A host of acronyms, abbreviations and terminology with less than well-known meanings may confront you while using the Gateway. This glossary should help you learn the meaning of those words. While we think we’ve done a good job here, we also suspect we might have missed some terms and welcome your feedback on how to improve the glossary.
The budget approved by the fiscal body of the taxing unit is called the adopted budget and follows the published budget. Both the published and adopted budgets are key pieces that feed the certification process conducted by the Department of Local Government Finance (DLGF).
Appropriations are authorizations to spend money out of a fund, made by a fiscal body such as a county council, city council, town board or school board. Appropriations are set in the local government's annual budget. Sometimes, however, appropriations are made but the money is not spent. In the state budget's general fund, such money reverts back to the general fund, so they are called reversions. Other times, additional appropriations are authorized above the initial budget appropriations. Thus, appropriations listed in the budget are spending authorized at the beginning of the fiscal year, but actual spending may be greater or less than appropriations.
Assessors value property for property tax purposes. Indiana has both county and township assessors. The county assessor is an elected position established by state statute. The county assessor oversees, advises and instructs township assessors and township trustee-assessors in their duties. Townships with more than 8,000 people have elected township assessors. Those with 5,000 to 8,000 people have the option to create a township assessor position.
Assessed value is the dollar value of taxable property established by the assessor. Gross assessed value is assessed value before deductions are subtracted. Net assessed value is after deductions and is the part of assessed value that is taxed. A government unit's tax rate multiplied by a taxpayer's net assessed value equals the amount the taxpayer owes to the unit (before credits); a unit's tax rate multiplied by total assessed value equals its gross tax levy. There are two types of assessed value: real property, which is land and buildings, and personal property, which is almost entirely business, utility and farm depreciable equipment.
The County Auditor is an elected position established in the state constitution. Auditors are elected to four year terms, and may not serve more than eight years in any twelve. The county auditor is the county fiscal officer, who assists with budget preparation and analysis and keeps accounts. The county auditor serves as the secretary to the county commissioners and the county council. The auditor prepares tax duplicates showing property assessments and taxes due. The taxes are collected by the treasurer, but distributed by the auditor to the governmental bodies for which they are collected.
A budget is an estimate of revenues to be received and appropriations authorized for the coming fiscal year. It is essentially a plan for the use of a government's resources. Submission of both published and adopted budgets to the Department of Local Government Finance is required for the certification of tax levies and rates by the State.
Every governmental unit is required by the SBOA to have a complete inventory of all capital assets owned by the unit and which reflect their acquisition value. Capital assets include infrastructure property that is stationary and has a long life (e.g., roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems); permanent improvements that add value to land (e.g., buildings, fences, landscaping, parking lots, retaining walls); and machinery, equipment and vehicles, and construction in progress, books and other assets not included in the previous two categories.
Money on hand or invested as evidence by entry in the unit’s ledger or records.
Cash Basis of Accounting
Method of accounting in which transactions are recorded when cash is received or paid. Most local governments are on the cash basis of accounting in Indiana.
All taxing units in Indiana are required by state law to submit their budgets to the Department of Local Government Finance for review and certification. To be certified means that the unit will be allowed to set the budget and the resulting levy of property taxes and the taxing rate.
Chart of Accounts
The accounts used by a unit to record and classify financial transactions. The standard chart of accounts contains a funds table, table of receipt accounts and table of disbursement accounts as a start to standardizing the record keeping and reporting.
The compensation paid to public employees is submitted annually to the State Board of Accounts as required by state law (IC 5-11-13-1 and IC 5-14-3.8-7). For more on public employee compensation as reported to the State, see (insert hyperlink).
A county is a legal subdivision of the state. All of the state's land area is inside one of its 92 counties. Counties provide police protection through the sheriff's office, courts and jails, welfare aid, park and recreation services, health services, road and bridge construction and maintenance, and other functions. Officers of the county, which are established by the Indiana Constitution, include the clerk of the court, auditor, recorder, treasurer, sheriff, coroner and surveyor. Officers of the county established by statute include the county council members, county commissioners and county assessor.
