Indiana counties establish new lodging tax rates for rental income

House Bill 1427, introduced in the Indiana House on April 24, 2025, aims to modify the existing lodging tax framework within the state. The bill proposes a structured approach to impose a local lodging tax on various accommodations, including hotels, motels, and college dormitories, while outlining specific exemptions and tax rates for different counties.

The primary purpose of House Bill 1427 is to generate additional revenue for local governments by allowing counties to impose a lodging tax on gross retail income derived from lodging services. The bill specifies that the tax rate may vary by county, with a maximum of 5% for most counties, while Howard County can impose up to 8%, and Daviess County can charge up to 9%. Parke County is also allowed to maintain an 8% rate after June 30, 2023. Notably, the bill exempts certain transactions, such as student rentals in university residence halls and long-term rentals exceeding 30 days.

Debate surrounding the bill has focused on its potential economic impact on the hospitality industry, particularly in tourist-heavy regions. Supporters argue that the additional revenue could enhance local services and infrastructure, benefiting communities. However, opponents express concern that increased lodging taxes may deter tourism and place a financial burden on visitors and local businesses.

The implications of House Bill 1427 extend beyond immediate revenue generation. Experts suggest that the bill could influence local tourism dynamics, potentially affecting hotel occupancy rates and pricing strategies. As counties consider adopting the new tax, the outcomes may vary significantly based on local economic conditions and tourism trends.

In conclusion, House Bill 1427 represents a significant shift in Indiana's approach to local lodging taxes, with the potential to reshape the financial landscape for counties and the hospitality sector. As the bill progresses through the legislative process, stakeholders will be closely monitoring its developments and potential impacts on local economies.