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Tax refund checks could include thousands of additional Hoosiers

State officials said the new round of refunds could cost somewhere around $3.4 million to process and around $800,000 to send out.

INDIANAPOLIS — It's not that Steve Madden is against sending another round of tax refund checks to Hoosiers ... the director of tax policy for Indiana’s Department of Revenue told lawmakers he just wants them to know it will take more time and more money.

And they'll need help to do it.

House Bill 1001 includes a $225 automatic tax refund to Hoosiers to provide inflationary relief. The money would come from the state's $6.1 billion surplus.

Madden said the new round of refunds could cost somewhere around $3.4 million to process and around $800,000 to send out.

He said about half of qualifying Hoosiers still haven't gotten the first tax refund check, in part due to supply chain issues.

RELATED: Indiana lawmakers consider inflation relief for Hoosiers from state's surplus

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Those first checks, going to people without direct deposit, will start going out in about two weeks.

The second refund check lawmakers are considering would be available to even more people, including those who did not file a tax return last year. Scott Johnston, director of Indiana's Office of Management and Budget, said that's an estimated 300,000 to 800,000 additional Hoosiers, many of whom are retirees.

Those who didn't file a tax return would have to file an affidavit to prove residency. The Department of Revenue would then validate each one.

The inflationary relief bill in the House would also eliminate the sales tax on children's diapers, add an additional tax exemption for an adopted child, and include $30 million in additional Medicaid assistance.  

"The Department of Revenue is thinking of ways it may be able to automate this part of the validation process by working with sister agencies, such as the BMV and FSSA," said Johnston, who added they are also considering the cost of hiring an outside company to verify applicant identities.

If an applicant's affidavit is denied, they would have the right to appeal. Johnston said if just 1% of applicants appeal, that could be around 5,000 cases.

"To put that in context, [the department of revenue] legal division completes 500 to 1,000 tax protest cases in a normal year. So, this would increase the legal caseload five to tenfold," Johnston said.

Madden and Johnston said they wanted lawmakers to be aware of the challenges and be thinking of ways to address them.

Representative Ed Delaney, a Democrat from Indianapolis, asked if repeated tax refunds were a "device to avoid investing in programs."

"Is that what we’re doing here?" Delaney asked. "We’re choosing between dribbling out money and making long-term investments in our schools and the possibility of things like passenger rail or lower tuition? Is that the choice we’re making – we’ll dribble it out rather than have an investment strategy?"

“We are making investments," House Speaker Todd Huston told 13News. “We are making investments in infrastructure, investing in education. These (proposed refund checks) are extra dollars. We want to return it to Hoosiers. It’s their money, we want to put it back into their hands.” 

“I support the refund but want to move onto real planned investments in universities, passenger rail, public health and local roads. We have the resources. As the CEO of Lilly suggested, we are falling behind in attracting people and businesses,” DeLaney concluded.  

Senate Bill 3 passes out of committee

The Senate's version of the inflationary relief bill, Senate Bill 3, passed out of committee Tuesday and is moving to the full Senate for debate. 

SB3 does not include a tax refund. Instead, it includes a sales tax cut on electricity, water, gas and phone bills.

"Leaders in Washington D.C. do not seem to understand the real life effects of inflation, but here in Indiana we understand this and are exploring ways to provide relief to Hoosiers with our policies," said State Sen. Travis Holdman, R-District 19, who authored the bill.

Amendment update

Senators voted down an amendment from democrats to spend $1 billion of budget surplus money to support K-12 public education.

“Our schools are struggling with filling almost 4,000 vacant teacher positions,” said Sen. Fady Qaddoura, a Democrat who represents northern Marion County and southern Hamilton County. If we wait until the end of the regular session to pass that legislation, that means the school year will be over. By introducing that one billion dollars before the beginning of the school year, we would be able to empower schools across the state to fill these vacancies so that Hoosier students can receive a quality education without disruptions in the classroom.”

Faddoura said he was disappointed the amendment didn’t pass.

“We were called into a special session to respond to crises,” he said. “And with $6.1 billion dollars in surplus, I call this reluctant leadership.”

Faddoura said Democrats would introduce another amendment Thursday on the Senate floor to send larger tax relief checks to Hoosiers.

“Our proposal sends $800 checks to joint filers and $400 for single filers who make up to $250,000,” he said, adding non tax filers, including retirees, would also be eligible.

By Thursday, House lawmakers had filed 63 amendments to be considered as part of House Bill 1001.

Representatives will reconvene on the House floor late Thursday afternoon to hear motions to consider the proposed changes.

The bill would provide a $225 automatic tax refund check to Hoosiers and eliminate the 7% sales tax on children’s diapers.

One amendment to the bill would also include an additional $75 automatic taxpayer refund for active and retired military members and people over 65 years old. Another would allow teachers to claim a tax credit of up to $300 for classroom supplies. Other amendments would direct money to passenger rail and public health programs.

The funding is coming from Indiana’s $6.1 billion budget surplus.

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