in-20250917-IR-045250443NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20232172 Individual Indiana Income Tax For The Year 2021 HOLDING Individuals met the burden of proving the Department’s assessment was incorrect. ISSUE

I. Indiana Individual Income Tax – Withholding.

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-3.6-2-13; IC 6-3.6-4-1; IC 6-8.1-5-1; Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Income Tax Information Bulletin 28 (November 2016). Taxpayers protest the Department’s assessment of additional Indiana income tax. STATEMENT OF FACTS Taxpayers are a married couple who are residents of Tennessee. For tax year 2021, Taxpayers filed their Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“Form IT-40PNR”) as married filing jointly. Husband is employed by an out of state employer and works in several states, including Indiana. After review, the Department issued a Notice of Proposed Assessment. Taxpayers disagreed with the assessment and submitted a protest to that effect. Taxpayers waived their right to an administrative hearing. This Letter of Findings is written in reliance on information provided by the Taxpayers and the Department’s records. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax – Withholding.

DISCUSSION The Department issued a Notice of Proposed Assessment for additional local income tax.  Taxpayers protested the Department’s assessment claiming local income tax was paid. Taxpayers further provided W-2’s, paystubs, and Individual Income tax return for Indiana to show local income tax was deducted from Taxpayer’s income earned in Indiana. 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 Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007).  An assessment is presumed valid.  A taxpayer must provide documentation explaining and supporting his or her position 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.’” Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). 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(a). IC 6-3-2-2(a) specifically outlines what is income derived from Indiana sources and subject to Indiana income tax. For Indiana income tax purposes, the presumption is that taxpayers file their federal income tax returns as required pursuant to the Internal Revenue Code. Thus, to efficiently and effectively compute what is considered the taxpayers’ Indiana income tax, the Indiana statute refers to the Internal Revenue Code. IC 6-3-1-3.5(a) provides the starting point to determine the taxpayers’ taxable income and to calculate what would be their Indiana income tax after applying certain additions and subtractions to that starting point. Regarding county taxes, IC 6-3.6-4-1 provides that, “a tax is imposed on the adjusted gross income of local taxpayers at a tax rate that is a sum of the tax rates imposed by the county’s adopting body and in effect in the county.” Pursuant to IC 6-3.6-2-13, a local taxpayer is defined as: The Form IT-40PNR is required for all “[f]ull-year nonresidents who received income from Indiana sources[.]” Income Tax Information Bulletin 28 (November 2016), 20161228-IR-045160560NRA. The tax due from nonresidents is calculated as “that part of [the 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,” 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). The Department reviewed Taxpayers’ IT-40PNR and determined that Taxpayers were responsible for Indiana income tax because Taxpayers received “compensation for labor or services rendered within [Indiana]” under IC 6-3-2-2(a)(4). Taxpayers argue the Department’s assessment is incorrect. A review of the Department’s records and information provided by Taxpayers shows that Indiana local income was withheld by Husband’s employer. The W-2’s and paystubs provided by Taxpayers accurately show such withholding. When the Department reviewed Taxpayers’ Form IT-40PNR, it adjusted Taxpayers’ return to include local income tax. The Department issued an assessment for additional withholding based on Husband’s employment in Indiana. A review of Taxpayers’ account shows that the Department incorrectly assessed additional local income tax which had already been withheld by employer. After reviewing the documentation, Taxpayers have met their burden under IC 6-8.1-5-1. Taxpayers provided documentation confirming local income tax was withheld by employer. The protest is sustained. FINDING Taxpayer’s protest is sustained. July 11, 2025 Replaces Finding Document: New