in-20250917-IR-045250456NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE SUPPLEMENTAL LETTER OF FINDINGS: 02-20241427 Corporate Income Tax For the Year 2020 HOLDING Multinational Conglomerate demonstrated that the proposed assessment was incorrect. ISSUE

I. Indiana Corporate Income Tax – Burden of Proof.

Authority: I.R.C. § 63; IC 6-3-1-3.5; IC 6-3-1-11; IC 6-3-2-1; IC 6-3-2-2; IC 6-3-2-2.6; IC 6-8.1-5-1; IC 6-8.1-5-4; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Stinson Est. v. United States, 214 F.3d 846 (7th Cir. 2000); E.I. DuPont De Nemours and Co. v. Indiana Dep’t of State Revenue, 79 N.E.3d 1016 (Ind. Tax Ct. 2017); Express Scripts Inc. v. Indiana Dep’t of State Revenue, 170 N.E.3d 273 (Ind. Tax Ct. 2021); 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); Indiana Dep’t of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974); United States v. McFerrin, 570 F.3d 672 (5th Cir. 2009). Taxpayer protested the proposed assessment, claiming that the assessment was incorrect. STATEMENT OF FACTS Taxpayer is a multinational conglomerate conducting business in Indiana and outside of Indiana. Together with its subsidiaries, Taxpayer periodically filed Indiana corporate income tax returns and amended its returns on a combined basis. In November 2021, Taxpayer filed a 2020 Indiana corporate income tax return and reported zero ($0) tax due. Taxpayer included a Statement 4, Schedule IT-20NOL – Corporate Income Tax Net Operating Loss Computation, which stated that it carried over and utilized approximately $39.5 million net operating losses (“NOLs”) from prior years and also carried forward remaining balance of approximately $14 million NOLs to “12/31/2021.” Subsequently in November 2022, Taxpayer filed its 2021 Indiana tax return and applied the approximately $14 million NOLs to reduce its income subject to Indiana income tax. The Indiana Department of Revenue (“Department”) reviewed Taxpayer’s tax returns and found that Taxpayer had no NOLs available to be utilized in 2020 and 2021. The Department therefore disallowed the NOLs and assessed additional tax, interest, and penalties. Taxpayer protested the assessments. Based on the additional documents submitted, a rehearing was held. This final decision ensues and addresses Taxpayer’s protest for 2020. Letter of Findings 02-20242784 addresses Taxpayer’s protest for 2021.

