 through 2024, Lake County saw the maximum levy increase at a rate of 4.2%, which was lower than the rate of assessed value, Schmal said. An increase in the maximum levy at a rate lower than assessed value resulted in property tax bills increasing by more than 20%, Schmal said.
In Lake County, property taxes for owner-occupied property increased at a rate “higher than desirable” from 2019 to 2024 because of the tax burden shift onto those properties from other properties.
“This shift is a result of the fundamentals in the assessment process that can’t be ignored when considering property tax reform otherwise history will repeat itself,” Schmal wrote in the email.” Property tax reform would likely be less of a topic if this assessment dynamic did not exist.”
Every community in Indiana has different needs, Hicks said, and local governments in those communities should continue to set property taxes based on those needs. Residents have the opportunity to vote in different elected officials if they disagree with property tax rates in their communities, he said.
“The people who are going to govern this best are the people who are setting the local budgets,” Hicks said.
Indiana has the 7th lowest property taxes in the country, Hicks said, but the 26th highest sales tax and the 34th highest income tax. The legislature is cutting property taxes because they don’t have to deal with cutting local services, he said,
“They aren’t going to cut the income and sales tax because they know the challenge of budgeting at the state level,” Hicks said. “Let local people set what they want and not jump into it because it’s politically easy.”