Use the current-year federal EITC for Indiana EITC eligibility in 2024 and 2025

changelog.d/fix-9644-in-eitc-eligibility-indexed.fixed.md

@@ -0,0 +1 @@
+Base Indiana EITC eligibility in tax years 2024 and 2025 on the current-year federal EITC instead of a recomputed credit with the frozen 2023 investment income limit and phaseout amounts, as IC 6-3.1-21-6(a) and (e) index those amounts to the taxable year.

policyengine_us/parameters/gov/states/in/tax/income/credits/earned_income/static_conformity_in_effect.yaml

@@ -1,4 +1,4 @@
-description: Indiana applies its static-conformity-to-Internal-Revenue-Code branch for the Earned Income Tax Credit if this indicator is true. The applicable snapshot is January 1, 2023 for tax years 2023-2025, and January 1, 2026 for tax years 2026 onward per Indiana SEA 243 of 2025.
+description: Indiana applies its static-conformity-to-Internal-Revenue-Code branch for the Earned Income Tax Credit if this indicator is true. The branch refers to Section 32 as in effect on January 1, 2023 (IC 6-3.1-21-6(a)), whose amounts are indexed to the taxable year.
 
 values:
   2010-01-01: false
@@ -13,7 +13,7 @@ metadata:
       href: https://iga.in.gov/laws/2024/ic/titles/6#6-3-1-11
     - title: IC 6-3.1-21 - Indiana Earned Income Tax Credit chapter
       href: https://iga.in.gov/laws/2024/ic/titles/6#6-3.1-21
-    - title: Indiana SEA 243 (2025) - Advances IRC conformity to January 1, 2026
-      href: https://iga.in.gov/legislative/2025/bills/senate/243
+    - title: Indiana SEA 243-2026, SECTION 6 - Moves the IC 6-3-1-11 conformity date to January 1, 2026 (does not amend IC 6-3.1-21)
+      href: https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=36
     - title: 2023 IT-40 Individual Income Tax Booklet (Indiana EITC discussion)
       href: https://forms.in.gov/Download.aspx?id=15792#page=9

policyengine_us/tests/policy/baseline/gov/states/in/tax/income/in_eitc.yaml

@@ -71,7 +71,7 @@
   output:
     in_eitc: 61.20
 
-- name: Indiana EITC TY 2026 uses the SEA 243 advanced January 1, 2026 IRC snapshot
+- name: Indiana EITC TY 2026 uses the current-year federal EITC
   period: 2026
   absolute_error_margin: 0.01
   input:
@@ -95,16 +95,16 @@
         members: [head, child]
         state_code: IN
   output:
-    # TY 2026 onwards Indiana SEA 243 (2025) advances the IRC reference to
-    # January 1, 2026. All filers take 10% of the current-year federal EITC
-    # per Schedule IN-EIC Section A; under SEA 243 the current and frozen
-    # (2026-01-01) computations coincide, so the credit is $442.70.
+    # SEA 243-2026 moves the IC 6-3-1-11 reference to January 1, 2026;
+    # IC 6-3.1-21-6(a) keeps its own January 1, 2023 date, whose section 32
+    # text indexes the amounts to the taxable year. All filers take 10% of
+    # the current-year federal EITC per Schedule IN-EIC Section A, so the
+    # credit is $442.70.
     in_eitc: 442.70
 
