in-20250827-IR-045250402NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 02-20241992 Indiana Corporate Income Tax For The Year 2022 HOLDING Business protested the assessment of additional corporate income tax.  Business established the Department’s assessment was incorrect. ISSUE

I. Corporate Income Tax – Net Operating Losses.

Authority: IC 6-3-1-3.5; IC 6-8.1-5-1; 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); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Income Tax Information Bulletin 116 (July 2018). Taxpayer argues the Department’s assessment of additional corporate income tax was incorrect due to an adjustment of net operating losses. STATEMENT OF FACTS Taxpayer is a multinational manufacturing company that does business in Indiana. For tax year 2022, Taxpayer filed an Indiana Corporate Adjusted Gross Income Tax Return (“Form IT-20”). On the return, Taxpayer claimed a net operating loss (“NOL”) and offset a portion its corporate income tax for 2022. The NOLs utilized were accrued between 2016 to 2021. The Indiana Department of Revenue (“Department”) reviewed the Form IT-20 and determined Taxpayer incorrectly calculated the amount of NOLs available. As a result, the Department issued an assessment for additional corporate income tax along with a penalty and interest. Taxpayer protested the assessment and recalculation of the NOLs. An administrative phone hearing was held in which Taxpayer’s representative provided additional information and documentation. This Letter of Findings results. Additional facts will be provided as necessary.

I. Corporate Income Tax – Net Operating Losses.

DISCUSSION After reviewing Taxpayer’s 2022 corporate income tax return, the Department determined that Taxpayer did not have the amount of NOL available as calculated on its return. As a result, the Department adjusted Taxpayer’s NOL to a different amount, which resulted in an assessment. Taxpayer protested the assessment and claimed that it had approximately $600,000 in NOLs remaining that were accrued between tax years 2016 and 2022. IC 6-8.1-5-1(c) states that “[t]he burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment, including Taxpayer’s penalty assessment, is therefore presumed valid. A taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. Additionally, “[W]hen [courts] examine a statute that an agency is ‘charged with enforcing . . . [courts] defer to the agency’s reasonable interpretation of 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). IC 6-3-1-3.5 allows Indiana taxpayers to claim NOLs based on the taxpayer’s federal net operating loss for a tax year as calculated under Section 172 of the Internal Revenue Code and adjusted for certain modifications required by IC 6-3-1-3.5. Income Tax Information Bulletin 116 (July 2018), 20180725 Ind. Reg. 045180312NRA, explains: Taxpayer argues the assessment is incorrect.  In support, Taxpayer provided an explanation of how it believed the Department’s calculations were incorrect, copies of prior tax years’ corporate tax returns, and its NOL calculations from 2016 through 2022. Taxpayer explained that for tax year 2016, it mistakenly reported the year’s Indiana net bonus depreciation allowance on Line 12 of Form IT-20 as a subtraction instead of reporting the net bonus depreciation allowance on Line 4 under Code No. 104. Taxpayer believes this mistake caused errors in the Department calculating the available NOLs. The same error was repeated on the IT-20 file for tax year 2017. When Taxpayer filed its Form IT-20 for tax year 2022, it claimed NOLs to offset its Indiana income. The Department’s review of the 2022 NOL required a review of Taxpayer’s prior returns, including tax years 2016 and 2017. As a result, the Department reduced Taxpayer’s Indiana Adjusted Gross Income (“AGI”) to zero for tax years 2016 and 2017. In turn, this adjustment affected the NOL calculations accrued in 2016 and utilization of those credits going forward. Adjusting Taxpayer’s AGI to zero was error by the Department and the adjustment changed the calculations of Taxpayer’s NOLs beginning in 2016. Because the accrual and utilization of NOLs relies on accurate information from previous tax years, when Taxpayer attempted to utilize an NOL in tax year 2022, it appeared there was no NOL available. Other than the net bonus depreciation being reported on the incorrect line of Taxpaye’rs 2016 return, the information provided on Taxpayer’s 2016 and 2017 returns appears to be correct. Taxpayer’s inclusion of the net bonus depreciation on Line 12 was error; however, this dollar amount is still used in the final calculation of NOLs for the tax year. Despite the error, Taxpayer’s calculations are correct in determining the final amount of NOL accrued each year. The Department will review Taxpayer’s account and correct the issues related to the NOLs beginning in tax year 2016 and going forward. The Department will then be able to determine the specific dollar amount of NOL remaining for Taxpayer’s utilization on its 2022 Form IT-2 return. FINDING Taxpayer’s protest is sustained. June 17, 2025 Replaces Finding Document: New