in-20251126-IR-045250656NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE MEMORANDUM OF DECISION: 01-20251174 Individual Income Tax For The Year 2023 HOLDING Married couple sufficiently supported their claim that the Department incorrectly adjusted their Indiana tax return for the year 2023. ISSUE

I. Individual Income Tax – Residency.

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); 45 IAC 3.1-1-22; 45 IAC 3.1-1-22.5; Income Tax Information Bulletin 28 (November 2023). Taxpayers argue the Department erred in adjusting their Indiana income tax return and refund amount. STATEMENT OF FACTS Taxpayers are a married couple filing jointly. Taxpayers were Indiana residents and moved to Florida in 2022. For tax year 2023, Taxpayers filed their Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“IT-40PNR”). Their return showed they had no Indiana sourced income and requested a refund. After review, the Indiana Department of Revenue (“Department”) adjusted Taxpayers’ return and allocated Taxpayers’ income to Indiana. This adjustment reduced Taxpayers’ requested refund. Taxpayers protested the adjustment and requested a resolution without a hearing. This Memorandum of Decision results. Additional facts will be provided as necessary.

I. Individual Income Tax – Residency.

DISCUSSION The Department adjusted Taxpayers’ IT-40PNR and reduced Taxpayers requested refund. Taxpayers disagreed and protested the adjustments. During the protest review, Taxpayers provided an explanation and additional documentation. 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 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. 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. IC 6-3-1-3.5(a) provides the starting point in determining the taxpayer’s taxable income and calculating what would be their 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. The Form IT-40PNR is required for all “[f]ull-year nonresidents who received income from Indiana sources[.]” Income Tax Information Bulletin 28 (November 2023), 20231129-IR-045230758NRA. The tax due from nonresidents is calculated as “that part of [taxpayer’s] total federal income that is derived from or connected with Indiana sources.” Id. By extension, Indiana income is “[i]ncome received from Indiana sources[.]” Id.; see also IC 6-3-2-2(n). Income Tax Information Bulletin 28 addresses the taxability of Indiana source income to nonresidents and the application of the federal exemption as follows: 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 weigh countervailing evidence 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 Department may request proof from taxpayers and assess their domicile. 45 IAC 3.1-1-22.5. The relevant regulation in determining domicile is 45 IAC 3.1-1-22.5. That regulation states: In the present case, Taxpayers moved from Indiana to Florida for retirement in 2022. Taxpayers have lived exclusively in Florida since then. Taxpayers have stated that they had no intention of returning to permanently live within Indiana. Husband’s Employer, a Kentucky entity, collected Indiana withholding tax on a non-qualified deferred compensation payout in 2023. Taxpayers submitted Form IT-40PNR detailing that neither of their wages were attributable to Indiana and that they lacked Indiana income. Consequently, Taxpayers requested a refund of Indiana withholding taxes collected by Husband’s Employer. Taxpayers explained that since they moved to Florida in late 2022 and have lived there since, they are not subject to Indiana income tax. After reviewing the documentation provided by Taxpayers, the Department agrees that Taxpayers were Florida residents beginning in 2022 and remained such during tax year 2023. Taxpayers provided a copy of Husband’s Florida driver’s license amongst other documentation that supports Taxpayers’ intent to abandon their Indiana domicile and establish a residence in Florida. Taxpayers’ conduct established a new domicile in Florida. Thus, the income from the deferred compensation payout is not subject to Indiana tax. Taxpayers have met their burden under IC 6-8.1-5-1. The Department will review Taxpayers’ IT-40PNR and issue any refund still owed. FINDING Taxpayers’ protest is sustained. June 26, 2025 Replaces Finding Document: New