Legislature considers easing regulations for startups
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Indiana is routinely touted for its positive business climate. Forbes Advisor recently ranked Indiana as the second best state in the country to start a small business, and the Tax Foundation placed Indiana among the top 10 states in the U.S.—and first in the Midwest—for its business tax climate in its 2024 State Business Tax Climate Index.
But a recent study throws some cold water on the idea that Indiana is among the best places for all the needs of a company launch. The Indiana Chamber of Commerce’s Indiana Prosperity 2035 Report Card found that Indiana ranks 40th in venture capital disbursement and 44th in overall new entrepreneurs.
House Bill 1165, authored by Rep. Jake Teshka, a Republican from South Bend, aims to bridge the gap for new startups.
“Although we’ve got a great business climate, the proof is not there,” Teshka told IBJ. “The new startups are not there. We really want to encourage that because we know that most new jobs in this country come from firms that are young.”
The legislation would combine two concepts that Teshka proposed last year.
It would create a “regulatory sandbox program” within the Indiana Economic Development Corp. with the goal of removing red tape for startups and new businesses while also requiring the state to encourage, but not mandate, that at least 5% of contracts and workforce development funding be awarded to businesses that have been in operation for fewer than five years. It also eliminates the initial fee charged by the Secretary of State’s Office to register a new business.
Natalie Robinson, Indiana director for the National Federation of Independent Businesses, testified in support of the legislation, saying it would “offer a safe space” for businesses to test products and ease the regulatory burden on startup companies.
“Regulatory state agencies use sandboxes to keep up to date with fast-paced innovation and promote market competition without sacrificing consumer protection,” Robinson testified Tuesday before the House Government and Regulatory Reform Committee. “States focused on advancing innovation see sandboxes as a means, not an end. This program would allow agencies to embrace insights gained from a regulatory sandbox to improve rulemaking, supervision, and enforcement policies so that the entire market can benefit.”
Mark Shublak, a lobbyist speaking on behalf of the Indiana Economic Development Association, a trade group representing a wide range of professions, said the legislation will help retain college graduates and boost job creation.
“We want to do everything we can as a state to have rural and urban entrepreneurs,” Shublak said. “We want to keep those college students in Indiana.”
But some environmental groups are concerned that the legislation would undermine existing regulations designed to protect Hoosiers.
“The Hoosier Environmental Council is all about making sure that this state has, at a minimum, health, safety and environmental regulations that are uniformly applied and easy to understand, and we think this adds a layer of confusion to that whole regime,” said David Van Gilder, senior policy and legal director for the Indianapolis-based nonprofit.
The committee recently heard testimony on the bill and referred it to the House Ways and Means Committee due to its expected financial impact. Under the proposed legislation, the IEDC would need to hire additional staff members to create a new regulatory relief office, at an estimated cost of $500,000, according to a fiscal impact statement from the Legislative Services Agency.
If passed, Indiana would become the ninth state to institute a regulatory sandbox program, behind states such as Florida, North Carolina, Utah and West Virginia, Teshka said.