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Committee considers tax deduction for victims of fraud; DOR outlines documentation and prior‑approval process
Summary
Senate Bill 213 would allow taxpayers to deduct stolen taxable income (for example, forced early retirement withdrawals diverted by fraud) beginning with tax year 2024. Department of Revenue witnesses described a prior‑approval application requiring documentation and said any recouped funds would be added back in later years.
Chair introduced Senate Bill 213 as a conformity measure to allow a state income tax deduction for certain theft or fraud losses similar to federal treatment, limited to Indiana‑sourced income and to the 2024 tax year forward. Matt Robinson of the Department of Revenue described three safeguards: taxpayers must apply and be approved by DOR before claiming the deduction; DOR would collect documentary evidence (bank statements, withdrawal records, police reports or other proof of fraudulent diversion); and the deduction could not exceed adjusted gross income and must be reversed should funds be recouped later.
Committee members asked how DOR would apportion out‑of‑state income and what documentation would suffice for small, everyday consumer frauds. Robinson said the deduction would be limited to Indiana income and that the department would work through an application and follow‑up requests for documentation. He acknowledged timelines and precise procedures would be developed administratively as the program is stood up.
The committee held further discussion and indicated additional drafting to clarify timelines for application and to ensure the department has sufficient authority and processes for audits and follow‑up.