County Adjusted Gross Income Tax (CAGIT)
CAGIT may be adopted by the county council at a rate of 0.5 percent, 0.75 percent or 1 percent. Almost all counties use the 1 percent rate. Revenue is distributed to all jurisdictions within an adopting county. School corporations share in revenue generated by only the first 0.25 percent, while other jurisdictions share in all revenue collected. More than half of CAGIT revenue must be used for property tax relief. It is either directly subtracted from the property tax levy or it causes a reduction in a jurisdiction's maximum levy. The remaining revenue is spendable for any purpose. CAGIT revenue is collected by the Indiana Department of Revenue and distributed back to the adopting counties. In mid-summer of each year, the department, after consulting the State Budget Agency, announces each county's certified distribution, which is the amount of income tax revenue the county will receive in the coming calendar year. The distribution amount is based on past income tax collections.
County Economic Development Income Tax (CEDIT or EDIT)
One of Indiana's county income taxes, CEDIT is adopted by the county council if the county has the County Adjusted Gross Income Tax (CAGIT), the COIT council if the county has County Option Income Tax (COIT), and either body if the county has neither. Most counties that use CEDIT also have either CAGIT or COIT. CEDIT generally can be adopted at rates up to 0.5 percent, but the combined CAGIT and CEDIT rates in counties with both taxes cannot exceed 1.25 percent, and the combined COIT and CEDIT rates cannot exceed 1 percent. Revenue is divided among the county, cities and towns and must be used for economic development or public capital projects. CEDIT revenue is collected by the state Department of Revenue and distributed back to the adopting counties. In mid-summer of each year the Department, after consulting the State Budget Agency, announces each county's certified distribution, which is the amount of income tax revenue the county will receive in the coming calendar year. Distributions are based on past revenue collections. An additional CEDIT rate may be added to fund a local homestead credit to offset the effect of inventory tax elimination on homeowners.
County Option Income Tax (COIT)
COIT is adopted by the COIT council, which is a combination of the fiscal bodies of the county, and the cities and towns within the county. Votes on the COIT council are distributed based on shares in total county population, with the county's votes based on population in areas outside of cities and towns. COIT is adopted at a rate of 0.2 percent in the first year. The rate can rise by one-tenth of a percent per year to a maximum of 1 percent. Revenue is divided among all jurisdictions in an adopting county except school corporations. All COIT revenue is spendable. If the COIT council desires, part of COIT revenue can be used for a local homestead credit, to reduce property taxes for homeowners. COIT revenue is collected by the state Department of Revenue and distributed back to the adopting counties. In mid-summer of each year the Department, after consulting the State Budget Agency, announces each county's certified distribution, which is the amount of income tax revenue the county will receive in the coming calendar year.
Cities, towns, redevelopment commissions, special districts, schools, government enterprises, and libraries in Indiana are among the local government units that can take on debt either through the issuance of bonds or through leasing. Debt can be secured either through payment of property taxes or specified revenues from other taxes or fees.
Department or Departmentalization
Many counties, cities and towns departmentalize their funds. For example, a department within the General Fund might include Controller, Coroner, Mayor, Sheriff or Treasurer. Whether a unit departmentalizes or not, disbursements are categorized by personal services, supplies, etc.
Local governments may own and manage enterprises. Examples of enterprises include utilities, public transportation systems, convention centers, parking garages, airports, cemeteries and even Internet services. Types of utilities include electric, gas, solid waste, storm water, trash, wastewater treatment plants, etc.
An excess levy is the amount of money that exceeds the maximum permissible levy. This may become a permanent increase or a one-year increase depending on the appeal submitted by the taxing unit. Each year the Department of Local Government Finance issues an agency memo describing the filing process for an excess levy.
