Advantages of Doing Business in Indiana Presented by: 219/

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1 COST OF DOING BUSINESS Advantages of Doing Business in Indiana Presented by: 219/

2 Corporate Income Taxes Corporate Income Tax Due Per Net Taxable Income of $1,000,000 Indiana (8.5%) $85,000 Illinois (9.5%) $95,000 2

3 Personal Income Taxes Indiana Individual Income Tax Rate 34% 3.4% County Income Tax Rates: Lake County, IN 0% Porter County, IN.5% (CEDIT) LaPorte County, IN.95% (CAGIT & CEDIT) Illinois Individual Income Tax Rate 5% For taxation of incomes of Partnerships, S Corporations, LLC s, LLP s. 3

4 Real Estate Property Tax Rates Municipality Indiana Tax Rate Crown Point (Lake) $ Merrillville (Lake) $ Hammond (Lake) $ (3% cap)* Portage (Porter) $ Valparaiso (Porter) $ * For Lake and St. Joseph Counties certain debt issued prior to 2009 is outside the tax caps. 4

5 Real Estate Property Tax Rates Indiana Tax Caps: 1% Residential; 2% Rental/Farmland and 3% Commercial. Tax Caps now part of Indiana s Constitution. Illinois Property tax rates average approximately 8.86% of actual value statewide (Source: Department of Commerce and Economic Opportunity) 5

6 Sample Real Estate Tax Calculation Assume $5 Million Building $100 cost sq. ft. and 50,000 sq. ft building. Indiana (assumes 75% cost is assessed) $2.50 tax rate. Over 10 years $937,500 taxes or $93,750 average per year without tax abatement. With 10 year abatement pay $473,438 over 10 years in taxes ($47,344 avg. per year) and SAVE $464,062 in taxes with abatement. Overall 49.5% property tax savings. 6

7 Sample Real Estate Tax Calculation Assume $5 Million Building $100 cost sq. ft. and 50,000 sq. ft building. Illinois (commercial assessment 38% in Cook County) tax rate 8.86% of actual value. Over 10 years pay py$ $1,683,000, taxes or $168,340 per year without tax abatement. With 10 year abatement pay $1,085,793 taxes over 10 years ($108,579 avg. per year) and save $597,607 in taxes with abatement. Overall 35.5% property tax savings. 7

8 Sample Real Estate Tax Calculation Illinois In previous example we assumed community gave 50% abatement first 5 years and on declining % next five years. If graded dhigh h a company might get 50% all 10 years or $841,500 in tax savings. The tax abatement % determined dby the community. 8

9 Sample Real Estate Tax Calculation Summary Indiana Company pays average $47,340 per year vs. Illinois location paying $84,150 (at 50% tax abate. savings) in real estate taxes with tax abatement. Indiana real estate tax savings in example is $36,810 per year. 9

10 Personal Property Taxes Indiana taxes personal property (i.e. equipment) at same tax rate at real property. Floor amount that equipment is assessed (after applying depreciation) is typically at 30% of original cost. Personal property taxes are also subject to the 3% tax cap. Illinois does not tax personal property. 10

11 Sample Personal Property Taxes Indiana $1,000,000 of equipment investment (asset life of 5 to 8 years Pool 2) $2.50 tax rate. Over 10 years pay $96,750 in personal property taxes or $9,675 average per year without tax abatement. With tax abatement e t pay $37,575 5 oe over 10 years or average of $3,758 per year. Tax savings over 10 years is $59,

12 Local Government Tax Credits and Incentives Tax Abatement e t Indiana communities can offer real and/or personal property p tax abatement to be phased in over a period of up to 10 years. Abatement percentage is on a declining percentage by year. Illinois permits an abatement on Commercial or Industrial property not to exceed 10 years and shall not exceed $4,000,000 in abated taxes. Amount of abatement is determined by the Municipalities. 12