 - name: in_eitc childless 2026 uses the current-year federal EITC
-  # All filers use the current-year federal EITC (Schedule IN-EIC Section A);
-  # under SEA 243 the 2026 frozen-IRC snapshot equals the current federal
-  # childless EITC, so 10% x $612 = $61.20 either way.
+  # All filers use the current-year federal EITC (Schedule IN-EIC Section A),
+  # so 10% x $612 = $61.20.
   absolute_error_margin: 0.01
   period: 2026
   input:
@@ -116,3 +116,231 @@
       household: {members: [parent], state_fips: 18}
   output:
     in_eitc: 61.20
+
+- name: Indiana EITC TY2025 uses the 2025 investment income limit for eligibility
+  # IC 6-3.1-21-6(a) and (e): section 32 as in effect on January 1, 2023
+  # indexes its amounts to the taxable year (26 U.S.C. 32(j)(1)).
+  # Rev. Proc. 2024-40 sec. 2.06: TY2025 investment income limit $11,950;
+  # two children: maximum credit $7,152, phaseout threshold $23,350, rate 21.06%.
+  # Interest $11,500 is above the TY2023 limit ($11,000) but within $11,950.
+  # AGI = 20,000 + 11,500 = 31,500.
+  # Federal EITC = 7,152 - 21.06% x (31,500 - 23,350) = 7,152 - 1,716.39 = 5,435.61.
+  # Indiana EITC = 10% x 5,435.61 = 543.56.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 20_000
+        taxable_interest_income: 11_500
+      child1:
+        age: 5
+        is_tax_unit_dependent: true
+      child2:
+        age: 6
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, child1, child2]
+    spm_units:
+      spm_unit:
+        members: [head, child1, child2]
+    households:
+      household:
+        members: [head, child1, child2]
+        state_code: IN
+  output:
+    eitc: 5_435.61
+    in_eitc_eligible: true
+    in_eitc: 543.56
+
+- name: Indiana EITC TY2025 childless filer past the TY2023 completed phaseout
+  # Rev. Proc. 2024-40 sec. 2.06: TY2025 no children: maximum credit $649,
+  # phaseout threshold $10,620, rate 7.65% (completed phaseout $19,104).
+  # Wages $18,000 are past the TY2023 completed phaseout ($17,640).
+  # Federal EITC = 649 - 7.65% x (18,000 - 10,620) = 649 - 564.57 = 84.43.
+  # Indiana EITC = 10% x 84.43 = 8.44.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 18_000
+    tax_units:
+      tax_unit:
+        members: [head]
+    spm_units:
+      spm_unit:
+        members: [head]
+    households:
+      household:
+        members: [head]
+        state_code: IN
+  output:
+    eitc: 84.43
+    in_eitc_eligible: true
+    in_eitc: 8.44
+
+- name: Indiana EITC TY2024 uses the 2024 investment income limit for eligibility
+  # Rev. Proc. 2023-34 sec. 3.06: TY2024 investment income limit $11,600;
+  # two children: maximum credit $6,960, phaseout threshold $22,720, rate 21.06%.
+  # Interest $11,300 is above the TY2023 limit ($11,000) but within $11,600.
+  # AGI = 20,000 + 11,300 = 31,300.
+  # Federal EITC = 6,960 - 21.06% x (31,300 - 22,720) = 6,960 - 1,806.95 = 5,153.05.
+  # Indiana EITC = 10% x 5,153.05 = 515.31.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 20_000
+        taxable_interest_income: 11_300
+      child1:
+        age: 5
+        is_tax_unit_dependent: true
+      child2:
+        age: 6
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, child1, child2]
+    spm_units:
+      spm_unit:
+        members: [head, child1, child2]
+    households:
+      household:
+        members: [head, child1, child2]
