Ind. Code ch. 6-3-2.1

in effect

Ind. Code § 6-3-2.1-1 Applicability

Sec. 1. This chapter applies to taxable years beginning after December 31, 2021. As added by P.L.1-2023, SEC.5.

Ind. Code § 6-3-2.1-2 Definitions

Sec. 2. The following definitions apply throughout this chapter: (1) "Electing entity" means a pass through entity described in IC 6-3-1-35 that is subject to Subchapter K or Subchapter S of the Internal Revenue Code and makes the election under this chapter. (2) "Entity owner" means the direct or indirect owners of an electing entity that are ultimately taxable on the entity's income under Subchapter K or Subchapter S of the Internal Revenue Code, except an owner described in subdivision (4)(A) through (4)(C). (3) "Nonresident" means: (A) a nonresident partner as defined by IC 6-3-4-12(n); (B) a nonresident shareholder as defined by IC 6-3-4-13(n); (C) a nonresident beneficiary as defined by IC 6-3-4-15(j); or (D) in the case of a shareholder of a corporation described in IC 6-3-2-2.8(2), a corporation described in Section 501(c)(3) of the Internal Revenue Code that is exempt from taxation under Section 501(a) of the Internal Revenue Code and that is not domiciled in Indiana; whichever is applicable. (4) "Owner" means a direct or indirect owner of an electing entity and includes a beneficiary of an estate or trust. However an owner shall not include: (A) an entity described in IC 6-3-2-2.8(3) that is not a partnership, a trust, or a corporation described in IC 6-3-2-2.8(2); (B) an entity described in IC 6-3-2-2.8(5); or (C) any other entity as determined by the department and listed in instructions or guidance issued by the department. (5) "Resident" means a partner, shareholder, or beneficiary: (A) that, in the case of an individual, estate, or trust, is a resident of Indiana as defined in IC 6-3-1-12; or (B) that is a partnership or corporation, including a corporation described in IC 6-3-2-2.8(1) or IC 6-3-2-2.8(2), that is domiciled in Indiana. As added by P.L.1-2023, SEC.5. Amended by P.L.194-2023, SEC.19; P.L.48-2026, SEC.1.

Ind. Code § 6-3-2.1-3 "Authorized person"; pass through entity tax election; applicability of election

Sec. 3. (a) For purposes of this section, "authorized person" means any individual with the authority from the electing entity to bind the electing entity or sign returns on its behalf. (b) Each taxable year, an authorized person may elect, on behalf of the electing entity, to have the adjusted gross income tax under IC 6-3-1 through IC 6-3-7 imposed upon the electing entity. The entity owners shall remain liable for adjusted gross income tax under IC 6-3-1 through IC 6-3-7 on their share of the electing entity's adjusted gross income but with the credit provided to the entity owners as set forth in section 5 of this chapter. (c) The election is applicable for the taxable year of the return. (d) The following apply to an election under this section: (1) For taxable years beginning after December 31, 2022, the election may be made at any time during the taxable year or after the end of the taxable year, but not later than the earlier of: (A) the due date of the electing entity's return for the taxable year, including any extensions; or (B) the date the electing entity files its return for the taxable year. (2) For taxable years beginning after December 31, 2021, and before January 1, 2023, the election must be made after March 31, 2023, and before August 31, 2024. (3) The election shall be made in the form and manner prescribed by the department. (4) The election, once made for a taxable year, is irrevocable, provided that an election under subdivision (2) may be made on an amended return if the electing entity filed a return on or before April 18, 2023. As added by P.L.1-2023, SEC.5.

Ind. Code § 6-3-2.1-4 Tax imposed; rate; return; treatment of certain tax payments by nonelecting pass through entity