I. Indiana Corporate Income Tax – Burden of Proof.

DISCUSSION Taxpayer argued that it correctly reported $0 tax due on its 2020 Indiana tax return because it had sufficient NOLs to reduce its income subject to Indiana income tax. The issue is whether Taxpayer met its burden of proof demonstrating that the proposed assessment was incorrect. 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). The Department “shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment” if it “reasonably believes that a person has not reported the proper amount of tax due[.]” IC 6-8.1-5-1(b). Notices of proposed assessment issued by the Department are prima facie evidence that the Department’s assessments are correct; the burden of proving the assessment is incorrect rests with the taxpayer. IC 6-8.1-5-1(c). Poorly developed or 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). When submitting evidence as part of its protest, the taxpayer needs to specify and explain the portions of the evidence that it believes to be relevant. As the Indiana Tax Court has previously noted (in the context of a summary judgment motion): “the Court will not consider” exhibits “on the off chance that it might find, on its own and undirected, some fact that supports” a claim, and “the Court is not required to search for specific facts on which” a party relies. Express Scripts Inc. v. Indiana Dep’t of State Revenue, 170 N.E.3d 273, 279 (Ind. Tax Ct. 2021). When an agency is charged with enforcing a statute, courts defer to the agency’s reasonable interpretation of that statute “over an equally reasonable interpretation by another party.” Indiana Dep’t of State Rev. v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Indiana imposes a tax on the adjusted gross income of every corporation that has adjusted gross income derived from sources within Indiana. IC 6-3-2-1(b); IC 6-3-2-2. To compute the income subject to Indiana corporate income tax, Indiana adopts a multistep process to calculate a corporation’s taxable Indiana adjusted gross income. Caterpillar, Inc., 15 N.E.3d at 581. Indiana generally follows the tax principles established in the federal law. IC 6-3-1-11. In determining the taxpayer’s Indiana adjusted gross income, Indiana first refers to I.R.C. § 63 as the starting point. When used “[i]n the case of corporations,” the term “‘adjusted gross income’ shall mean the same as ‘taxable income’ (as defined in Section 63 of the Internal Revenue Code)” with modifications. IC 6-3-1-3.5(b). The taxpayer is entitled to carry forward the NOLs under IC 6-3-2-2.6. However, “deductions, exemptions, and exclusions are matters of legislative grace.” Stinson Est. v. United States, 214 F.3d 846, 848 (7th Cir. 2000). Such deductions are narrowly construed. See United States v. McFerrin, 570 F.3d 672, 675 (5th Cir. 2009) (citing Stinson Est. v. United States, 214 F.3d 846 (7th Cir. 2000)). Where such a deduction is claimed, “the party claiming the same must show a case, by sufficient evidence, which is clearly within the exact letter of the law.” See Indiana Dep’t of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96, 100 (Ind. Ct. App. 1974). Under Caterpillar, such Indiana NOLs must exclude foreign source dividend (“FSD”) deductions. Caterpillar, Inc., 15 N.E.3d at 583–85. When the taxpayer incorrectly includes such FSD deductions to increase or decrease its Indiana NOLs, the Department is authorized to make retroactive adjustments to the taxpayer’s NOLs. See E.I. DuPont De Nemours and Co. v. Indiana Dep’t of State Revenue, 79 N.E.3d 1016 (Ind. Tax Ct. 2017). Taxpayer here claimed that for 2020, it was entitled to utilize the approximately $39.5 million NOLs to reduce its Indiana taxable income down to zero and it had approximately $14 million NOLs – as the remaining balance – to be carried forward to “12/31/2021.” Taxpayer offered additional documents, which included multiple amended returns based on federal Revenue Agent Reports, to support its protest. The Department reviewed the documents and cross-referenced its records dated back to 1988. In April 2025, the Department completed two Schedule IT-20NOLs and corresponding Workpaper. The Department determined that Taxpayer had: (i) approximately $39.5 million NOLs to be utilized in 2020, (ii) approximately $14.4 million NOLs to be carried forward and utilized in 2021, and (iii) zero ($0) NOLs after December 31, 2021. Taxpayer continued to protest that it was entitled to additional NOLs and some of the NOLs do not expire until 2028. Upon review, however, Taxpayer is mistaken. Taxpayer here provided no statutory authority to support its argument. In addition, Taxpayer’s documents demonstrated that it filed the returns to claim the NOLs of an entity that generated losses prior to August 1997. The NOLs in question were subject to the 15-year carryforward limitation. Further, Taxpayer’s documents showed that it erred in including FSD deductions to increase its Indiana NOLs. Such FSD deductions must be excluded; they cannot be used to increase or decrease Taxpayer’s Indiana NOLs under Caterpillar. As such, pursuant to E.I. DuPont De Nemours and Co. v. Indiana Dep’t of State Revenue, the Department properly adjusted Taxpayer’s NOLs and the amount of carryover accordingly. See E.I. DuPont De Nemours and Co. v. Indiana Dep’t of State Revenue, 79 N.E.3d 1016 (Ind. Tax Ct. 2017). The Department is not able to agree that Taxpayer was entitled to additional NOLs beyond what the Department verified and determined in April 2025. To conclude, the Department is prepared to agree that Taxpayer was allowed to utilize the approximately $39.5 million NOLs in 2020 to reduce its taxable income and had $0 tax due for 2020 based on the April 2025 Schedule IT-20NOLs and corresponding Workpaper. Taxpayer was allowed to carry forward the approximately $14.4 million NOLs to the year 2021. Taxpayer has no additional NOLs remaining after December 31, 2021. The Department will adjust its records accordingly. FINDING Taxpayer’s protest is partially sustained. Taxpayer was entitled to claim the approximately $39.5 million NOLs to reduce its tax liability for 2020. July 14, 2025 Replaces Finding Document: New