in-20250917-IR-045250444NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242030 Individual Income Tax For The Year 2023 HOLDING Married couple successfully established that the Department’s assessment of additional income tax was incorrect. ISSUE

I. Individual Income Tax – Residency.

Authority: IC 6-8.1-5-1; IC 6-3-2-1; IC 6-3-1-3.5; IC 6-3-2-2; 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 2016). Taxpayers protest the assessment of individual income tax for the year 2023. STATEMENT OF FACTS Taxpayers are a married couple that filed their taxes jointly. Taxpayers moved from Indiana to Virginia in 2022 pursuant to Husband’s employment-related transfer. Taxpayers filed a 2023 Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“IT-40PNR”) and requested a refund of withholding taxes collected by Husband’s employer. Taxpayers also filed a Virginia Individual Income Tax Return for 2023. After review, the Indiana Department of Revenue (“Department”) adjusted the return and issued a Notice of Proposed Assessment. Taxpayers protested the assessment and 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. Individual Income Tax – Residency.

DISCUSSION The Department determined that Taxpayers owed additional income tax after reviewing their IT-40PNR. Taxpayers disagreed and protested the assessment. Taxpayers provided their Virginia Individual Income Tax Return, W-2, and Standard Form 50 (“SF-50”). 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 2016), 20161228-IR-045160560NRA. 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,” 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 claimed homestead credits or exemptions, place of voting, permanent place of residence in that state or other place of domicile, claimed benefits on the federal income tax return, place of employment/business in that state; however, these are rebuttable presumptions the taxpayer may overcome with contrary evidence. 45 IAC 3.1-1-22.5(c). In the present case, Taxpayers stated they resided in Indiana for January and February of 2022. In March 2022, Taxpayers moved from Indiana to Virginia in response to husband’s job-related transfer. Taxpayers have lived exclusively in Virginia since March 2022. After their move, Taxpayers received a W-2 from Husband’s employer which stated that the employer incorrectly collected Indiana withholding tax for all of 2023. Consequently, Taxpayers requested a refund of Indiana withholding taxes. Taxpayers explained that since they moved to Virginia in March 2022 and have lived there since, they are not subject to Indiana income tax for tax year 2023. After reviewing the documentation provided by Taxpayers, the Department agrees that Taxpayers were Virginia residents since March of 2022 and remained such during tax year 2023. Taxpayers provided an employment verification letter, Form 50, W-2’s, and Virginia tax return for 2023 to show taxes were paid to Virginia for 2023. Taxpayers’ supporting documents demonstrate that they established a new domicile in Virginia and that neither spouse worked in Indiana in 2023. Thus, Taxpayers’ income is not subject to Indiana income 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. July 22, 2025 Replaces Finding Document: New