It absolutely does not hit party-members.
It can hit allied NPC:s, because sometimes they don't seem to be flagged properly.
You can almost always see if something is getting targeted by whether they get an outline or not. Things that are outlined will get hit by the effect, while things that are not outlined will not.
Honestly, the fact that Battle Stomp does not hit allies is probably part of the reason why it's so insanely powerful. If it did, it would be a lot harder to use.
I really wish that we could adjust the arcs of certain skills and things like grenades, and the range of certain AoE skills, especially since there's things that extend ranges, but I guess it wouldn't work with controllers, so we're SOL.