in-20250827-IR-045250426NRA: DEPARTMENT OF REVENUE

DEPARTMENT OF REVENUE Information Bulletin #123 Income Tax August 2025 Effective Date: Upon Publication SUBJECT: Physician Practice Ownership Tax Credit REFERENCES: IC 6-3.1-40 DISCLAIMER: Information bulletins are intended to provide nontechnical assistance to the general public. Every attempt is made to provide information that is consistent with the appropriate statutes, rules, and court decisions. Any information that is not consistent with the law, regulations, or court decisions is not binding on either the department or the taxpayer. Therefore, the information provided herein should serve only as a foundation for further investigation and study of the current law and procedures related to the subject matter covered herein. SUMMARY OF CHANGES Other than nonsubstantive technical changes, this bulletin is updated to reflect the expansion of the Physician Practice Ownership Tax Credit to physicians other than primary care physicians. In addition, this bulletin is updated to reflect the new application process for the credit as well as the new statutory cap for annual credits awarded. Finally, this bulletin is updated to reflect new minimum ownership requirements for a physician to qualify for the credit. INTRODUCTION In 2024, the Indiana General Assembly enacted IC 6-3.1-40, which created a new Physician Practice Ownership Tax Credit (the “credit”). When enacted, the credit was available only for a primary care physician who acquired an ownership interest in certain primary care practices that begin providing primary care services after December 31, 2023. In 2025, the credit was expanded to include practices other than primary care practices. In addition, the credit was amended to provide an annual credit cap and annual certification of the credits. Further, the credit was clarified to provide that physicians must meet minimum ownership requirements starting in 2025. For purposes of this bulletin, for tax year 2024 only, health care services and physicians refer only to primary care services and primary care physicians. In addition, any ownership and operation of a practice is limited solely to primary care physicians for purposes of the 2024 credit. DEFINITIONS FOR 2024 ONLY “Primary care services” means any of the following: A “primary care physician” means an individual: A “qualifying primary care practice” means an entity that meets all of the following: DEFINITIONS FOR 2025 AND LATER A “qualifying practice” means an entity that meets all of the following: A “physician” means an individual: COMPUTATION OF THE CREDIT For 2025, a physician who owns an interest in a qualifying practice is permitted a credit of $20,000 per year for three years beginning with the first taxable year in or after which the entity is established and also bills for health care services at least six months during the taxable year. For 2024, the credit is limited to physicians who meet the definition of primary care physician, who own an interest in a qualifying primary care practice, and who bill for primary care services for six months or more during 2024. The ownership interest in the practice will be determined at the end of the first year of qualification (for qualifying primary care practices in 2024) or the year of application (for other qualifying practices). Subsequent acquisitions and transfers of ownership will be disregarded for credit eligibility. In the case of a fiscal year qualifying practice, the physician’s eligibility for the credit will be determined as of the last day of the qualifying practice’s year. For example, if a qualifying practice has a taxable year of July 1, 2024, to June 30, 2025, the physician’s first year of the credit is 2025. In the case of a married couple filing jointly and both spouses are eligible for the credit, contact the department at the email address below if the amount to be claimed during the taxable year is greater than $20,000. In addition, if a physician passes away during the three-year credit period, the heirs of the physician are not eligible for the credit even if the heirs otherwise would meet the requirements to qualify for the credit. For credits first allowable in 2024, certain nominal interests owned by a primary care physician in a qualifying practice will be treated as if the physician did not own an interest in the practice. Ownership interests in which a primary care physician’s interest in the qualifying practice, including property owned by the qualifying practice, would be less than $60,000 upon liquidation and distribution of the qualifying practice, will be treated as not being an ownership interest. For 2025 and later, the credit will be allowable if the physician owns at least 5% of the income in the practice. In addition, if the practice has more than 10 physician owners, the minimum qualifying ownership is fifty percent divided by the number of physician owners. For instance, if a practice is owned by twelve physicians, a physician must own at least 4.167% (50% divided by 12) of the practice to qualify for the credit. APPLYING FOR THE CREDIT FOR 2025 AND LATER  Starting with the 2025 credit year, an entity whose owners qualify for the credit must apply for the credit. The entity must complete Form IN-PPOTC on behalf of the owners eligible for the credit and list the owners eligible for the credit. The Form IN-PPOTC must be completed no earlier than July 1 of the calendar year for which the credit is first sought and no later than June 30 of the calendar year following the calendar year for which the credit is first sought. The credit will be awarded in the order in which the credit is received. The credit is subject to a maximum grant of $10,000,000 per state fiscal year. If a credit is awarded to an owner, the amount granted to an owner will be $60,000. In the event that a credit application is received and the credit application would cause the credit to exceed the $10,000,000 cap, that application and all subsequent applications will be denied. REPORTING THE CREDIT  To report the credit, Code 880 must be used. The credit will be reported on Schedule IN-OCC, Part A. The PIN or Project Code will be the physician’s Indiana license number without any letters. For example, a physician with licenses 98765432A and 98765432B will use “98765432.” For credits first awarded in 2025 and later, the department will provide approval to the entity for each physician approved for the credit. ANNUAL CREDIT CLAIMS AND RECAPTURE The credit allowable to a taxpayer is limited to the taxpayer’s state adjusted gross income tax liability for a taxable year after application of other nonrefundable credits allowable prior to this credit. If a credit is not allowable for a taxable year due to the limitation of the taxpayer’s tax liability, the unused credit can be carried forward for up to 10 years after the first taxable year for which the credit was allowable and must be reduced as it is claimed. If any credit is carried forward, either to a future year or from a prior year, the credit must also be listed on Schedule IN-OCC, Part B. If a taxpayer claims a credit and within five years of the taxpayer’s qualification for a credit, the taxpayer: the department will assess the taxpayer an amount of any credits claimed by the taxpayer. If a taxpayer has a carryforward of any unused credit, the remaining unused credit will be disallowed. The department may request documentation from the taxpayer who claims the credit verifying the taxpayer’s qualifications for the credit. This documentation is not required to be provided with the filing of the taxpayer’s return and should not be provided with the filing of the return. Failure to provide the requested documentation will result in an initial denial of the credit. If you have any questions concerning this bulletin, contact the Tax Policy Division at taxpolicy@dor.in.gov.