in-20250326-IR-075250155RAA: $9,500.00

TITLE 75 SECRETARY OF STATE Regulatory Analysis LSA Document #25-155

I. Description of Rule

This document represents additional analysis and clarification to a previous rulemaking action. With the exception of section headers, content in bold is new to this document. The un-bolded sections were reviewed in a previous rulemaking action. With the advent of the Secretary of State’s office “Business One Stop” and “INBiz” initiatives (circa 2011) the agency was charged with developing and maintaining a state of the art, highly automated on-line business registration hub, which other state agencies could easily interface with (i.e. DOR, IDWD, IPLA), that provided 24-7 self-service access to millions of imaged and digital business records administered by the agency. The agency’s array of IT applications, which the public and other state agencies depend on, exists in a state of nearly constant revision and reinvention – to keep with the pace of IT evolution. The statutory framework for the agency’s Business Services Division calls for its IT infrastructure to be entirely transaction funded from “enhanced access” transaction fees. The fee structure (contentiously developed by previous administrations) appears to have struck a reasonable balance between low filing and transaction fees (Indiana ranks among the 10% lowest in the nation for low-cost business registration costs) and costs of hosting, sustaining and advancing the necessary IT infrastructure for the array of business services the agency is charged with providing. In keeping with HEA 1623’s directives and intent, the agency will be promulgating administrative rules for its Enhanced Access transaction fee-based Business Entity registration and service department. In general, and pursuant to the Indiana Business Organization Code (Title 23) the Secretary of State Business Services Division administers over 100 separate types of online corporate and business entity filings and 4 types of commercial bulk data file upload subscription services. In addition to collecting designated statutory filing fees, pursuant to IC 4-5-10-2 the agency collects fees for electronic, expedited, and enhanced public and commercial access to information maintained by the Secretary of State. “Enhanced Access” fees collected by the agency for online business organization filings range from $30 to $1 for 25 filing types. No “Enhanced Access: fee is collected for 78 filing types. The agency collects “Enhanced Access” fees for commercial bulk data file upload services ranging from $35 for a single monthly report upload of new business filings to $9,500 for a comprehensive, updated, annual data upload subscription. This document represents additional clarity of fees based on feedback from the Office of Management and Budget regarding a previous rulemaking action. These are not additional fees. This report describes with additional clarity the fees incurred for bulk data orders. Secretary of State Business Services Division “Enhanced Access” bulk data order filing fees:

