IndianaSB 259Second Regular Session 124th General Assembly (2026)SenateWALLET

Partnership composite returns.

Sponsored By: Scott Baldwin (Republican)

Signed by Governor

Summary

Removes penalty provisions that apply if a pass through entity fails to include in a composite return nonresident partners, nonresident shareholders, or nonresident beneficiaries that do not have distributive share income of greater than $0. Makes conforming changes.

tax and fiscal policythe houseways and means

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Bill Overview

Analyzed Economic Effects

3 provisions identified: 1 benefits, 2 costs, 0 mixed.

Penalty relief for small partnerships

For returns due after December 31, 2024, qualifying partnerships get help avoiding penalties for late or incomplete Indiana IT-65 returns. The law presumes reasonable cause when all five conditions are met. The partnership has no more than 10 partners; a married couple filing jointly counts as one. Each partner is an individual other than a nonresident alien, or an individual's estate. Each partner's percentage share stays the same across every partnership item. The partnership has not elected federal consolidated audit proceedings, and all partners reported their shares on timely income tax returns.

Businesses face penalties for missing nonresidents

A pass-through entity faces a $500 penalty when its combined tax return leaves out a required nonresident. The penalty is per entity, not per omitted person. For trusts and estates, it covers omitted nonresident beneficiaries with more than $0 of Indiana-source distributable net income. No penalty applies for leaving out someone who was not required to be included. Inclusion is generally judged when the return is filed, except for fraud or intentional or reckless disregard of tax law.

Nonresident tax rules cover some nonprofits

Indiana's pass-through entity tax rules now count some tax-exempt nonprofit corporations as nonresidents. This covers 501(c)(3) corporations exempt under Section 501(a) whose legal home is outside Indiana. They must also own shares in a corporation covered by IC 6-3-2-2.8(2). This classification change does not specify a tax amount.

Sponsors & Cosponsors

Sponsor

  • Scott Baldwin

    Republican • Senate

Cosponsors

  • Craig Snow

    Republican • House

  • Lonnie Randolph

    Democratic • Senate

  • Travis Holdman

    Republican • Senate

Roll Call Votes

All Roll Calls

Yes: 137 • No: 0

House vote • 2/23/2026

Third reading: passed

Yes: 93 • No: 0

Senate vote • 1/26/2026

Third reading: passed

Yes: 44 • No: 0

Actions Timeline

  1. Signed by the Governor

    3/3/2026Senate
  2. Public Law 48

    3/3/2026Senate
  3. Signed by the President of the Senate

    2/26/2026Senate
  4. Signed by the Speaker

    2/25/2026House
  5. Signed by the President Pro Tempore

    2/24/2026Senate
  6. Returned to the Senate without amendments

    2/24/2026House
  7. Third reading: passed; Roll Call 311: yeas 93, nays 0

    2/23/2026House
  8. Second reading: ordered engrossed

    2/19/2026House
  9. Committee report: do pass, adopted

    2/17/2026House
  10. First reading: referred to Committee on Ways and Means

    1/28/2026House
  11. Referred to the House

    1/27/2026Senate
  12. Senator Holdman added as second author

    1/26/2026Senate
  13. Third reading: passed; Roll Call 83: yeas 44, nays 0

    1/26/2026Senate
  14. House sponsor: Representative Snow

    1/26/2026Senate
  15. Second reading: ordered engrossed

    1/22/2026Senate
  16. Committee report: amend do pass, adopted

    1/20/2026Senate
  17. Senator Randolph added as coauthor

    1/15/2026Senate
  18. First reading: referred to Committee on Tax and Fiscal Policy

    1/8/2026Senate
  19. Authored by Senator Baldwin

    1/8/2026Senate

Bill Text

  • Enrolled Senate Bill (S)

  • Introduced Senate Bill (S)

  • Senate Bill (H)

  • Senate Bill (S)

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