in-20251126-IR-045250650NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241221 Individual Income Tax For the 2022 Tax Year HOLDING Married couple failed to establish that they were entitled to a refund. ISSUE

I. Individual Income Tax – Burden of Proof.

Authority: I.R.C. § 62; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-3-1; IC 6-8.1-5-1; IC 6-8.1-5-4; IC 6-8.1-6-4; Stinson Estate v. United States, 214 F.3d 846 (7th Cir. 2000); 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); Tell City Boatworks, Inc. v. Indiana Dep’t of State Revenue, 162 N.E.3d 603 (Ind. Tax Ct. 2020); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007). Taxpayers protest the Department’s assessment of additional Indiana income tax. STATEMENT OF FACTS Taxpayers are a married couple who live outside of Indiana. Taxpayers timely filed a nonresident income tax return for the 2022 tax year with the Indiana Department of Revenue (“Department”) on which they claimed a refund. The Department denied their refund request and issued a proposed assessment for additional tax. Taxpayers timely protested, and this Letter of Findings results. Since Taxpayers waived their right to a hearing, this Letter of Findings relies on the Department’s records and documents that Taxpayer submitted.

I. Individual Income Tax – Burden of Proof.

DISCUSSION Taxpayers argue that they neither lived nor worked in Indiana in 2022, so they should not owe Indiana income taxes on Husband’s wage income. The Department denied their refund request and issued an assessment for two reasons: first, because Taxpayers self-reported Indiana income on their 2022 income tax return; second, because taxpayers claimed a credit for taxes withheld and paid to Indiana that Husband’s employer never paid to the state. 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) and Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Where a taxpayer is challenging the Department’s final determination, the taxpayer is required to provide documentation explaining and supporting its challenge. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). Additionally, “when [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.’” Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision are entitled to deference. Indiana imposes a tax on “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. The starting point for determining Indiana income tax is the taxpayer’s federal adjusted gross income as defined in I.R.C. § 62, which taxpayers are directed to enter on their Indiana return before making modifications that are outlined in IC 6-3-1-3.5. IC 6-8.1-5-4(a) requires that “[e]very person subject to a listed tax must keep books and records so that the [D]epartment can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records. The records [] include all source documents necessary to determine the tax, including invoices, register tapes, receipts, and canceled checks.” The person also “must allow inspection of the books and records and returns by the [D]epartment or its authorized agents at all reasonable times.” IC 6-8.1-5-4(c). Individuals may claim tax credits for taxes withheld from income and paid to the Department. IC 6-3-3-1. Like deductions, exemptions, and exclusions, tax credits are matters of legislative grace. Stinson Estate v. United States, 214 F.3d 846, 848 (7th Cir. 2000). Tax credits are narrowly construed, and the burden rests with the taxpayer to demonstrate that it qualifies for any claimed credits. Id.; Tell City Boatworks, Inc. v. Indiana Dep’t of State Revenue, 162 N.E.3d 603, 626 (Ind. Tax Ct. 2020). Taxpayers argue that they have never lived in Indiana, and they argue that neither of them worked in Indiana in 2022. Therefore, Taxpayers argue, they should not be subject to Indiana income tax on any of their income. Taxpayers provided their 2022 resident tax return from their state of residence, W-2 forms for both Husband and Wife, and driver’s licenses from their state of residence to support their claim. However, the documents that Taxpayers provided not only do not support this assertion, but the documents suggest the opposite. Taxpayers filed a tax return with the Department for the 2022 tax year. Taxpayers did not authorize a preparer to file their return with the Department; they filed their return themselves. On their Indiana return, Taxpayers claimed that they had $97,494 dollars of Indiana income. In other words, the Department claimed that Taxpayers had Indiana-source income for 2022 because Taxpayers told the Department that they did. Further, Taxpayers’ return as filed in their home state claimed a credit for income taxes paid to Indiana on the same $97,494 of income. Taxpayers have claimed that $97,494 of Husband’s income was earned in Indiana to two different state departments of revenue, and only now that Indiana has demanded that Taxpayers pay tax on that income have Taxpayers changed their stance. The Department therefore cannot agree at this time that Taxpayers have no Indiana-source income. Taxpayers also protest the Department’s denial of credit for state income tax that they believe Husband’s employer withheld and paid to the Department. Taxpayers provided Husband’s W-2 to support this position. However, Husband’s W-2 and the Department’s records agree that Husband’s employer withheld and paid state tax only to Taxpayers’ home state. Husband’s employer did, however, withhold and remit local income tax to the Department on behalf of an Indiana county. The Department does not contest that Taxpayers are entitled to a credit for the local income tax withholding. In short, Taxpayers reported to the Department that they earned income in Indiana. Taxpayers reported to their home state that they earned income in Indiana, and they reported to their home state that they paid taxes to Indiana in order to reduce their home state income tax liability. Husband’s employer reported that Husband earned $97,494 in an Indiana county, and his employer withheld and remitted local income taxes to the Department. Taxpayers have provided no documentation suggesting that Husband did not earn income in Indiana in 2022, and Taxpayers have provided several pieces of documentation suggesting that he did. The Department therefore cannot agree with Taxpayers’ claim that the Department’s assessment is incorrect. FINDING Taxpayer’s protest is denied. August 18, 2025 Replaces Finding Document: New