The fiscal body is the taxing unit’s government council or board.
The fiscal year is the 12-month period for which a government budgets expenditures and revenues. In Indiana, the local government fiscal year is the same as the calendar year, January 1 to December 31. State government and school fiscal years run from July 1 to June 30. The federal government fiscal year is October 1 to September 30.
Food and Beverage Tax
A few local governments have been authorized by the state legislature to collect sales tax on food and beverage sales. The tax is 1 percent and is added to the 7 percent state sales tax. It is collected by the state Department of Revenue and remitted to the local government. The tax is on restaurant food and beverages consumed in the restaurant or purchased "to go." Revenues are usually used for economic development and tourism projects.
A fund is cash set aside for the purpose of accounting for the general or specific activities of a local government. The General Fund is used to account for all of the general operations of the local government. Debt service funds are used to pay interest and principal on bonds. Cumulative funds are used to save for future capital expenditures. Road and street funds are used to pay for road and street maintenance.
Property is qualified for the homestead credit if it is owned and occupied by the taxpayer and is the taxpayer's primary residence. Homestead credits vary by taxing district. Homestead credits are calculated after assessed values and tax rates are set, so they reduce the amount of property tax revenue received by local governments. Lost revenue from the state homestead credit is replaced by state appropriations, which are paid to local governments to compensate. There are two local homestead credits. A few counties that have adopted the County Option Income Tax (COIT) use some of the income tax revenue to fund an additional local homestead credit. Many counties have adopted a homestead credit to offset the tax shift to homeowners that occurred when the property tax on inventories ("inventory tax") was eliminated. These homestead credits are funded with an additional County Economic Development Income Tax (CEDIT).
Income Taxes, County
Most Indiana counties collect local income taxes. There are three, the County Adjusted Gross Income Tax (CAGIT), the County Option Income Tax (COIT), and the County Economic Development Income Tax (CEDIT or EDIT). Counties may adopt CAGIT or COIT, and/or CEDIT. The taxes are all collected based on state taxable income, the same tax base as the state income tax. They differ in the use local governments may make of the revenue. CAGIT revenue is distributed to all local governments, including school corporations. All the revenue schools receive from CAGIT must be used to reduce school property taxes. Part of the CAGIT revenue received by civil governments (counties, townships, cities and towns, library districts and other special districts) must be used for property tax reductions, and part can be added to local budgets. COIT revenue is distributed to all civil (non-school) governments. All of it may be added to local budgets, and spent for general purposes. CEDIT is distributed to counties, cities and towns only. The revenue may be added to budgets, but spent only on public capital projects (such as courthouses or jails) or economic development projects (such as industrial parks). An additional CEDIT rate can be adopted to offset the effect of inventory tax elimination on homeowners.
Many counties collect a sales tax on the gross incomes of hotels and motels, known as the innkeeper’s tax or the hotel-motel tax. It may be adopted at the option of county governments at a rate up to 5 percent. Some counties have special legislation authorizing the tax, and some of these use a tax rate of 6 percent. Some counties collect and administer the tax themselves, but for most the state Department of Revenue collects the tax at the same time as the sales tax and remits the revenue to the counties. In most counties, the revenue is placed in a convention and visitors fund, to be used for the promotion of travel, conventions and tourism in the county. The innkeepers tax rates and effective dates by county are available from the Indiana Department of Revenue’s website: www.in.gov/dor/3469.htm.
Legislative Services Agency
The Indiana Legislative Services Agency (LSA) is the bill drafting and research arm of the Indiana General Assembly. It is comprised of three offices: the Office of Bill Drafting and Research (OBDR), the Office of Code Revision (OCR), and the Office of Fiscal and Management Analysis (OFMA). OFMA annually issues the Indiana Handbook of Taxes, Revenues and Appropriations, which is an extremely useful guide to state and local government revenues and expenditures.
