2025 Indiana Legislative Update: New Laws to Take Effect July 1

The 2025 legislative session concluded following the adoption of the State’s biannual budget in the early morning hours of April 25, 2025. It was a session marked by significant policy shifts in the areas of government spending, property tax relief, education, health care, and juvenile law. More than 1,200 bills were introduced, with approximately 20% of them becoming laws. Below is a summary of some of the key bills from the 2025 legislative session, most of which will take effect July 1.

Fiscal Matters

The most significant bills from the 2025 legislative session include HEA 1001, which establishes the State’s budget for the next two years, and SEA 1 and HEA 1427, which address property tax relief. The State’s budget bill required significant 11^th hour work after revenue forecasts projected a $2 billion reduction in the amount of anticipated tax revenues over the two-year budget term. While the impacts of these far-reaching bills are still being evaluated, below is a summary of the key changes:

HEA 1001

• Fully funds school choice program and eliminates income caps, starting with the 2026-2027 school year.
• Increases the tax on cigarettes by $2.00 per pack (from $1.00 to $3.00).
• Reduces spending across most state agencies by 5%.
• Reduces funding for local public health agencies from $100 million per year to $40 million per year.
• Cuts funding for public television and public radio to the tune of approximately $7 million.
• Amends the process for appointment of the Indiana University Board of Trustees so that all Trustees are now appointed by the Governor.

SEA 1 and HEA 1427

• Caps real estate tax levies at the prior year’s level unless the local governing body approves an increase following a public hearing.
• Creates a new supplemental homestead credit of 10% of the property tax liability, up to a maximum of $300 beginning in 2026.
• Creates up to $250 in additional credits for disabled veterans and $150 for seniors on fixed incomes.
• Increases the business personal property tax exemption from $80,000 in 2025 to $2,000,000 starting with the 2026 assessment year.
• Removes the existing 30% depreciation floor for business personal property first placed in service after July 1, 2025.
• Requires that referendums and local public questions can only be placed on the ballot during general elections.
• Mandates that school districts must share operational revenue with charter schools, unless they are determined to be exempt from the revenue sharing requirements.

Of the foregoing changes, many observers believe that public schools will be the most significantly impacted. Nonpartisan estimates project a loss of approximately $744 million in public school funding from 2026 to 2028.

Anecdotally, some school districts are already looking at ways to absorb the shortfall. Following a recent failed referendum, Central Noble Community Schools notified stakeholders of a plan to reconfigure operations, including moving 5^th-grade students to the Jr/Sr high school building and moving all second-grade students at Wolf Lake Primary School to Central Noble Elementary. The Superintendent also proposed a new transportation plan that includes eliminating service to students within an expanded walk zone and introduced the possibility of transitioning to a four-day instructional week as a possible cost-saving measure.

Education

HEA 1002 was promoted as a deregulation effort intended to streamline Indiana’s education code. According to the bill’s author, Rep. Bob Behning, the goal was to remove directives and provide additional flexibility for schools and districts. Specific changes include allowing the Governor to appoint a Secretary of Education without regard to advanced degrees or education experience (as was previously required) and removing a requirement for high school students to take at least one semester of an ethnic studies course. In total, the bill eliminates or modifies over 60 different educational requirements and programs.

HEA 1348, authored by Rep. Tim Wesco, now recognizes diplomas from nonaccredited institutions and from homeschooling as meeting state requirements for completion of high school. The bill also prohibits state agencies and higher education institutions from rejecting students or treating them differently based solely on their having received a diploma from a nonaccredited school.

HEA 1041 requires state educational institutions and private post-secondary educational institutions that sponsor athletic programs to designate each team or sport as either (i) a male, men’s, or boy’s sport, (ii) a female, women’s or girl’s sport, or (iii) a coeducation or mixed team sport and prohibits students from participating on a team or sport that does not match the student’s biological sex at birth.

HEA 1064 removes language from the Indiana code that prohibits students from enrolling in certain schools primarily for athletic reasons.

HEA 1498 re-establishes a school accountability system that assigns schools a letter grade of A-F based on school performance. The bill requires the State Board of Education to develop the new framework for the A-F grading system by the end of 2025 and provides guidance on measuring school performance, including prioritizing students earning diploma seals.

SEA 146 increases base starting teacher pay by $5,000 to $45,000.00, beginning June 30, 2025. It also increases the percentage of each school corporation’s budget that must be allocated toward teacher salaries from 62% to 65%.

Health Care

HEA 1003 focuses on preventing Medicaid fraud, drug pricing regulation and billing transparency. The bill authorizes the Medicaid Fraud Control Unit to investigate provider fraud, to ensure that Medicaid funds are used properly. It also prohibits entities that participate in the 340B Drug Pricing Program from charging individuals more for prescription drugs than the acquisition cost, which could reduce expenses for certain low-income patients.

HEA 1004 aims to drive down healthcare costs for patients by setting pricing targets for five (5) of Indiana’s largest non-profit health systems. The list of impacted health systems includes Indiana University Health, Ascension, Franciscan Health, Parkview Health, and Community Health Network. The bill requires the Office of Management and Budget to determine Indiana’s national average hospital prices and requires the foregoing health systems to bring their prices in line with the statewide averages by 2029. If any hospital system fails to bring its prices in line with the statewide average, it risks facing a one-year revocation of its state nonprofit status.