13 Local Government Tax Credits and Incentives (Continued) Tax Increment Financing (TIF) Districts Used for infrastructure improvements or Financing i Company s building and equipment investment through Economic Development Revenue Bonds (pledges tax increment for repayment on the bonds). Like having a 100% tax abatement over life of the Economic Development Revenue Bonds. 13

14 Local Government Tax Credits and Incentives (Continued) Tax Increment Financing (TIF) Districts Utilizes future tax incremental property taxes to pay for improvements necessary to induce development. Newly established TIFs have a life of 25 years. 14

15 Workers Compensation Workers Compensation Annual Premium Based on 100 Employees (2010) Indiana $47,072 Illinois $134,919 Average Workers Compensation Rate (2008) Indiana $1.23 Illinois $2.79 Source: U.S. Bureau of Labor Statistics/ U.S. Department of Labor/ Bureau of Economic Analysis. 15

16 Unemployment Insurance Average Unemployment Insurance Based on 100 Employees (2010) Indiana $18,900 Illinois $41,820 Indiana state unemployment to cover the first $9,000 of employees wages in 2011 up from $7,000. Rates range from.7% to 2.5%. Illinois state unemployment covers the first $12,740 of employees wages:.7% to 8.4% 16

17 Price of Electricity Average Price of Electricity, Industrial Sector (2009) (cents/kwh)(1) Indiana $5.82 Illinois $7.62 (1) Actual costs will vary based on usage and load factors. Source: Indiana Economic Development Corporation. 17

18 Price of Natural Gas (Industrial) Average Price of Natural Gas (per Therm) Indiana $6.71 Illinois $7.29 (1) Actual costs will vary based on usage and load factors. Source: Indiana Economic Development Corporation. 18

19 Construction Cost Factors NW Indiana Chicago Area Materials Installation Total Source: RS Means Building Construction Cost Data, 2011 Wage Benefit Comparison: Average Hourly Rate for 18 Skilled Trade Classifications $50.44 $57.36 Source: NWI Building Trades Council and the Chicago Building Trades Council 19

20 Summary of NWI/IN Annual Cost Savings Annual Indiana Illinois Savings Corp. Income Tax $85,000 $95,000 $10,000 (based on net taxable income of $1,000,000) Individual Inc. Tax $34,000 $50,000 $16,000 Real Estate Taxes $47,340 $84,150 $36,810 (Assume $5 Million Building $100 cost sq. ft. and 50,000 sq. ft building with 10 year abatement both states and Indiana property tax caps of 1% 2% 3% are constitutional) Personal Property $3, ($3,758) (based on $1,000,000 of equipment investment (asset life of 5 to 8 years Pool 2) $2.50 tax rate with 10 year abatement) Workers Comp. $47,072 $134,919 $87,847 (based on 100 Employees (2010)) Unemployment $22,900 (1) $41,820 $18,920 (based on 100 Employees (2010)) Average Electricity Price/Industrial Sector $5.82 $7.62 (cents/kwh costs vary based on usage/load) Average Natural Gas $6.71 $7.29 (per Therm costs vary based on usage/load) Average Construction Costs $ $ (new construction material/installation per square foot) Average Hourly Rate for 18 Skilled Trade Classifications (NWI) $50.44 $ / (1) Factors increase in workers comp. wage base by $2,000 per employee in Note: Above is based on projected annual savings based on assumptions used in this presentation (including real and personal property over 10 year period). Compiled and calculated by 20

21 Advantages in Northwest Indiana Taxes Lower taxes than surrounding states. Location Proximity to Chicago and other major market areas. Transportation Unequalled highway, rail andlake Michigan port access. Workforce Experienced and talented workforce. Higher Education Two major Purdue University campuses, Indiana University Northwest, Calumet College of St. Joseph, Valparaiso University and four Ivy Tech Campuses provide huge higher education capabilities. Quality of life Broad variety of high value, low tax residential options from lake front living to many options for rural and urban homes. 21