Local Government Finance, Department of
The Department of Local Government Finance (DLGF) is a state government agency charged with overseeing administration of the property tax. It was formerly known as the State Tax Board. The agency has a staff in Indianapolis and field representatives throughout Indiana. It is DLGF’s responsibility to enforce the state's property tax controls, determine the rules for assessing real and personal property, and offer education to county and township assessing officials. DLGF is the agency to which budget, debt and other reports are submitted by local governments. DLGF can be found on the web at www.dlgf.in.gov.
Market Value Assessment
A method of property assessment which sets property values for property tax purposes at their predicted sales prices in an "arms length" transaction. Indiana's 2002-03 reassessment valued property based on market value assessment, as a result of the Indiana Supreme Court decision in the Town of St. John court case. Market value can be estimated using three different methods, which are appropriate for different property types. The methods are comparative sales, which estimates the selling price for a property by comparing its characteristics to other properties that have recently sold; cost less depreciation, which estimates the selling price by calculating what it would cost to build the property, less depreciation; and income capitalization, which calculates what a buyer would be willing to pay for an income-earning property by dividing the income earned by a rate of return. Farm land is assessed at its use value in agriculture. It is the only major category of property not assessed based on market value. Prior to 2002, Indiana was one of two states which did not use market value as a basis for assessing property (Nevada still does not). Instead, Indiana used a True Tax Value system, which set property assessments based on construction costs, less age-based depreciation, plus the market value of land.
Motor Vehicle Excise Tax
The motor vehicle excise tax is a local tax on the value of automobiles, light trucks and motorcycles. The tax payments vary based on the age and the initial retail price of the vehicle. Annual payments vary from $12 on the oldest and lowest priced vehicles, to $532 on the newest, most expensive vehicles. Taxpayers pay the tax each year when they register their vehicles. The license branches collect the tax. Motor vehicle excise tax revenue is distributed to all local governments based on shares in the property tax rate, and used for general purposes. The revenue is not used exclusively for road maintenance. In fact, statewide, school corporations receive about half of motor vehicle excise tax revenues. The motor vehicle excise tax was originally created in the early 1970s to replace the personal property tax on vehicles. In 1996 the legislature enacted a substantial cut in excise tax rates, and partially replaced this revenue for local governments out of lottery and riverboat gaming revenues.
Motor Vehicle Excise Surtax and Wheel Tax
These are county option taxes on vehicles, with revenue used by counties, cities and towns for road maintenance and repair. County councils may adopt these taxes together. The surtax may be set at between 2 percent and 10 percent of the motor vehicle excise tax payments by owners of automobiles, light trucks and motorcycles. Counties may instead impose a flat fee of between $7.50 and $25 per vehicle. The Wheel tax is a flat fee per vehicle (not per wheel) of between $5 and $40 on heavier vehicles. Taxpayers pay the surtax and wheel tax upon registration of the vehicle at the license branches. Revenues are distributed to the county, cities and towns, and must be used to construct, reconstruct, repair or maintain streets and roads.
Net Assessed Value
Net assessed value is after deductions and is the part of assessed value that is taxed. A government unit's tax rate multiplied by a taxpayer's net assessed value equals the amount the taxpayer owes to the unit (before credits).
Comparing values across cities, towns or townships can be misleading. The budget for the City of Fort Wayne will be much larger than that of Bremen. However, if the budget is calculated as the amount per capita, comparisons are then more meaningful. It’s done by dividing the amount (budget, disbursements, debt) by the population of the unit. It’s an easy way to express the amount “per person.” Where appropriate, per capita amounts have been provided in Gateway reports (using Report Builder) and are based on the Census 2010 population.
