in-20250917-IR-045250449NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE MEMORANDUM OF DECISION: 01-20251011 Individual Indiana Income Tax For the Year 2023 HOLDING Individual did not meet the burden of proving the Department’s reduction of the requested refund was incorrect. ISSUE

I. Indiana Individual Income Tax – Deductions and Exemptions.

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-9-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Larsen v. Indiana Dept. of State Revenue, 80 N.E.3 289 (Ind. Tax Ct. 2017); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E. 2d 1138 (Ind. Tax Ct. 2010); Income Tax Information Bulletin 28 (February 2022); International Students – Information for Students, https://www.in.gov/dor/i-am-a/individual/student-taxes/international-students/; U.S. Citizenship and Immigration Policy Manual – Volume 2, Chapter 1, https://www.uscis.gov/policy-manual/volume-2-part-f-chapter-1; U.S. Citizenship and Immigration Policy Manual – Volume 2, Chapter 9, https://www.uscis.gov/policy-manual/volume-2-part-f-chapter-9; Individual Taxpayer Identification Number (ITIN), https://www.irs.gov/tin/itin/individual-taxpayer-identification-number-itin. Taxpayer argued that the Department’s reduction of the requested refund was incorrect. STATEMENT OF FACTS Taxpayer is a nonresident alien pursuing her education at an Indiana college. For tax year 2023, Taxpayer filed an Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“Form IT-40 PNR”) and calculated a refund of approximately $750. After review, the Indiana Department of Revenue (“Department”) adjusted Taxpayer’s return and reduced the refund to approximately $100. Taxpayer disagreed and submitted a protest to that effect. Taxpayer requested resolution without a hearing. This Memorandum of Decision results and is based on information provided by Taxpayer in the protest submission and a review of the Department’s records. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax – Deductions and Exemptions.

