24 March 2026 Indiana updates IRC conformity, expands upcoming amnesty program and denies tax benefits to businesses and individuals from foreign adversaries
On March 5, 2026, Indiana Governor Mike Braun signed Senate Bill 243 (SB 243), which updates Indiana's Internal Revenue Code (IRC) conformity date, expands the upcoming tax amnesty program and clarifies provisions on the elective pass-through entity tax. On the same day, Governor Braun also signed Senate Bill 256 (SB 256) which, among other things, denies tax benefits to affiliates of foreign terrorist organizations. In Senate Bill 212, Indiana previously updated its IRC conformity date to July 4, 2025, to adopt certain provisions in the One Big Beautiful Bill Act (OBBBA)1 (see Tax Alert 2026-0392). This update was limited to IRC Section 23 (adoption tax credit), IRC Section 168(e)(3)(B)(vi) (accelerated cost recovery system) and IRC Section 223(c)(2)(E) (safe harbor for absence of deductible for telehealth). SB 243 updates Indiana's IRC conformity date to January 1, 2026 (from January 1, 2023). SB 243's effect on certain OBBBA provisions is described next. SB 243 decouples Indiana from IRC Section 168(n) bonus depreciation for certain qualified production property as of July 4, 2025. Indiana's decoupling from IRC Section 168(k) remains in place. Taxpayers must add or subtract any amounts that reflect the depreciation that would have been allowed had bonus depreciation not been elected in the year the eligible asset was placed in service. For tax years beginning on or after December 31, 2024, SB 243 references domestic R&E expenditures under IRC Section 174A(b)2 and requires an addition to taxable income for amounts deducted under OBBBA provisions. SB 243 also allows for catch-up amortization of R&E expenditures incurred in 2022-24. Accordingly, Indiana continues to require the expensing of both domestic and foreign R&E expenditures in the year paid or accrued. A small-business taxpayer electing to amend a prior-year federal income tax return under OBBBA provisions allowing retroactive deduction of certain R&E expenses must amend the Indiana corporate income tax return to add back those amounts to Indiana taxable income, if the taxpayer deducted those expenses on a prior-year Indiana return. If the taxpayer does not make the retroactive federal election, the R&E expenses are treated as capitalized for federal purposes and must be added back to taxable income in the year the amortized amounts are deducted for federal purposes. SB 243 updates its reference to global intangible low-taxed income to net CFC tested income. The IRC Section 250(a)(1)(B) deduction remains disallowed for Indiana purposes and must be added back to taxable income. Earlier this year, the Indiana Department of Revenue (Department) announced that the tax amnesty program would run from July 15, 2026, through September 15, 2026 (reference Tax Alert 2026-0392). SB 243 extends eligibility for the program by one additional year and will now include unpaid tax liabilities due for tax periods ending before January 1, 2024 (from January 1, 2023). The Department is expected to issue additional guidance in the near future. SB 243 makes a technical correction to a provision on the pass-through entity tax (PTET), allowing credits for out-of-state income-tax payments to be applied to the PTET. SB 243 authorizes the Department to send documents electronically through its online tax system (INTIME). It also allows taxpayers to request to receive all documents from the Department through INTIME. SB 256 restricts individuals and businesses from "foreign adversary" nations from purchasing real property in Indiana. It also requires certain foreign agents to register with the Indiana Attorney General. Among its provisions, SB 256 denies tax benefits to individuals or entities that are designated an affiliate of a foreign terrorist organization. Taxpayers should review Indiana's updated IRC conformity as applied to OBBBA provisions, as well as look for Department guidance on the upcoming amnesty program. Taxpayers will also want to look for further guidance from Indiana as to how the provisions affecting individuals and businesses from 'foreign adversary' nations will be applied. (For discussion of similar legislation in Nebraska prohibiting certain entities from receiving benefits from Nebraska tax incentive programs, see Tax Alert 2025-2317),
Document ID: 2026-0714 | ||||||
