in-20260826-IR-045260284NRA: LETTER OF FINDINGS: 01-20241444

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241444 Individual Income Tax For the Years 2019-2020 HOLDING Illinois couple established that the Department’s assessment of additional income tax was incorrect. ISSUE

I. Individual Income Tax – Federal Discrepancy.

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; Indiana Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Dept. of State Revenue v. Rent-A- Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 15-5-1 Taxpayers protested the Department’s assessment of additional income tax. STATEMENT OF FACTS Taxpayers are a married couple filing jointly in Indiana. Taxpayers are residents of Illinois, so Taxpayers filed Form IT-40PNR Part-Year and Full Year Nonresident (“IT-40PNR”) returns to report income Taxpayers made while gambling at an Indiana casino during each of the tax years at issue. Taxpayers also filed federal returns for each of the tax years at issue. The Internal Revenue Service (“IRS”) adjusted Taxpayers’ returns, increasing Taxpayers’ federal adjusted gross income (“FAGI”) for each tax year, then notified the Indiana Department of Revenue (“DOR”) of its adjustments. The Department, in turn, adjusted Taxpayers’ Indiana returns to match the IRS’s reporting. Those adjustments resulted in DOR issuing a Notice of Proposed Assessment (“NOPA”) for additional income tax liability to Taxpayers. Taxpayers disagreed with the assessment and submitted a protest to that effect. This Letter of Findings is based on the information provided by Taxpayers, information available to the Department, and the tax laws of this state. Additional facts will be provided as necessary.

I. Individual Income Tax – Federal Discrepancy.

DISCUSSION Taxpayers protested the imposition of additional Indiana income tax for the tax years 2019 and 2020. The Department adjusted Taxpayers’ adjusted gross income (“AGI”) to match the FAGI on Taxpayers’ federal returns. The increase in Taxpayers’ AGI resulted in additional income tax being due. As a threshold issue, it is the taxpayer’s responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that the Department’s claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment, including a taxpayer’s penalty assessment, is therefore presumed valid. A taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. Additionally, “[W]hen [courts] examine a statute that an agency is ‘charged with enforcing . . . [courts] defer to the agency’s reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.’” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Indiana imposes a tax “upon the adjusted gross income of every resident person, and on that part of the adjusted gross income derived from sources within Indiana of every nonresident person.” IC 6-3-2-1(a). IC 6-3-2-2(a) outlines what is income derived from Indiana sources and subject to Indiana income tax. There is a presumption that a taxpayer files his/her federal income tax return as required by the Internal Revenue Code. Thus, to effectively compute what is considered a taxpayer’s Indiana income tax, Indiana law refers to the Internal Revenue Code. IC 6-3-1-3.5 provides a starting point in determining a taxpayer’s taxable income and calculating what would be his/her Indiana income tax after applying certain additions and subtractions, with any necessary modifications following. Modifications are outlined in IC 6-3-1-3.5(a). IC 6-8.1-5-1(b) mandates that “[i]f the department reasonably believes that a person has not reported the proper amount of tax due, the department shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available . . . . ” (Emphasis added); see also 45 IAC 15-5-1. Taxpayers provided copies of documentation in support of their protest, including Taxpayers’ IT-40PNRs, IRS record of accounts transcript, and W2-G’s received from the Indiana Casino. These, in addition to a review of information available to the DOR, establish a processing error occurred upon DOR’s receipt and review of the adjustments made by the IRS to Taxpayers’ FAGI. This processing error resulted in Taxpayers’ total income being incorrectly attributed to Indiana. Therefore, Taxpayers have met their burden under IC 6-8.1-5-1(c) establishing the Department’s assessment of additional income tax was incorrect to the extent that it attributed Taxpayers’ total income to Indiana sources. The Department will re-evaluate Taxpayers’ returns and issue a corrected NOPA, should one be necessary, to account for Taxpayers’ Indiana sourced income only. FINDING Taxpayers’ protest is sustained to the extent detailed above. June 5, 2026 Replaces Finding Document: New