Indiana Property Tax Abatement: ERA, Benefits, and Compliance

An Indiana property tax abatement is a phased deduction, lasting up to ten years, that a city, town, or county can grant on the added assessed value from new construction, building improvements, or qualifying new equipment inside a locally designated Economic Revitalization Area. It is authorized by Indiana Code 6-1.1-12.1. The land and any existing structures keep generating full property tax throughout; only the new value gets the temporary break.

Getting one is a local process with a fixed sequence: the area has to be designated, a Statement of Benefits has to be approved before the work or the equipment purchase, and once the abatement is running, an annual compliance form keeps it alive.

What Qualifies

Real property abatements cover two kinds of work. Redevelopment means building a new structure on unimproved land or on a site cleared for that purpose. Rehabilitation means remodeling, repairing, expanding, or otherwise improving an existing building. The statute defines “property” as a building or structure, not land, so buying a lot and holding it produces no deduction.¹

Personal property abatements cover five categories of new equipment:

New manufacturing equipment used in production.
New farm equipment, capped at a five-year abatement rather than ten.
New research and development equipment.
New logistical distribution equipment used in warehousing and distribution.
New information technology equipment serving a productive business purpose.

The word “new” governs each category. Used or already-installed equipment does not qualify, and timing matters: the Statement of Benefits has to be filed before the equipment is installed.²

There is also a separate deduction for returning a vacant commercial or industrial building to use. The owner or a tenant has to actually occupy the building for commercial or industrial purposes, and the deduction is calculated on the assessed value of the occupied portion, multiplied by a percentage the designating body sets under the same schedule rules that apply to other ERA deductions.³

The Economic Revitalization Area Requirement

Nothing qualifies for an abatement until the local designating body, generally a city council, town council, or board of county commissioners, has formally declared the site an Economic Revitalization Area. Indiana law defines an ERA as an area that has become undesirable for normal development because of deterioration, age, obsolescence, substandard buildings, lack of growth, or similar conditions that have depressed property values or blocked normal use.¹

The definition is broader than blighted neighborhoods. It reaches areas where existing facilities are technologically or economically obsolete in a way that threatens local employment and tax revenue. Agricultural land can qualify if the designating body requires it to stay in predominantly agricultural use for a specified period.¹ The designating body has to make a formal finding that the area meets these criteria before any owner within it can claim a deduction.⁴

The order is not negotiable. Installing equipment or breaking ground before the ERA designation is in place leaves nothing to abate.

The Statement of Benefits

Every application runs through a Statement of Benefits form filed with the designating body. Real property projects use Form SB-1/Real Property (State Form 51767) from the Indiana Department of Local Government Finance.⁵ Personal property claims use a separate SB-1 form, and vacant building deductions use their own version.

Whatever the form, the designating body cannot approve the deduction without making affirmative findings on four points:

The projected investment amount is reasonable for the type of project or equipment.
The estimated number of employees to be hired or retained is a realistic result of the investment.
The estimated annual salaries for those positions are reasonable.
The overall benefits are sufficient to justify the deduction.²

The job and wage numbers on this form are not throwaway estimates. They become the benchmarks for every annual compliance review for the life of the abatement. Inflating them to help the application clear the vote sets up a compliance problem that can strip the deduction later.

Designation and Public Hearing

The designating body has to follow the procedures in IC 6-1.1-12.1-2.5, which in practice unfold in three steps:

A declaratory resolution, where the board states its intent to designate the ERA and grant the abatement.
A public hearing, advertised locally, where residents can comment.
A confirmatory resolution, adopted after the hearing, that finalizes the designation and sets the abatement terms.

Timelines vary by jurisdiction, but expect at least several weeks to move through the sessions. For equipment claims, the Statement of Benefits has to be on file before this hearing or before installation, whichever comes first.²

How Long and How Much

The designating body writes the abatement schedule and it must specify the deduction percentage for each year. Length cannot exceed ten years, with farm equipment capped at five.⁶ The statute does not fix a percentage curve; the board tailors each schedule based on:

Total dollar investment in real and personal property.
Number of new full-time equivalent jobs created.
How the average wage of new employees compares to the state minimum wage.
Infrastructure demands the project places on the community.

A common local pattern is a ten-year schedule starting at 100% of the new assessed value and stepping down by ten percentage points a year, but that is a policy choice, not a statutory requirement. The county auditor applies whatever percentages are in the approved schedule to the new assessed value when calculating each year’s bill.

Annual Compliance Filing

Approval is not the finish line. For every year the abatement runs, the owner has to file a Compliance with Statement of Benefits form (CF-1) with both the county auditor and the designating body.⁷

Which version depends on the deduction type. Real property filers use Form CF-1/Real Property, due before May 15. Personal property filers use Form CF-1/PP, due between January 1 and May 15 of each abatement year. Vacant building deduction holders use Form CF-1/VBD, also on the May 15 deadline.⁷ If the township or county assessor has granted a filing extension, the CF-1 is due by that extended date.

The form reports actual investment, current employment, and wages paid against the original projections. That comparison is how the designating body decides whether the community is getting what it agreed to.

What Happens If You Fall Short

A missed CF-1 filing, or a serious gap between promised jobs and wages and delivered jobs and wages, gives the designating body grounds to hold a hearing and reduce or terminate the deduction. Losing the abatement restores the full tax rate on the improved value immediately, and every remaining scheduled year of deduction is gone.

There is one safety valve. The designating body can pass a resolution waiving certain noncompliance, such as a missed filing, but only after holding a public hearing on the waiver. It is discretionary, and the board sets whatever conditions it chooses. Separately, if the deduction was obtained through false information, the statute provides for repayment of the improperly claimed amount.

Treating the CF-1 as a scheduled calendar item from the day the abatement is approved is the way businesses avoid this scenario.

How the Tax Caps Change the Math

Indiana’s constitutional property tax caps, often called circuit breaker credits, limit total property taxes to a fixed share of gross assessed value: 3% for commercial and industrial property, including personal property, and 2% for agricultural land.⁸

Caps apply separately from abatements, and the interplay matters. If the total bill on your property already falls under the cap without any abatement, the abatement saves real dollars. If the cap would have pulled your bill down to the same level on its own, the abatement’s practical value may be smaller than the paper percentage suggests. In taxing districts with high local rates, where the circuit breaker is already doing significant work, run the numbers both ways before assuming the abatement percentage translates directly into savings.

1
Indiana General Assembly. Indiana Code 6-1.1-12.1-1 – Definitions
2
Indiana General Assembly. Indiana Code 6-1.1-12.1-4.5 – Statement of Benefits, Findings by Designating Body
3
Indiana General Assembly. Indiana Code 6-1.1-12.1-4.8 – Property Owner Statement of Benefits, Vacant Building Deduction
4
Indiana General Assembly. Indiana Code 6-1.1-12.1-2 – Findings by Designating Body
5
Department of Local Government Finance. Department of Local Government Finance Forms
6
Indiana General Assembly. Indiana Code 6-1.1-12.1-17 – Abatement Schedules
7
Cornell Law Institute. Indiana Administrative Code 50 IAC 10-3-4 – Compliance with Statement of Benefits
8
Department of Local Government Finance. Fact Sheet – Circuit Breaker Caps