Indiana tax code allows for an enterprise zone tax deduction for qualified employees who live and work in an enterprise zone designated by the State of Indiana. A section of Terre Haute surrounding the downtown area has been designated by the State of Indiana as an enterprise zone area and its boundaries include Indiana State University. This means that some Indiana State University employees will be eligible for an additional deduction when filing individual tax returns. This following questions and answers are designed to assist employees with the enterprise zone tax deduction.

What is an enterprise zone?

An enterprise zone is an area within a city where there is a significant amount of unemployment, and several business facilities that are not being used to their maximum. An enterprise zone created is in effect for ten years with the potential for two five year renewals. There are currently 29 areas that have been designated as enterprise zones.

What are the boundaries of the Terre Haute enterprise zone?

The State of Indiana has provided a map and street address directory to help employers and employees to locate the boundaries of the enterprise zone. To view the Terre Haute enterprise map click here. To view a street address directory click here.

How do I qualify for the enterprise zone tax deduction?

Indiana Code I.C. 6-3-2-8 defines a "qualified employee" as an individual who:

1. Has a principal place of residency in the enterprise zone where employed.

2. Performs services for the employer 90% of which are directly related to the conduct of the employer's trade or business located in an enterprise zone.

3. Performs services for the employer at least 50% of the time during the taxable year within a state enterprise zone; and

4. Is employed by a business that remains eligible to receive benefits and incentives as provided by enterprise zone legislation.

How much of my income am I entitled to deduct?

Employees who qualify for this deduction may be entitled to deduct from state adjusted gross income one-half (1/2) of the enterprise zone income earned or $7,500, whichever is less.

Is the 2005 tax year the first year I have been entitled to take the deduction?

The 2002 tax year was the first year the State of Indiana has allowed governmental agencies and not-for-profit organizations to be considered "eligible employers" for purposes of this deduction. This means that Indiana State University employees were first eligible for this deduction for the 2002 tax year.

Do student employees qualify for the enterprise zone deduction?

According to the Indiana Department of Revenue, student employees may qualify for the deduction if they live off campus within the enterprise zone and at least 50% of the work they performed during the year was with Indiana State University. The Indiana Department of Revenue has stated that students who live in student housing on campus do not qualify because the temporary nature of the housing does not constitute a "principal place of residency".

What should I do if I determine that I qualify for the enterprise zone tax deduction?

If you determine that you qualify for the enterprise zone tax deduction, you must attach State Form IT-40QEC to your state individual income tax return to support any claimed deduction of earned enterprise zone income. ISU employees must request State Form IT-40QEC from the Payroll Office by completing the Enterprise Zone Deduction Certificate Request Form. The Enterprise Zone Deduction Certificate Request Form requires that employees certify their residency in the enterprise zone each year. Once the form is received in Payroll, the Payroll Office will then make the earnings determination, certify the form, and mail the form to qualifying employees.

How long will it take to get my IT-40QEC certified by the Payroll Office?

The certification process is based on W-2 earnings. Therefore, IT-40QECs will be sent out within a week following the W-2 mailing. Employees who request Form IT-40QEC after the W-2 statements have been mailed should receive the Payroll certification within a few days.