Ind. Quashes Bid to Ease Interstate Tax Bite on Banks

Indiana lawmakers have rejected a proposal that would have lowered taxes for Indiana-based banks that do business in other states.

Under current law, Indiana collects taxes from multistate banks and thrifts on income earned inside and outside the Hoosier State. For example, First Financial Corp. in Terre Haute pays Indiana taxes on its earnings at its two in-state banks and its three Illinois subsidiaries.

Bank trade groups have been lobbying to change the law since one of Indiana's largest and oldest bank companies moved its charter to Michigan in January. Evansville-based CNB Bancshares switched its charter because Michigan does not require its banks to pay state taxes on out-of-state subsidiaries. CNB expects that the move will save it $1.6 million per year.

The trade groups had been pushing to change the so law that banks would have to pay Indiana tax only on income earned in the state. The bill was passed by the state Senate but failed in the House last week in the final hours of the legislative session.

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