Sec. 4. (a) A tax shall be imposed on the adjusted gross income of an electing entity for the taxable year of the election. The adjusted gross income of the electing entity shall be the aggregate of the direct owners' share of the electing entity's adjusted gross income. For purposes of this section: (1) the electing entity shall determine each nonresident direct owner's share after allocation and apportionment pursuant to IC 6-3-2-2; and (2) the electing entity shall determine the resident direct owner's share either: (A) before allocation and apportionment pursuant to IC 6-3-2-2; or (B) after allocation and apportionment pursuant to IC 6-3-2-2. The electing entity must use the same method for all resident direct owners. (b) The tax rate shall be the tax rate specified in IC 6-3-2-1(a) (before July 1, 2025) or IC 6-3-2-1(b) (after June 30, 2025) as of the last day of the electing entity's taxable year, and the tax shall be due on the same date as the entity return for the taxable year is due under this article, without regard to extensions. (c) On its return for the taxable year, the electing entity shall attach a schedule showing the calculation of the tax and the credit for each direct owner, and remit the tax with the return, taking into account prior estimated tax payments and other tax payments by the electing entity, along with other payments that are credited to the electing entity as tax paid under this chapter or as tax withheld under IC 6-3-4 or IC 6-5.5-2-8. The department may prescribe the form for providing the information required by this section. (d) If a pass through entity makes estimated tax payments, makes other tax payments, or has other payments that are credited to the electing entity as tax paid under this chapter or a tax withheld under IC 6-3-4 or IC 6-5.5-2-8, and the pass through entity does not make the election under section 3 of this chapter, the pass through entity: (1) may treat pass through entity tax remitted on its behalf under this chapter as pass through entity tax to its direct owners, provided that: (A) the tax is designated on a schedule similar to the schedule required under subsection (c) and is reported to the direct owners in the manner provided in section 5 of this chapter; and (B) the pass through entity credits an amount to a direct owner no greater than the tax that otherwise would be due under this chapter on their share of the adjusted gross income from the pass through entity or the direct owner's portion (as determined under subsection (a)) of the pass through entity tax passed through to the pass through entity, whichever is greater (for purposes of this clause, a trust or estate shall compute the tax in the same manner as an electing entity); (2) shall treat any payment other than a payment designated under subdivision (1) as a withholding tax payment under IC 6-3-4-12, IC 6-3-4-13, IC 6-3-4-15, or IC 6-5.5-2-8 to the extent the pass through entity otherwise has not remitted or been credited with such withholding; and (3) may request a refund of any payment in excess of the amounts credited or designated under subdivision (1) or (2). (e) If a pass through entity elects to be subject to tax under this chapter and the pass through entity determines that its tax is less than the pass through entity tax that is paid on its behalf, the pass through entity may treat the tax paid on its behalf in a manner similar to subsection (d). However, the pass through entity may not treat an amount less than its own liability under this chapter as pass through entity tax under subsection (d)(1). As added by P.L.1-2023, SEC.5. Amended by P.L.236-2023, SEC.64; P.L.118-2024, SEC.11; P.L.230-2025, SEC.70.

Ind. Code § 6-3-2.1-5 Computation of tax; refundable credit; applicability of other credits

