Authority: IC 6-8.1-3-3

Affected: IC 6-3.5-7; IC 6-3.6

Sec. 3. (a) For a resident of an adopting county, the following applies:

1. (1) If an individual's county of residence adopts or has adopted the local income tax (LIT), his or her entire adjusted gross income will be subject to the tax rate adopted in the individual's county of residence.
2. (2) Notwithstanding subdivision (1), Perry County residents are not subject to tax on income earned in a contiguous county outside Indiana and subject to local income tax in that county. Prior to 2017, this exemption only applies to taxes imposed under IC 6-3.5- 7.

(b) For a resident of a nonadopting county and out-of-state residents, if an individual resides in a nonadopting county or outside the state of Indiana, but his or her principal place of business or employment is in an Indiana adopting county, only the adjusted gross income derived from his or her principal place of business or employment in Indiana will be subject to LIT.

(c) For purposes of determining what income is subject to LIT, all income derived from an Indiana county in which the principal place of business or employment is located is subject to LIT as follows:

1. (1) The income subject to tax includes compensation and self-employment income, as well as net income derived from ownership or beneficial interest in a pass-through entity.
2. (2) In the case of income derived from the operation of a business (profits from a business but not compensation), only such income derived from the conduct of business in the county of principal place of business or employment will be subject to LIT.

(Department of State Revenue; 45 IAC 3.1-4-3; filed May 10, 2017, 3:04 p.m.: 20170607-IR-045160491FRA; readopted filed Aug 11, 2023, 10:08 a.m.: 20230906-IR-045230534RFA)