in-20250917-IR-045250451NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251347 Individual Income Tax For the 2023 Tax Year HOLDING Individual established that she was entitled to claim certain deductions from her federal adjusted gross income (“FAGI”) when calculating her Indiana income tax. ISSUE

I. Individual Income Tax – Federal Adjusted Gross Income.

Authority: I.R.C. § 62; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-8.1-5-1; 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); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Instructions for Form 2106 (2023). Taxpayer protests the Department’s assessment of additional income tax based on its increase of her FAGI as reported on her Indiana income tax return. STATEMENT OF FACTS Taxpayer, an Indiana resident who regularly files income tax returns with the Indiana Department of Revenue (“Department”), timely filed her individual income tax return for the 2023 tax year. The Department reviewed Taxpayer’s return and denied all expenses that Taxpayer claimed on her federal Form 2106, on the grounds that Taxpayer had not shown that she was eligible to claim the deductions allowed on that form. The Department accordingly increased Taxpayer’s FAGI and issued her an assessment for additional income tax. Taxpayer timely protested, and the Department held an administrative hearing. This Letter of Findings results. Additional facts will be provided as necessary.

I. Individual Income Tax – Federal Adjusted Gross Income.

DISCUSSION The Department determined that Taxpayer had claimed deductions at the federal level incorrectly on the federal Form 2106. The Department therefore adjusted Taxpayer’s Indiana income tax return to remove those deductions which, in turn, raised Taxpayer’s taxable federal income and therefore raised Taxpayer’s taxable Indiana income. Taxpayer argues that she is entitled to claim the deductions on her federal Form 2106. 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) and Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Further, “[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.’” Dept. 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 shall be 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. I.R.C. § 62 defines FAGI as gross income minus certain specified deductions. Relevant to this protest, I.R.C. § 62 allows taxpayers to deduct from their FAGIs “expenses paid or incurred with respect to services performed” as an employee of a state or local government paid “on a fee basis.” I.R.C. § 62(a)(2)(C). Taxpayers who qualify may claim these expenses on their federal returns by completing Form 2106. Instructions for Form 2106 (2023). Taxpayer stated that she works for an Indiana agency on a fee basis. Taxpayer provided the contract under which she performs services for the state agency. In other words, Taxpayer qualifies under I.R.C. § 62(a)(2)(C) to claim the deductions specified on Form 2106. The Department will therefore recalculate her tax owed according to the Form 2106 deductions as Taxpayer stated them on her original filing. FINDING Taxpayer’s protest is sustained. July 11, 2024 Replaces Finding Document: New