Sec. 5. (a) Each electing entity shall compute each direct owner's share of the tax imposed by section 4 of this chapter and reflect that amount in the form and manner prescribed by the department. (b) Each entity owner shall be entitled to a refundable credit in an amount equal to the amount of tax under this chapter credited to the entity owner. (c) An electing entity or pass through entity shall be permitted to claim a credit for taxes withheld or paid on the entity's behalf. (d) An electing entity that has direct owners that would be permitted to claim a credit under IC 6-3-3-3 for taxes paid to another state with regard to a taxable year may elect to claim a credit under this chapter for: (1) an amount equal to the income of a resident direct owner attributable to a state other than Indiana multiplied by the rate imposed by IC 6-3-2-1(a) (before July 1, 2025) or IC 6-3-2-1(b) (after June 30, 2025) or maximum individual income tax rate imposed by that other state, whichever rate is less, if: (A) the electing entity makes an election to tax resident direct owners in the manner prescribed in section 4(a)(2)(A) of this chapter; and (B) the other state grants a credit to its residents substantially similar to the credit as provided under IC 6-3-3-3(a); and (2) an amount equal to the income attributable to Indiana multiplied by the rate imposed by IC 6-3-2-1(a) (before July 1, 2025) or IC 6-3-2-1(b) (after June 30, 2025) or the maximum individual income tax rate by the nonresident direct owner's state of residence, whichever rate is less, if the nonresident direct owner would be permitted a credit under IC 6-3-3-3(b) for the income attributable to Indiana and derived from the electing entity. (e) An electing entity may elect to claim a credit for any credit under IC 6-3-3 or IC 6-3.1, other than the credits under subsections (b) through (d), and arising from the operations of the electing entity, or which are passed through to or assigned to the electing entity for the taxable year. For purposes of this subsection, the following apply: (1) The credit must be allowable to pass through to the direct owners of the electing entity under the provisions of the credit. (2) The credit must be first allowable to the direct owners of the pass through entity in a taxable year ending on or after the taxable year of the electing entity. (3) The amount of the credit that the entity may claim against the tax attributable to any direct owner under subsection (a) may not exceed the credit that is available to be passed through to the direct owner. (f) For purposes of subsections (d) and (e), the following apply: (1) The elections under subsections (d) and (e) are separate elections to which the following apply: (A) An election under subsection (e) applies to all credits other than the credits described in subsections (b) through (d). No allowance for an election to apply to one (1) or more credits and to not apply to one (1) or more credits is permitted. (B) The election to claim the credits under subsections (d) and (e) must be made on the original return filed by the electing entity. A failure to claim a credit shall be treated as if the credit was not allowable to the electing entity. (C) An election to apply a credit applies to the tax for all direct owners of the electing entity, provided that an election under subsection (d) applies only to direct owners that are individuals, estates, or trusts. (2) If an electing entity claims credits under both subsections (d) and (e), the electing entity shall apply the credit under subsection (d) first, then any amount allowable under subsection (e). (3) The sum of the credits attributable to a direct owner of an electing entity shall not exceed the tax computed by the electing entity for the direct owner under this chapter. (4) A provision under IC 6-3-3 or IC 6-3.1 requiring a credit to be passed through shall not prevent an electing entity from applying the credit against the tax imposed under this chapter. (5) An entity owner shall be permitted to claim any credit otherwise allowable to the owner to the extent otherwise permitted by IC 6-3-3 or IC 6-3.1. As added by P.L.1-2023, SEC.5. Amended by P.L.230-2025, SEC.71; P.L.128-2026, SEC.14.

Ind. Code § 6-3-2.1-6 Exception; estimated tax payments; penalty for underpayment

Sec. 6. (a) Except as otherwise provided in this section, an electing entity shall be subject to the obligation to make estimated tax payments under this article for the tax imposed under section 4 of this chapter in the same manner as applicable to corporations under IC 6-3-4-4.2(b). (b) For taxable years ending on or before June 30, 2023, an electing entity is not required to make estimated tax payments. (c) For taxable years ending after June 30, 2023, and on or before December 31, 2024, an electing entity shall make an estimated tax payment for the taxable years on or before the end of the taxable year. There shall be no penalty for underpayment of estimated tax, except to the extent the underpayment fails to equal or exceed fifty percent (50%) of the tax imposed by section 4 of this chapter for the taxable year. (d) For taxable years ending after December 31, 2024, there shall be no penalty for underpayment of estimated tax, except to the extent one (1) or more payments required during the taxable year fail to equal or exceed the lesser of twenty percent (20%) of the tax imposed under this chapter for the taxable year or twenty-five percent (25%) of the tax imposed under this chapter for the preceding taxable year. (e) In the event of an underpayment under subsection (c) or (d), the electing entity shall be subject to a penalty at the rate prescribed under IC 6-8.1-10-2.1(b) on the amount of the underpayment. As added by P.L.1-2023, SEC.5. Amended by P.L.213-2025, SEC.72; P.L.205-2025, SEC.7; P.L.23-2026, SEC.37.

Ind. Code § 6-3-2.1-7 Applicability; application of partnership audit and administrative adjustments to electing entity

Sec. 7. (a) This section applies if: (1) the department determines that an electing entity underreported its tax under this chapter; (2) an electing entity files an amended return reporting an underpayment of tax under this chapter; or (3) the Internal Revenue Service adjusts the adjusted gross income of an electing entity. (b) If a partnership is an electing entity, the partnership shall be subject to IC 6-3-4.5 on any assessment and reporting of changes. (c) If a corporation described in IC 6-3-2-2.8(2) is an electing entity, the corporation and its shareholders shall be subject to the provisions of IC 6-3-4.5 in the same manner as a partnership and its partners with regard to the tax imposed under this chapter, except that any change in attributes is treated as occurring in the year to which the change relates unless required by the Internal Revenue Code. As added by P.L.1-2023, SEC.5.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://iga.in.gov/laws/2026/ic/titles/6Fetched: 10/17/2026