CLINTON COUNTY, Ind. (September 23, 2025) – The Clinton County Council received a preliminary fiscal impact study on its first of three days of budget hearings detailing the deep effects of state tax reform legislation, Senate Enrolled Act 1 (SEA 1, SB1), which is projected to shrink the county’s property tax base while reshaping local revenue streams over the next six years.
The analysis, presented by financial advisor Emma Adlam of Baker Tilly on September 9 showed that SB1 introduces significant changes across property taxes and local income taxes (LIT). These changes begin phasing in starting in 2026 and continue through 2031.
For the immediate 2026 budget year, the county is operating under a constraint imposed by SB1: the Maximum Levy Growth Quotient (MLGQ) is capped at 4%, down from an estimated 5.6% it would have been under the standard formula.
Property Tax Base Shrinkage
The new law introduces several automatic deductions expected to reduce the county’s net assessed value (NAV).
The current $48,000 Standard Deduction for homestead properties will be phased down starting in 2027 and will reach zero by 2031. Concurrently, the Supplemental Homestead Deduction will increase to 66.7% by 2031. These changes are projected to decrease the NAV of an average Indiana home from $120,446 (2025) to $80,158 (2031).
Non-homestead residential, agricultural, and long-term care properties (classified as “2% properties”) will receive automatic deductions, starting at 6% in 2026 and rising to 33.4% by 2031.
The de minimis exemption for Business Personal Property (BPP) will increase substantially from $80,000 to $2 million starting with the 2027 assessment. It is estimated that approximately 21% of the county’s current BPP Net Assessed Value may be eliminated under this new exemption. Furthermore, the 30% depreciation floor for new equipment placed in service after January 1, 2025, will be removed, allowing for greater depreciation (with exceptions for existing TIF areas).
The net result of these property tax changes is a shrinking tax base for the county.
Income Tax Structure Overhaul
SB1 also mandates an overhaul of local income tax distribution, significantly impacting property tax relief.
Clinton County currently dedicates a 0.50% Local Income Tax to Property Tax Relief Credit (PTRC). This credit is applied directly to the property owner’s gross tax bill, which has the secondary effect of lowering the Circuit Breaker losses allocated to local taxing units. Pursuant to SB1, this income tax expires following 2027.
The current complex LIT expenditure structure will be eliminated and replaced starting in 2028. Under the new structure, the County Council is given the authority to adopt up to 1.2% for general County Services. Baker Tilly’s illustrative estimates show that a 1.2% County Services LIT could generate approximately $10.6 million, which is higher than the county’s $9.6 million estimated total LIT distribution for 2026 under the current structure.
Fiscal Outlook
Despite the changes, long-term modeling conducted by Baker Tilly, extending projections through 2031, indicates that the county’s net levy is still expected to grow, albeit at a slower rate than if SB1 had not been enacted.
The Legislative Services Agency (LSA) model, which forecasts through 2028, also estimated that the county will see an increase in its net levy.
However, the immediate 2026 budget forecast indicates tight margins: the $320,985 in additional levy gained from the capped MLGQ, combined with a $119,333 increase in certified shares, is largely offset by a projected $300,000 reduction in interest income due to anticipated federal interest rate cuts. This leaves the county with a net gain of only $140,300 in additional general revenue for the 2026 budget.
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