Personal property is almost entirely business, farm and utility depreciable equipment. Equipment owners pay property taxes on the assessed value of their personal property. Personal property includes equipment such as factory machinery, farm equipment such as tractors, and utility equipment such as electric generating machinery. Less than one percent of personal property is owned by individuals, mainly large recreational vehicles. Personal property is assessed annually by property owners, using forms that are usually distributed by township assessors. The assessment date is March 1. Prior to 1972 automobiles were assessed as personal property, but these taxes were replaced by the motor vehicle excise tax. Until 2006 personal property included business inventories, such as auto dealers’ stocks of vehicles, goods on retailers' shelves, farm livestock and stored grain, and fuel for utility plants.
The primary source of revenue for local governments is the property tax, which is a tax on the assessed value of property.
Property Tax Controls
The system of state imposed restrictions on the ability of local governments to collect taxes. For civil (non-school) governments, annual increases in operating levies are restricted to the six-year average of statewide personal income growth. Civil government cumulative funds have maximum rate limits, and most are also included within the operating levy ceiling. Debt service levies are not limited, though the Department of Local Government Finance can approve or reject local bond issues. School corporation levies are limited by rules set by the state school aid formula, which usually changes every two years.
Property Tax Credits
Property tax credits are percentages subtracted from property taxpayer tax bills after assessed values, deductions and tax rates have been calculated.
Property Tax Deductions and Exemptions
Deductions and exemptions reduce the assessed value of property on which property taxes must be paid. Exemptions include whole categories of property which are not taxed. Exempt property includes property owned by government, not-for-profit corporations, property used for educational, scientific, literary, religious or charitable purposes, and many others. Some types of property are also exempt, irrespective of its owners, including pollution control equipment and wildlife habitats. Deductions are dollar amounts that may be subtracted from the assessed value of otherwise taxable property, if the owner and property qualify. Deductions include the homestead standard deduction, which allows most homeowners to subtract up to $35,000 from the assessed value of their primary residence, the mortgage deduction, which allows taxpayers to subtract $3,000 from the assessed values of their mortgaged residences; the 65 or over deduction, which allows people age 65 or over to subtract $3,000 from the assessed value of their residences. There are also deductions for veterans and people who are blind or disabled. Certain types of property qualify for deductions, including property equipped with solar energy heating systems and property equipped with resource recovery systems. Assessed value before deductions is gross assessed value; after deductions, net assessed value.
Property Tax Levy
The property tax levy is the revenue collected by a local government from the property tax. It is the sum of all the property tax payments that taxpayers make to the local government. While the levy is the product of the local government's property tax rate and its assessed value, the rate is actually calculated so that it will raise a particular levy dollar amount from the assessed value tax base. The levy amount is set initially to cover the difference between a local government's appropriations and its non-property tax revenues. This calculation is made on budget form 4-B. However, the levy is subject to a variety of state property tax controls which limit the amount that a local government can collect each year. The "gross levy" is the levy before property tax credits, and the net levy is the levy after these credits are subtracted. The net levy is the amount that property taxpayers actually pay to their local government.
Property Tax Rate
The property tax rate measures the share of a taxpayer's assessed value which must be paid in property taxes each year. It is measured in dollars per $100 assessed value, so it is equivalent to a percentage. If a taxpayer owns property assessed at $100,000 after deductions, for example, and the property tax rate is $2 per $100 assessed value, the taxpayer owes $2,000 in property taxes (before credits). The tax rate is determined by dividing a government's property tax levy (the revenue to be collected) by the property tax base (net assessed value), and multiplying by 100. The tax rate usually changes every year for each local government. The rate that a taxpayer pays is the sum of the property tax rates in all the jurisdictions in which his or her property is located (the "tax district"), always including the county, township and school corporation, often including a city or town, library district or other special district.