II. Fiscal Impact Analysis

The anticipated effective date of the rule is July 1, 2025. These fees were created by IC 4-5-10 in 1997 and amended in 2011 and 2019 and have funded a continuous path towards data migration to new formats that interacted with improved computer programs resulting in our current INBiz system. The details of legislative statute and rules below, and the subsequent rules meet the new HEA-1623-2023 requirements. Our EA fees have not changed for the past 10 years. IC 4-5-10-5 Electronic and enhanced access fund The secretary of state may enter one (1) or more agreements in furtherance of the purposes of this chapter. Fees collected by the secretary of state under IC 23, IC 24, IC 26, or IC 33 may not be deposited into the fund. Interest that accrues from investment of money in the fund shall be deposited into the fund. As added by P.L.260-1997(ss), SEC.38. Amended by P.L.114-2011, SEC.2; P.L.177-2019, SEC.2. IC 4-5-10 “Technology Enhancement and Service Improvement” authorizing the Secretary of State to provide transaction fee supported enhanced online access infrastructure for public and commercial users, and multiple state agencies, was enacted in 1997 and amended in 2011 and 2019. Sources and uses of funds for the transaction fee based “Business One Stop/INBiz system are detailed in IC 5-5-10-3 “Electronic and Enhanced Access Fund. The agency has not changed the structure or amounts of enhanced access filing fees during the past 10 years. Indiana has received public commendation for being among the lowest corporate filing fee states in the nation. See: https://fox59.com/indiana-news/indiana-is-the-second-best-state-to-start-a-business-in-2024/ Enhanced Access Fund revenues for 103 types of corporation filings administered by the Business Services Division: FY20 $3,351,219 for 318,488 filings; FY21 $4,523,634 for 403,351 filings; for FY22 $4,508,907 for 390,258 filings; FY23 $5,079,211 for 445,706 filings; FY24 (8 months) $3,169,397 for 278,924 filings. From FY20 through February 2024 the average filing revenue for 1,836,724 filing transactions was $11.24. Bulk Data purchase revenue: FY20 $112,810.00 for 173 transactions; FY21 $174,240.00 for 178 transactions; FY22 $170,870.00 for 207 transactions; FY23 $198,810.00 for 205 transactions; FY24 $198,590.00 in revenue for 239 transactions. This revenue is contained in the figures above and was approved in the previous budget committee report and rulemaking action, but the bulk data fees and revenue were not specifically set out. Based on OMB feedback, this report includes bulk data fees specifically. Pursuant to IC 4-5-10-5 all corporate filing enhanced access filing fees are deposited into the agency Enhanced Access Fund (46070) and are dedicated to maintaining the IT infrastructure necessary for accepting, payment processing, permanent archiving, 24-7 public, self-serve accessibility, and multi-agency access to millions of business records entrusted to the agency. Enhanced Access Fund expenses for administration of the filing and IT system to support and develop the agency’s duties with respect to corporate records filing, archiving, and public access responsibilities: (estimated at 70% of the agency’s Business One Stop/INBiz program costs): FY20 $3,641,774; FY21 $2,990,038; FY22 $3,692,320; FY23 $4,390,940 FY24 (8 months) $3,343,783. This document represents additional clarity of fees based on feedback from the Office of Management and Budget regarding a previous rulemaking action. These are not additional fees but are contained within the revenue listed below. This report describes with additional clarity the fees incurred for bulk data orders. Same as above in a table format: Fiscal Year Bulk Data Revenues Number of transactions FY 20 $ 112,810.00 173 FY 21 $ 174,240.00 178 FY 22 $ 170,870.00 207 FY 23 $ 198,810.00 205 FY 24 $ 198,590.00 239 The rule changes do not change or increase fees as explained below but are added for clarity and per requirements of HEA-1623-2023

III. Impacted Parties

At the end of 2023 there were 658,059 active businesses registered with the Business Service division of the Secretary of State. Our division has completed and recorded almost a half million filings with 98+% of them flowing through the INBiz portal and completed by the BSD staff of 10 people including directors. Bulk data fees are only incurred by commercial entities or individuals engaged in mass solicitations to Indiana businesses. The group of bulk data customers in FY 2024 contained only 39 individuals or companies. BSD Statistics Page (658,059 Active registered businesses) Category as of 12-31-23 % completed online New business 98 % BER reports 99.48% Number of total filings 499,587 Since these rules are being promulgated in response to HEA-1623 all the above parties are currently in compliance so we will explain the impact of these fees based on the comparison of fees from other central states that are similar in geography and economic cost of living. We will look at the total cost of the three most frequent registrations LLC formation, Amendments, and annual entity reports. What is difficult to compare is the time required to complete these transactions and the ease of doing so, which reflects the time spent by the public needing to be compliant with statute. Our division and the SOS excel in superior service that is efficient, accessible and quick. Always being responsible for the costs of compliance and our ministerial duties for accurate records. This assures the public and various other business entities that rely on the accuracy of and integrity of our statutory duties.

IV. Changes in Proposed Rule

The provisions of the proposed rules are an entirely new section. They are the promulgation of Enhanced Access fees already permitted to be assessed by the Indiana Code. The following is a table of reasons for rejections, fees, and IC/IAC which sets forth the applicable law: Online Filing EA fee IC Authority Proposed IAC Purpose of proposed rule Monthly Listing of New Businesses $35 IC 23-0.5-1-5 75 IAC 8-3-18 Document existing enhanced access fee Bulk download with monthly updates $9,500 IC 23-0.5-1-5 75 IAC 8-3-19 Document existing enhanced access fee Bulk data monthly update $500 IC 23-0.5-1-5 75 IAC 8-3-20 Document existing enhanced access fee One-time bulk download $8,000 IC 23-0.5-1-5 75 IAC 8-3-21 Document existing enhanced access fee