Real Estate

The 2025 legislative session included a few changes to Indiana’s landlord-tenant law. Under HEA 1079, a warehouseman or storage facility may now sell a tenant’s personal property if the property remains unclaimed forty-five (45) days after the landlord delivers a notice to the tenant including an order from the court authorizing the removal of personal property and the identification and location of the warehouseman or storage facility (current law requires a warehouseman or storage facility to wait 90 days before the property may be sold). HEA 1115 allows a landlord to obtain an order for emergency possession of premises if the court finds, by a preponderance of evidence, that: 

• A tenant or the tenant's guest has committed a crime that affects the health and safety of another tenant, the landlord, or an agent of the landlord

or 

• A tenant provided materially false information to induce the landlord into leasing or giving possession of the rental unit to the tenant

HEA 1347 amends the list of items property owners are required to disclose as part of the seller’s residential disclosure form (State Form 46234) to include whether the property is located within a locally designated historic district and whether the property is subject to a conservation easement as

Development

Under HEA 1037, municipalities cannot enact or enforce a rule that is more stringent than the requirements of Indiana’s Construction Stormwater General Permit (“CSGP”). Although the CSGP contains comprehensive requirements for managing erosion, sedimentation, and runoff from construction activities, its provisions are generally limited to projects that involve land-disturbing activities greater than one (1) acre. Under HEA 1037, municipalities will generally not be permitted to impose the same requirements contained in the CSGP on sites under one (1) acre or impose requirements that are stricter than those contained in the CSGP, even if the site is greater than one (1) acre. The bill does allow municipalities to issue a stop work order to a person conducting a land-disturbing activity on a site that is less than one (1) acre if the person fails to control dust or sediment from leaving the site and the person has failed to correct the condition within forty-eight (48) hours following written notice from the municipality.

Employment

SEA 475 prohibits hospitals, hospital systems, affiliated managers of hospitals, and parent companies of hospitals from requiring physicians to enter into noncompete agreements after July 1, 2025. This bill still allows for nondisclosure agreements intended to protect confidential information and trade secrets. It also still allows agreements regarding non-solicitation of employees, as long as the restriction does not exceed one (1) year after the physician’s employment ends. SEA 475 does not affect noncompete agreements that were originally entered into before July 1, 2025.

Family Law

HEA 1605 was a bill aimed at achieving comprehensive reform of Indiana’s juvenile law. Among other things, the bill: 

• Requires the Office of the Secretary of the Family and Social Services to share certain information with the Indiana Department of Child Services (“DCS”) to allow DCS to respond more quickly to child abuse/neglect cases
• Adds new categories of drug exposure, including exposures to fentanyl-containing and fentanyl-related substances, as grounds for a CHINS determination
• Expands the list of individuals who can attend and participate in CHINS hearings to include an individual with whom the child is placed and a representative of a licensed child-placing agency
• Creates rebuttable presumptions that a child is in need of services if the court finds that the child’s parent is subject to an order requiring the parent to participate in drug rehabilitation or that the parent has exposed the child to certain types of drugs, including fentanyl and fentanyl-related substances
• Expedites the timeframe for initial termination of parental rights (“TPR”) hearings
• Requires DCS to perform criminal background checks on parents or household members and share the results with the court before reunification

Probate and Estate Planning Matters

HEA 1081 makes it easier for charitable organizations that have been designated as a beneficiary of an individual retirement account, retirement account, brokerage transfer on death account, annuity, or life insurance policy to obtain the funds without jumping through hoops. Under this bill, a financial institution or insurance company in control of the funds must transfer the funds directly to the charitable organization upon receipt of an affidavit that: 

• Certifies the charitable organization’s 501(c)(3) status
• Includes a copy of a corporate authorization authorizing the receipt of funds
• Includes a W-9
• Includes a copy of the deceased individual’s death certificate or other proof that the individual has died.

HEA 1088 adds to the list of actions a personal representative can take in an unsupervised administration without the approval of the court, the ability to distribute in kind all or part of the decedent’s interest in a retirement plan or account that the estate is a beneficiary of or has an interest into a distributee. HB 1088 also redefines the handling of certain non-probate transfers as “direct postmortem transfers.” Under this change, a direct postmortem transfer is a transfer of an asset to a testamentary trust if any of the following circumstances apply: 

• The asset transferred to the trust is a distribution of death proceeds under a life insurance policy or annuity
• The testamentary trust is a designated beneficiary of an individual retirement account, employee benefit plan governed by ERISA
• The transfer is a distribution from another trust, the result of a disclaimer, a transfer on death pursuant to IC 32-17-14, or a decanting distribution. 

In the cases of direct postmortem transfers, the transfer is considered effective upon the decedent’s death regardless of when the will is admitted to probate and does not constitute part of the decedent’s estate or subject to claims of the estate except in limited circumstances.

HB 1213 was a response to HB1034 from the 2024 legislative session. Under that law, the property and casualty insurance coverage on property transferred by a transfer on death instrument after December 31, 2024 was automatically extended to the beneficiary for a period of 60 days. Under HB 1213, the legislature clarified that commercial lines of property insurance do not transfer to the beneficiary. HB 1213 also excludes the casualty and liability coverage from carrying forward to the beneficiary.

Elections and Voting

SB 10 specifies that identification documents provided by educational institutions will not be accepted for proving eligibility to vote. High school and college-aged students will now be required to obtain a state-issued ID or driver’s license to be eligible to vote.

SB 287 requires candidates for school boards to declare their party affiliation or specify that they are not associated with any political party. While proponents of this bill argued that party affiliations will improve transparency by providing additional information about each candidate’s background and ideas, opponents argued that party affiliation is unrelated to decisions regarding how to best educate Indiana’s children.

Barrett McNagny LLP is a full-service law firm with a dedicated team that can help you navigate the impacts of any new laws on you or your business. If you have any questions about the 2025 legislative session and what these laws mean for you, please contact one of our professionals today.

About the Author:

Brandon J. Almas is a member of Barrett McNagny’s Real Estate and Economic Development team. He can be reached at bja@barrettlaw.com or 260-423-8819.