Property Tax Replacement Credits
State property tax replacement credits (PTRC or SPTRC) were revenues paid by the state government to local governments to reduce property taxes. They were created in 1973 and first paid in 1974. In 1974, an increase in the state sales tax from 2 percent to 4 percent generated the state revenue to fund the PTRC. Since the early 1980s state funds in addition to the 2 percentage points of the sales tax have been used to meet the PTRC revenue requirement. Since tax restructuring in June 2002, PTRC has equaled the sum of two calculations. The state pays 20 percent of operating tax levies charged to real and individual personal property. Operating levies do not include debt service, cumulative funds, capital projects funds, or excess levies. The state also pays 60 percent of the school corporation general fund levy. Real property owners are eligible for both parts of PTRC. Personal property owners are eligible for only the school 60 percent. Tax restructuring increased the PTRC payments to offset the effects of the 2002-2003 reassessments on homeowners.
Real property is land and structures. The assessed value of real property composes the lion's share of the Indiana property tax base. Real property includes agricultural land and non-agricultural land, houses, commercial and factory buildings, and so forth. Real property is reassessed statewide on a fixed schedule. The most recent reassessment was in 2002, for taxes payable in 2003. In between statewide reassessments real property is reassessed when there is a change in land use or new construction. Starting with taxes payable in 2007, real property values are updated annually to account for inflation. Structures are often referred to as improvements.
The process of updating the assessed values of real property for property tax purposes, to account for changing sales prices or construction costs. In Indiana, reassessments are done periodically on a statewide basis. The most recent reassessments have taken place for taxes payable in 1980, 1990, 1996, and 2003. The 2003 reassessment changed the basis for Indiana assessment to market value.
The County Recorder is an elected position created by the Indiana Constitution. The recorder maintains public records which detail transactions in real estate, mining, personal property, mortgages, liens, leases, subdivision plats and personal bonds. These include all records regarding titles to real property (land and buildings), which constitute the legal basis for ownership.
Money that is appropriated in a budget for a fiscal year, but is not spent. In the state general fund, unspent money reverts to the general fund. There are reversions every year, because of the vagaries of spending and billing. During and after recessions, when revenues fall short, reversions often are part of the governor's strategy for holding down spending. The Governor may ask state agencies to spend a certain percentage less than their appropriations.
State Board of Accounts
The State Board of Accounts audits the financial statements of all governmental units within the state, including counties, cities, towns, school corporations, and state agencies. The Board evaluates government financial statements using professional auditing standards required of all independent audit organizations. The Board sometimes performs investigatory audits when fraud or noncompliance with statutes is suspected. Access the State Board of Accounts website at www.in.gov/sboa.
Tax District (or taxing district)
An area with a particular combination of county, township, school corporation and other local property tax rates. The tax rate that a taxpayer pays is the sum of the rates of the overlapping county, township, school corporation and (possibly) city or town, library district and special district tax rates. A tax district is an area with a particular combination of overlapping units.
Tax Restructuring (June 2002)
In June 2002, the General Assembly passed the most significant tax changes in Indiana in 20 years. Restructuring came about in part because of the revenue shortfalls caused by the recession and in part because of major property tax shifts expected from the 2002-03 reassessments. The sales tax was increased from 5 percent to 6 percent. Tobacco and riverboat gaming taxes were also raised. About two-thirds of the added revenue was paid out to local governments for property tax relief, in the form of additional property tax replacement credits. The remainder was added to the state budget. Restructuring also effectively converted Indiana to a market value assessment state, reformed the corporate income tax, and provided for elimination of the inventory tax.
Tax Review, Indiana Board of
The Indiana Board of Tax Review is the state body to which property owners may appeal their assessments. If property owners believe there has been an assessment error, they first appeal to local county or township assessors. The next step is to the county-wide Property Tax Assessment Board of Appeals (PTABOA). Then appeals are made to the Board of Tax Review. If further appeal is needed, the taxpayer may appeal to the Indiana Tax Court. More information on property tax appeals can be found at: www.in.gov/dlgf/2508.htm.
The county treasurer collects property taxes and receives revenues from taxes collected by the state, such as the local income taxes. The treasurer oversees parts of the tax sale process in the case of delinquent property taxes. The treasurer has investment responsibility for county funds.