V. Benefit Analysis

As referenced in Section I. the enhanced access legislation from 1997 (IC 4-5-10-2) set Indiana through the SOS office on a path to build a highly automated online business registration platform. “With the advent of the Secretary of State’s office “Business One Stop” and “INBiz” initiatives (circa 2011) the agency was charged with developing and maintaining a state of the art, highly automated on-line business registration hub, which other state agencies could easily interface with (i.e. DOR, IDWD, IPLA), that provided 24-7 self-service access to millions of imaged and digital business records administered by the agency.” Indiana businesses and new people forming businesses are enjoying the rewards of that currently with a 98% online adoption rate. Our division has built a system that delivers on its mandate and has found a good balance of fees to valuable services and required time spent to stay compliant. To date this year (2024) we have had over a million users of INBiz with an average engagement time of less than 4 minutes. People are getting their business completed with our office quickly and efficiently. Indiana was just selected as the number 2 best place to register a new business by Forbes magazine just a couple of points behind number one due to availability of investment capital. Our INBiz portal was a big part of that. https://www.forbes.com/advisor/business/best-states-to-start-a-business/ Overall, both current business, new business and business outside of Indiana can find not only an efficient way to interact with the Secretary of State but many other agencies of state government (DOR, DWD, IPLA, Attorney General, ISBDC and others) Most states listed in the comparison group do not have as high an uptake of online filings and therefore must operate with higher agency staff.

VI. Cost Analysis

Please note these fees may or may not have enhanced access fees included from other states as those are not broken out on many SOS sites. Many states also charge expediting fees which Indiana does not since we are able to process most items very quickly. Many other states charge larger fees for small changes like email and name changes where Indiana only charges a dollar just enough to prevent malicious filings meant to corrupt our records or promote fraudulent information. In an effort to make the best like for like comparison to other States, Bulk data fees are represented below categorized by one time purchase and annual subscriptions costs. Most bulk data transactions in Indiana fall into these two categories. Other States offer their data in differing frequencies based on their systems and what they can efficiently produce. Central State Comparison: State Bulk data one time Annual subscription Illinois $2,500 $ 200 per weekly update $12,900 one-time with weekly updates Indiana $ 35 monthly list of new $8,000 one-time all active $15,500 one-time with monthly updates Kentucky $1,500 one-time $ 500 per monthly update $ 5,100 one-time with monthly updates Michigan $6,000 – monthly only $ 72,000 Minnesota $2,400 - weekly only $124,800 Missouri $ 500 – monthly only $ 6,000 Ohio $1,050 $ 1,050 Wisconsin $ 250 - weekly only $ 13,000 Our revenues, compared to the cost (Section II) of overall efficient and quick services, provide superior interaction for constituents and allow our staff and supporting call center to interact with anyone not able to complete their transactions online to get their business complete. We are also able to maintain the infrastructure and staff to service paper filers. Interested parties and many types of commercial entities have access to millions of records, some dating back to the 18th century. Bulk data transactions are in practice exclusively purchased by commercial actors for market research, solicitation, or similar purposes. The general public enjoys unlimited free access to browse the business registry through INBiz, which is sufficient for everyday access needs.

VII. Sources of Information

Division Entity Records INBiz Google Analytics Various SOS websites Forbes.com/advisory

VIII. Regulatory Analysis

In summary our INBiz portal and our Business Service team have created tools and processes to meet the enhanced access legislation from 1997 IC 4-5-1-0-2 but continue to pursue updates, additional agency connectivity, and an overall better business ecosystem. Updates are needed as more constituents move to interact with us through mobile devices (approx. 14% this year) and technology evolves with artificial intelligence changing the interaction within the business marketplace. Fraudulent activity and cybercrime continue to grow threatening the integrity of our state records and funding is needed to build those protections to provide friction to bad actors and maintain the best process for our law-abiding public. Our analysis contained herein demonstrates the balance that has been created to achieve current realities and future goals. No new fees are proposed, and current fees have not changed in over 10 years. In keeping with HEA 1623’s directives and intent, the agency has promulgated administrative rules contained herein for its enhanced access transaction fees for business entities’ creation, maintenance, dissolutions and reinstatements.

IX. Contact Information of Staff to Answer Substantive Questions

Notice of First Public Comment Period with Proposed Rule: 20250326-IR-075250155FNA Notice of Determination Received: February 25, 2025