in-20261028-IR-045260393NRA: LETTER OF FINDINGS: 01-20251118

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251118 Individual Income Tax For The Year 2023 HOLDING Married couple met the burden of proving the Department's assessment was incorrect. ISSUE

I. Individual Income Tax – Residency.

Authority: IC 6-3-1-3.5; IC 6-3-1-12; IC 6-3-2-1; IC 6-3-2-2; IC 6-3-3-3; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 3.1-1-22; 45 IAC 3.1-1-22.5. Taxpayers protest the Department's assessment of additional individual income tax for 2023. STATEMENT OF FACTS Taxpayers lived in Missouri throughout the entire tax year 2023. Taxpayers filed a Missouri Department of Revenue 2023 Individual Income Tax Return as Married Filing Combined. Taxpayers also filed an IT-40 Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return ("IT-40 PNR"), which requested a refund of taxes withheld on their behalf. After review, the Indiana Department of Revenue ("Department") issued a Notice of Proposed Assessment for Indiana income tax. Taxpayers protested and an administrative hearing was held. This Letter of Finding results. Additional facts will be issued as necessary.

I. Individual Income Tax – Residency.

DISCUSSION Taxpayers lived in Missouri throughout 2023. Taxpayers filed a Missouri Department of Revenue 2023 Individual Income Tax Return as Married Filing Combined. Taxpayers also filed an IT-40 PNR due to Taxpayer A previously residing in Indiana for a portion of 2022. The Department reviewed the IT-40 PNR. Based on the information provided on Taxpayer A's W-2, it was determined that income tax was owed to Indiana. Therefore, the Department assessed individual income tax to Taxpayers. Taxpayers disagreed and protested the assessment. During the hearing, Taxpayers provided an explanation and additional documentation to support their position. 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 DOR'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 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(b). IC 6-3-1-3.5(a) provides the starting point in determining the taxpayer's taxable income and calculating what would be his/her Indiana income tax after applying any particular additions and subtractions. The statute provides in part that Indiana adjusted gross income starts with "'adjusted gross income' (as defined in Section 62 of the Internal Revenue Code) . . . " Id. IC 6-3-1-12 provides: IC 6-3-3-3(a) states: By extension, Indiana income is "[i]ncome received from Indiana sources," with the exception of "certain types of Indiana source income subject to tax only by the taxpayer's state of legal residence." Id.; see also IC 6-3-2-2(n). 45 IAC 3.1-1-22(a) defines "domicile" as the "state or other place in which a person intends to reside permanently or indefinitely and to return to whenever he or she leaves the place." Once a person is domiciled in Indiana, "that status is retained until such time as he or she voluntarily takes positive action to become domiciled in another state or country and abandons the Indiana domicile[.]" 45 IAC 3.1-1-22(b). In other words, a new domicile is not necessarily created when an individual moves to a place outside of Indiana. To establish a new domicile, the taxpayer must both "be physically present at a place" and demonstrate "simultaneous intent of establishing a permanent place of residence at that place." 45 IAC 3.1-1-22(c); see also State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988). In determining if a taxpayer has changed his or her domicile status, the Department must review factors such as continued occupation of a permanent place of residence or employment; however, these are rebuttable presumptions the taxpayer may overcome with contrary evidence. 45 IAC 3.1-1-22.5(c). The relevant regulation in determining domicile is 45 IAC 3.1-1-22.5. That regulation states: In this case, the Department issued an assessment for tax year 2023. Taxpayers owed income tax based on information reported on Taxpayer A's W-2. Taxpayer A initially resided and was domiciled in Indiana until April 2022. While domiciled in Indiana, Taxpayer's W-2 reported an Indiana address. Taxpayer A subsequently moved to and was permanently domiciled in Missouri beginning in April 2022. Although Taxpayer A moved to Missouri, his employer failed to update his W-2 with his new Missouri address. Therefore, the Department attributed all of Taxpayer's income to Indiana for tax year 2023. Taxpayer stated during the administrative hearing that he permanently moved to Missouri in April 2022, registered his vehicle in Missouri, and obtained a Missouri driver's license. Additionally, Taxpayer A provided a letter from his employer verifying that beginning in April 2022, Taxpayer A had a permanent Missouri address. Because Taxpayer A changed his domicile and employment to Missouri beginning in April 2022, Taxpayer A had no income subject to Indiana income tax year for tax year 2023. Thus, Taxpayer A has met the burden imposed under IC 6-8.1-5-1(c) of proving the proposed assessment wrong. FINDING Taxpayers' protest is sustained. August 13, 2026 Replaces Finding Document: New