11 March 2026 Indiana removes $500 penalty on pass-through entities that omit investors with no Indiana-source income from a composite filing On March 3, 2026, Indiana Governor, Mike Braun, signed into law Senate Bill 259 (SB 259), which removes penalty provisions that apply if a pass-through entity fails to include in a composite return nonresident partners, shareholders, or beneficiaries that do not have distributive share income greater than $0. Under prior law, pass-through entities that failed to include all nonresident partners, nonresident shareholders, or nonresident beneficiaries in a composite return were subject to a penalty of $500 per pass-through entity. The Indiana Department of Revenue (Department) began enforcing this penalty beginning in tax year 2024.1 SB 259 is immediately effective and applies to pass-through-entity returns due, including extensions, after March 3, 2026. SB 259 removes penalties for pass-through entities, such as partnerships, that fail to include non-resident partners with zero distributive share income from Indiana sources on composite tax returns. Enacted as Public Law 48, this law seemingly aims to eliminate penalties on businesses whose tax filings show no tax is owed.
Document ID: 2026-0615 | ||||||
