in-20250917-IR-045250448NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242864 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 – Burden of Proof.

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-3-3-3; IC 6-3-6-10; IC 6-8.1-5-1; IC 6-8.1-5-4; Wendt LLP v. Indiana Dep’t of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010). Taxpayers protest the assessment of individual income tax for the year 2023. STATEMENT OF FACTS Taxpayers are a married couple that file their taxes jointly. Husband lives and works in China. Wife resides in Indiana. Taxpayers filed a 2023 Indiana Full-Year Resident Individual Income Tax Return (“IT-40”). After review, the Indiana Department of Revenue (“Department”) adjusted the return and issued a Notice of Proposed Assessment. Taxpayers protested the proposed assessment, opting for the Department to make its written decision based on the materials sent in with the protest. As such, Taxpayers waived their right to an administrative hearing. This Letter of Findings is written based on the materials in the protest file. Further facts will be supplied as necessary. I. Individual Income Tax – Burden of Proof. DISCUSSION The Department determined that Taxpayers owed additional income tax after reviewing their IT-40. The Department based this determination on its conclusion that Taxpayers’ income reported at the federal level did not match the amount reported at the state level. Taxpayers disagreed and protested the assessment. 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. In making his or her case, a taxpayer is required to provide documentation explaining and supporting his or her argument that the Department’s position is wrong. Poorly developed and 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). Indiana requires taxpayers to keep records to support their own tax calculations. IC 6-8.1-5-4(a). These records must include all original documents needed to determine tax liability. Id. Specifically, IC 6-3-6-10(a) provides, “A taxpayer subject to taxation under this article shall keep and preserve records and any other books or accounts as required by IC 6-8.1-5-4. All the records shall be kept open for examination at any time by the department or its authorized agents.” (Emphasis added). Indiana imposes an adjusted gross income tax on all residents with taxable Indiana income. IC 6-3-2-1(a). To effectively compute what is considered the taxpayer’s 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 taxpayer’s taxable income and to calculate what would be their Indiana income tax after applying certain additions and subtractions to that starting point. One such subtraction is a foreign income tax credit. Under Indiana law, taxpayers may claim a credit against their Indiana income tax for foreign taxes paid on income included in their Indiana adjusted gross income. IC 6-3-3-3(c). During the Department’s initial review, it was determined that Taxpayers’ federal adjusted gross income was incorrect. The review included adjustments related to Taxpayers’ IT-40. Specifically, the Department stated that Taxpayers did not provide sufficient documentation to prove Husband paid income tax to China. In support of their protest, Taxpayers provided the Department with a written statement from Husband’s employer certifying the tax paid, documentation from the Chinese government certifying the amount of income tax withheld from income, and a copy of Taxpayers’ IT-40 Schedule 5: Credits and Schedule 6: Offset Credits. Taxpayers’ records clearly substantiate the amount of taxes paid to a foreign entity on their IT-40, as allowed under IC 6-3-3-3(c), and therefore, the Department’s assessment of additional income tax was incorrect. The Department agrees that Taxpayers have carried their burden to show that the initial adjustments were incorrect. FINDING Taxpayers’ protest is sustained. July 30, 2025 Replaces Finding Document: New