A new Indiana law adds a compliance requirement to tax credit applications—and the penalty for getting it wrong is steep.
Most Indiana retailers don't realize that a provision buried in HB1406, the state's recent tax and fiscal bill, creates a new compliance obligation for anyone applying for Indiana Economic Development Corporation (IEDC) tax credits. The rule is straightforward, but the stakes are real.
Starting July 1, 2026, any business applying for an IEDC tax credit must sign an affirmation under penalty of perjury stating that the business is not owned or controlled by a foreign adversary entity. This applies to all IEDC credit applications going forward.
The language comes from Section 3 of HB1406, which amends Indiana Code Section 5-28-6-9.5(b). The provision is brief but consequential: applicants must certify their status, and the state will rely on that certification.
The compliance requirement itself is simple. The penalty structure is not.
If an applicant makes a false affirmation—either knowingly or through inadequate due diligence—the consequences are automatic and severe: full revocation of the tax credit and repayment of all benefits already received. There is no graduated penalty, no cure period, and no discretion built into the statute. A false certification triggers a complete clawback.
For a retailer who has received credits over multiple years, this could mean returning tens of thousands of dollars, plus the loss of ongoing tax benefits.
This rule applies to any retail business—from single-location shops to multi-unit operators—that has applied for or currently receives IEDC tax credits. It also applies to any retail business planning to apply after July 1, 2026.
If your business has received credits in the past, you are not retroactively subject to this requirement. The rule takes effect on July 1, 2026, and applies to new applications and renewals filed on or after that date.
If you currently receive IEDC tax credits or are considering applying, begin documenting your ownership structure now. Understand who owns your business, who controls it, and whether any foreign adversary entities have any stake in it—direct or indirect.
The term "foreign adversary entity" is not defined in the statute itself, so clarification from the IEDC or the Indiana Department of Revenue may be necessary as the July 1, 2026 effective date approaches. It is worth monitoring state agency guidance as the deadline nears.
If your business has complex ownership—including investors, partners, or corporate parents—consult with your accountant or attorney before signing any affirmation. The penalty of perjury language is not decorative; it creates both civil and potential criminal exposure for false statements.
HB1406's foreign adversary provision is a straightforward rule with a sharp penalty. It does not prevent any business from applying for credits—it simply requires honest disclosure. But the all-or-nothing clawback structure means getting the affirmation right matters.
For a detailed, business-specific guide to this provision and other IEDC credit requirements, contact your state trade association or local economic development office.