+        state_code: IN
+  output:
+    eitc: 5_153.05
+    in_eitc_eligible: true
+    in_eitc: 515.31
+
+- name: Indiana EITC TY2024 childless filer past the TY2023 completed phaseout
+  # Rev. Proc. 2023-34 sec. 3.06: TY2024 no children: maximum credit $632,
+  # phaseout threshold $10,330, rate 7.65% (completed phaseout $18,591).
+  # Federal EITC = 632 - 7.65% x (18,000 - 10,330) = 632 - 586.76 = 45.24.
+  # Indiana EITC = 10% x 45.24 = 4.52.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 18_000
+    tax_units:
+      tax_unit:
+        members: [head]
+    spm_units:
+      spm_unit:
+        members: [head]
+    households:
+      household:
+        members: [head]
+        state_code: IN
+  output:
+    eitc: 45.24
+    in_eitc_eligible: true
+    in_eitc: 4.52
+
+- name: Indiana EITC TY2023 control, interest above the TY2023 limit
+  # Rev. Proc. 2022-38 sec. 3.06: TY2023 investment income limit $11,000.
+  # Interest $11,500 exceeds it, so no federal EITC and no Indiana EITC.
+  period: 2023
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 20_000
+        taxable_interest_income: 11_500
+      child1:
+        age: 5
+        is_tax_unit_dependent: true
+      child2:
+        age: 6
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, child1, child2]
+    spm_units:
+      spm_unit:
+        members: [head, child1, child2]
+    households:
+      household:
+        members: [head, child1, child2]
+        state_code: IN
+  output:
+    eitc: 0
+    in_eitc_eligible: false
+    in_eitc: 0
+
+- name: Indiana EITC TY2025 control, interest above the TY2025 limit
+  # Interest $11,951 exceeds the TY2025 limit of $11,950 (Rev. Proc. 2024-40
+  # sec. 2.06(2)), so no federal EITC and no Indiana EITC.
+  period: 2025
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 20_000
+        taxable_interest_income: 11_951
+      child1:
+        age: 5
+        is_tax_unit_dependent: true
+      child2:
+        age: 6
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, child1, child2]
+    spm_units:
+      spm_unit:
+        members: [head, child1, child2]
+    households:
+      household:
+        members: [head, child1, child2]
+        state_code: IN
+  output:
+    eitc: 0
+    in_eitc_eligible: false
+    in_eitc: 0
+
+- name: Indiana EITC TY2025 interest exactly at the TY2025 limit
+  # 26 U.S.C. 32(i)(1) denies the credit only if disqualified income "exceeds"
+  # the limit, $11,950 for TY2025 (Rev. Proc. 2024-40 sec. 2.06(2)).
+  # Two children: maximum credit $7,152, phaseout threshold $23,350
+  # (Rev. Proc. 2024-40 sec. 2.06(1)), phaseout rate 21.06% (32(b)(1)).
+  # AGI = 20,000 + 11,950 = 31,950.
+  # Federal EITC = 7,152 - 21.06% x (31,950 - 23,350) = 7,152 - 1,811.16 = 5,340.84.
+  # Indiana EITC = 10% x 5,340.84 = 534.08.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 20_000
+        taxable_interest_income: 11_950
+      child1:
+        age: 5
+        is_tax_unit_dependent: true
+      child2:
+        age: 6
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, child1, child2]
+    spm_units:
+      spm_unit:
+        members: [head, child1, child2]
+    households:
+      household:
+        members: [head, child1, child2]
+        state_code: IN
+  output:
+    eitc: 5_340.84
+    in_eitc_eligible: true
+    in_eitc: 534.08