DISCUSSION Taxpayer protested the Department’s reduction of the calculated refund for tax year 2023. In the protest materials, Taxpayer explained that her husband and two of their three children hold F-2 visas. As a result, her husband is unable to obtain a social security number as an identifier to be used on her tax return (i.e., to be claimed as a dependent on the return). The same holds true for the two older children. Taxpayer argues that since she is only allowed to work twenty hours per week, she and her family rely on her limited income, so she should be allowed to claim them as dependents on her Indiana tax return. Taxpayer also provided documentation from the Social Security Administration regarding the family’s attempts to obtain social security numbers for her husband and children and various other documents related to the family’s entrance to the United States from the U.S. Customs and Border Protection, and the Department of Homeland Security. As a threshold issue, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. The Indiana Tax Court has noted that poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E. 2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480, 486 (Ind. Tax Ct. 2012). “[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). More generally, IC 6-8.1-9-1(a) affords a taxpayer a statutory right to file a claim for refund. 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(b). 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.  Form IT-40PNR is required for all “[f]ull-year nonresidents who received income from Indiana sources[.]” Income Tax Information Bulletin 28 (February 2022), 20230510 Ind. Reg. 045230265NRA. 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). The determination of resident or nonresident alien status and treaties with a student’s foreign county will be considered when determining whether a student is an Indiana resident. International Students – Information for Students, https://www.in.gov/dor/i-am-a/individual/student-taxes/international-students/ (last visited June 30, 2025). If a student qualifies as an Indiana resident, he/she must file an Indiana tax return if his/her wages and other income is $1,000 or more. Id. A nonresident must pay taxes on any amount of income earned in Indiana. Id. An international student, generally an individual with an F, J, or M visa, who is a nonresident alien for federal purposes is not an Indiana resident and files Form IT-40PNR to report any Indiana income. Id. The Immigration and Nationality Act governs immigration and visa operations and provides for the admission of nonimmigrants, including foreign students. U.S. Citizenship and Immigration Policy Manual – Volume 2, Chapter 1, https://www.uscis.gov/policy-manual/volume-2-part-f-chapter-1 (last visited June 30, 2025). The F nonimmigrant visa category is for aliens seeking to study in the United States. Id. A nonimmigrant academic student classification (F-1 visa) allows an alien to enter the United States as a full-time student at a U.S. college or university. Id. An F-1 student’s spouse and unmarried children under the age of 21 may accompany the F-1 student to the United States and are eligible for admission in F-2 status as dependent family members. U.S. Citizenship and Immigration Policy Manual – Volume 2, Chapter 9, https://www.uscis.gov/policy-manual/volume-2-part-f-chapter-9 (last visited June 30, 2025). Certain requirements must be met in order for a spouse and children to be eligible for admission, such as possessing an original Form I-20. Id. Further, F-2 dependents are not authorized to work in the United States; however, F-2 nonimmigrants are permitted to attend elementary, middle, and high school on a full-time basis or purse avocational and recreational studies. Id. Under some circumstances, a social security number or an IRS-issued individual taxpayer identification number (“TIN”) is not required for a taxpayer to claim a valid dependent exemption. In Larsen v. Indiana Dept. of State Revenue, 80 N.E.3 289 (Ind. Tax Ct. 2017), Larsen filed his 2013 federal and Indiana tax returns without providing social security numbers for any of his three dependent children. Id. at 290. The children lacked social security numbers or TINs due to Larsen’s religious objections. Id. Larsen claimed federal dependency exemptions for each child, and when the IRS requested additional information regarding the lack of social security numbers, Larsen explained his religious objection. Id. The IRS later granted his federal dependency exemptions. Id. at 291. When his Indiana return was filed, the Department requested social security numbers for the children, and when no numbers were provided, the Department denied his Indiana dependency deductions. Id. at 292. The Indiana Tax Court held that while the Department had statutory authority to request social security numbers on a taxpayer’s return, Indiana Code 6-3-1-3.5(a)(5) allows an Indiana dependency deduction for each federal dependency exemption under the Internal Revenue Code. Id. The Court reasoned the Indiana statute did not require a social security number, rather, only that a federal dependency exemption was allowed. Id. Because Larsen could show that the IRS allowed a federal dependency exemption on his 2013 return, the Department was required to do the same. Id. Here, Taxpayer is a nonresident alien living in the U.S. on an F-1 visa to pursue academic and language studies at an Indiana college. Taxpayer’s husband and two children accompanied her to Indiana; all three of which had valid F-2 visas. Because of her nonresident status and academic pursuits, Taxpayer was required to file Form IT-40PNR and report her Indiana sourced income. Taxpayer did so; however, the Department’s review reveals that the Form IT-40PNR was completed incorrectly. First, Taxpayer completed Schedule C related to certain Indiana deductions. Taxpayer claimed approximately $9,800 in deductions related to apartment rent. The maximum allowed for the rent deduction is $1,500 if married filing separately as Taxpayer filed for tax year 2023. Further, Taxpayer completed Schedule D: Exemptions, which works in conjunction with Schedule IN-DEP, related to dependent and dependent child information. On both the Schedule D and Schedule IN-DEP, Taxpayer listed her husband and two children as dependents with calculations relying on the stated deductions (i.e., $1,000 allowed for each dependent, etc.). Taxpayer also calculated additional exemption amounts of $1,500 per person as if each person was being claimed for the first time. In total, Taxpayer claimed approximately $7,000 in exemptions for her husband and three children. Between Indiana deductions and exemptions, Taxpayer totaled approximately $17,000 of credit and calculated a refund owed of approximately $750. Considering the information provided, Taxpayer’s F-1 visa status, and her husband and two of her children’s F-2 visa status, the Department’s adjustments were correct. Taxpayer is a nonresident alien residing in the United States for education purposes. Her family attempted to obtain social security numbers for her husband and two older children; however, they are prohibited from doing so based on their F-2 visa status. As a result, Taxpayer incorrectly calculated the total amount of deductions and credit allowed for tax year 2023. Finally, the facts of Larsen are distinctly different than those in Taxpayer’s situation. Larsen was a United States citizen and an Indiana resident with a religious objection to obtaining social security or TIN numbers for his children. Larsen also had documentation showing he had obtained valid federal dependency exemptions for his three children after explaining his religious objection to social security numbers to the IRS. Taxpayer has not provided any information related to a federal return for tax year 2023 nor has she claimed she had an allowed federal dependency exemption for either her husband or the two older children. Without such, an Indiana dependency exemption is not allowed. FINDING Taxpayer’s protest is denied. July 17, 2025 Replaces Finding Document: New