A state tax credit buried in HB1406 could offset a significant portion of downtown renovation costs—but only if your project meets specific criteria.
Most Indiana retail owners don't realize that HB1406, a tax bill passed in 2024, contains a provision that could directly reduce their state tax liability if they're planning to renovate, rehabilitate, or historically preserve a building in a small-town downtown.
Here's what's actually in the law.
For-profit businesses that undertake redevelopment or rehabilitation projects in qualifying downtown areas receive a state tax credit equal to 20% of project costs. Nonprofit developers receive 30%. The credit is not a grant—it reduces state income or corporate tax owed, dollar for dollar.
This applies to real property projects: renovation, rehabilitation, or historic preservation work on buildings in downtown areas of cities or towns under 30,000 population, or counties under 75,000 population.
Credits are drawn from a dedicated $15 million annual allocation within the Indiana Economic Development Corporation's $300 million cap. Credits are not subject to repayment obligations, meaning once awarded and used, they don't need to be returned.
The annual allocation limit matters: demand may exceed availability in some years, so early application is prudent if your project qualifies.
The provision becomes effective July 1, 2026. There is no stated sunset date, meaning the program is not scheduled to expire—though future legislatures could modify or eliminate it.
If you own or operate a retail business in a small Indiana town and are considering renovation, expansion, or historic restoration of your storefront or building, this credit could materially reduce your project's net cost. A 20% tax credit on a $100,000 renovation, for example, reduces your tax liability by $20,000.
The qualification hinges on location: your downtown must be in a municipality under 30,000 people or a county under 75,000. Most of rural and small-town Indiana qualifies; larger metropolitan areas do not.
If you're planning a project, document your timeline and costs. When the provision takes effect on July 1, 2026, contact the Indiana Economic Development Corporation or your local economic development office to understand the application process, any additional eligibility criteria, and how to claim the credit.
The law itself is found in HB1406, Section 15, IC 6-3.1-34-24(i), Page 23.
This is a legitimate state incentive designed to encourage downtown investment in small towns. It's worth understanding if your business is in a qualifying area and you're considering capital improvements.
For a detailed, business-specific guide to HB1406's provisions affecting retail, contact your local chamber of commerce or economic development authority.