policyengine_us/tests/policy/baseline/gov/states/in/tax/income/in_eitc_eligible.yaml

@@ -103,4 +103,8 @@
     would_file_taxes_voluntarily: true
     takes_up_eitc: true
   output:
-    in_eitc_eligible: true
+    # No federal EITC means no Indiana EITC: IC 6-3.1-21-6(a)(2) bases the
+    # credit on the federal credit "claimed for the taxable year", and the
+    # 2025 IT-40 booklet (Schedule 5, line 6) requires that the filer "be
+    # eligible for and have claimed an EIC on your federal tax return".
+    in_eitc_eligible: false

policyengine_us/variables/gov/states/in/tax/income/credits/earned_income_credit/in_eitc_eligible.py

@@ -1,8 +1,4 @@
 from policyengine_us.model_api import *
-from policyengine_us.tools.state_eitc_helpers import (
-    calculate_eitc_demographic_eligibility,
-    calculate_eitc_like_amount,
-)
 
 
 class in_eitc_eligible(Variable):
@@ -21,38 +17,23 @@ def formula(tax_unit, period, parameters):
         if not p.credits.earned_income.decoupled:
             return gets_federal_eitc
         if p.credits.earned_income.static_conformity_in_effect:
-            # IC 6-3-1-11 (Indiana's IRC definition for IC 6-3.1-21):
-            #   - TY 2023 through 2025: IRC as in effect on January 1, 2023.
-            #   - TY 2026 onward: IRC as in effect on January 1, 2026, per
-            #     Indiana SEA 243 (2025).
-            # The snapshot dates are statutory literals; policyengine-core
-            # parameters do not support date-valued types, so they appear
-            # here rather than in the parameter tree.
-            snapshot_date = "2026-01-01" if period.start.year >= 2026 else "2023-01-01"
-            frozen_eitc = parameters.gov.irs.credits.eitc(snapshot_date)
-            child_count = tax_unit("eitc_child_count", period)
-            demographic_eligible = calculate_eitc_demographic_eligibility(
-                tax_unit, period, frozen_eitc, child_count
-            )
-            filer_identification_eligible = tax_unit(
-                "filer_meets_eitc_identification_requirements", period
-            )
-            investment_income_eligible = (
-                tax_unit("eitc_relevant_investment_income", period)
-                <= frozen_eitc.phase_out.max_investment_income
-            )
-            frozen_federal_eitc = calculate_eitc_like_amount(
-                tax_unit,
-                period,
-                parameters,
-                child_count,
-                demographic_eligible,
-                filer_identification_eligible,
-                separate_filer_eligible=frozen_eitc.eligibility.separate_filer,
-                eitc_parameters=frozen_eitc,
-                investment_income_eligible=investment_income_eligible,
-            )
-            return frozen_federal_eitc > 0
+            # IC 6-3.1-21-6(a) allows the credit to an individual "eligible
+            # for an earned income tax credit under Section 32 of the
+            # Internal Revenue Code as in effect on January 1, 2023". That
+            # date is the chapter's own: SEA 243-2026 moves the general
+            # IC 6-3-1-11 date to January 1, 2026 but does not amend
+            # IC 6-3.1-21.
+            # Section 32 as in effect on that date indexes its earned income,
+            # phaseout and investment income amounts to the calendar year in
+            # which the taxable year begins (26 U.S.C. 32(j)(1)), and
+            # IC 6-3.1-21-6(e) applies the same cost of living adjustments.
+            # Section 32 has not been amended since, so eligibility under
+            # the conformity-date text is eligibility for the current-year
+            # federal credit, not for the credit with the snapshot date's
+            # dollar amounts. The IT-40 booklet (Schedule 5, line 6) also
+            # requires that the filer "be eligible for and have claimed an
+            # EIC on your federal tax return".
+            return gets_federal_eitc
         # if Indiana EITC is decoupled from federal EITC
         # ... check separate filing status
         filing_status = tax_unit("filing_status", period)

source_conflicts/candidates.yaml

@@ -2275,37 +2275,6 @@ candidates:
   state: unreviewed
   note: 'The statute-first rule requires changing the instructions-based scope if the federal-eligibility reading
     is verified; the 2026 statutory text remains unverified. Code not yet on main: gov/states/in/tax/income/deductions/in_claim_of_right_deduction.yaml.'
-- id: us-in:eitc-current-versus-frozen-federal-base
-  program: income-tax
-  years:
-    from: 2023
-    type: tax
-  question: Is Indiana's EITC based on the current federal credit transferred by Schedule IN-EIC or the credit under
-    its January 1, 2023 conformity date?
-  sources:
-  - kind: statute
-    citation: IC 6-3-1-11; IC 6-3.1-21
-    url: null
-  - kind: form
-    citation: 2025 Schedule IN-EIC (State Form 49469), Section A, Line A-1
-    url: null
-  readings:
-    statute: Use the frozen 2023 federal base.
-    other: Use the current-year federal EITC.
-  example: A 2025 childless filer aged 30 with $8,000 wages receives $60.00 under the frozen base versus $61.20
-    under the current base.
-  pe_us:
-    follows: conflicting-source
-    code:
-    - policyengine_us/variables/gov/states/in/tax/income/credits/earned_income_credit/in_eitc.py
-    - policyengine_us/variables/gov/states/in/tax/income/credits/earned_income_credit/in_eitc_eligible.py
-    prs:
-    - https://github.com/PolicyEngine/policyengine-us/pull/8902
-  state: unreviewed
-  note: 'PE-US follows Schedule IN-EIC: under static conformity in_eitc multiplies the current-year federal credit
-    by the match rate, and its comment argues the post-2023 federal changes are inflation indexing only (in_eitc.py).
-    in_eitc_eligible tests the frozen snapshot, January 1, 2023 through 2025 and January 1, 2026 from 2026. The
-    statute-first rule requires changing the amount base if frozen conformity is verified.'
 - id: us-in:liheap-income-floor-vs-smi-limit
   program: liheap
   years: