Delaware County, Indiana

Property Tax Replacement Credit Property Tax Replacement Credits (PTRC) are a state program of tax relief. The percentage PTRC rate is subtracted from the gross tax. This would cost the local governments lost revenue, so the state pays local governments the PTRC amounts out of its budget. On this tax bill the PTRC rate is 29.3747%. Multiply this by the gross tax of $4,029.92, and the result is the replacement credit amount, $1,183.78. The taxpayer does not pay this amount. It is paid by the state to the local governments. PTRC was created during the Bowen Administration's tax reforms in 1973. Originally, the sales tax was increased from 2% to 4%, and the revenue pledged to the property tax replacement fund. Revenue from this fund was to be paid to all local governments to reduce their property taxes by 20%. By the early 1980s it was found that the sales tax revenue from the added 2 percentage points was not enough for the annual PTRC payments. Since then an additional appropriation is made by the state from its other revenues (like individual income and corporate income taxes). Also in the early 1980s, the kinds of property tax collections eligible for property tax replacement credits were limited. In particular, property taxes collected for debt service on bonds issued after 1984 were made ineligible for PTRC payments. Debt service payments are outside the property tax controls. The state was concerned that paying 20% of local unit debt service might encourage more borrowing and construction that was necessary. The tax restructuring of June 2002 greatly increased the complexity of the PTRC calculations. There are now two PTRC rates for each tax district, one that applies to real property and individual personal property, and another that applies to business depreciable equipment and inventories (until 2006 pay 2007). The rate applied to real property--including homes--is higher. For this tax district, the rate for real property is 29.3747%, and the rate for business personal property is 20.2592%. PTRC rates for all property had been lower before restructuring, averaging about 14% statewide. The added PTRC was another way that the General Assembly sought to protect homeowners from the effects of market value reassessment. Statewide, property tax relief payments approximately doubled from 2001 to 2004, becoming the second largest item in the state budget, after K-12 education. The state's budget is tight, so during the 2005 budget session the Governor and the General Assembly decided that growth in these payments had to be limited. The total payment amount was frozen at the 2005 level for 2006 and 2007. For tax bills, this means that the PTRC and homestead credit percentages will decline in 2006 and 2007. Property taxpayers will have to pay a larger share of the gross tax.