in-20250827-IR-045250400NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE FINAL ORDER DENYING REFUND: 01-20251405 Individual Income Tax For The Year 2023 HOLDING Individual failed to establish the Department’s assessment of additional income tax was incorrect. ISSUE

I. Individual Income Tax – Nonresidents with Indiana Income.

Authority: IC 6-3-2-1; IC 6-3-2-2; IC 6-3.6-2-13; IC 6-3.6-4-1; IC 6-8.1-5-1; IC 6-8.1-9.5-2; Indiana Dept. of State Revenue v. Caterpillar, Inc 15 N.E.3d 579 (Ind. 2014); 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); Income Tax Information Bulletin 28 (November 2023); Income Tax Information Bulletin 39 (January 2023). Taxpayer protests the Department’s assessment for state income tax. STATEMENT OF FACTS Taxpayer is a resident of Kentucky. During the relevant tax year, Taxpayer gambled at an Indiana casino, accruing taxable monetary winnings. The Indiana Department of Revenue (“Department”) determined that Taxpayer had failed to report her gambling winnings on her Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“Form IT-40PNR”) and adjusted her return to include her gambling winnings. Due to the adjustments, Taxpayer’s refund as originally requested on the IT-40PNR was reduced. Taxpayer disagreed with the Department’s adjustments and submitted a protest to that effect. Taxpayer waived her right to an administrative hearing. This Final Order Denying Refund is written in reliance on information provided by the Taxpayer and the Department’s records. Additional facts will be provided as necessary.

I. Individual Income Tax – Nonresidents with Indiana Income.

DISCUSSION The Department determined that Taxpayer failed to report income from gambling activities in Indiana on her Form IT-40PNR resulting in a reduced refund. Taxpayer disagreed and argued that she is entitled to the full refund as originally requested. In support of her protest, Taxpayer provided a copy of her W-2Gs for 2023 and a copy of her amended Form IT-40PNR. 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. 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). 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(a) (emphasis added). A nonresident is defined as “any person who is not a resident of Indiana.” IC 6-3-1-13. Here, Taxpayer is a Kentucky resident who received income from gambling activities at an Indiana casino Under IC 6-3-2-2, winnings from an Indiana casino are derived from Indiana sources and are therefore subject to income tax. The Department’s Income Tax Information Bulletin 28 (November 2023), 20231129 Ind. Reg. 045230758NRA, provides, “[i]ncome received from Indiana sources is considered Indiana income to nonresidents, except certain types of Indiana source income subject to tax only by the taxpayer’s state of legal residence.” Some taxpayers, however, may be subject to taxation both by the state where their income is derived and their state of residence. To account for this, “Indiana has entered into agreements with several states to eliminate the requirement of paying tax to two states on the same income.” Id. One such state is Kentucky. However, “[w]ith regard to income from sources other than salaries, wages, tips, and commissions, that income is not covered by a reciprocity agreement.” Id. (emphasis in original). Further, the Department’s Income Tax Information Bulletin 39 (January 2023), 20230125 Ind. Reg. 045230010NRA, provides that certain types of nonresident income are directly allocated to Indiana including “[w]innings from Indiana’s riverboats, casinos, and lotteries.” Pursuant to IC 6-3-2-2, winnings from an Indiana casino are Indiana source income subject to Indiana income tax. Though, Indiana has adopted reciprocity agreements with some states as noted in Income Tax Information Bulletin 28, Income Tax Information Bulletin 39 provides that income from Indiana that is not salaries, wages, tips, or commission, is not covered under those reciprocity agreements. Therefore, Taxpayer’s winnings from an Indiana casino are directly allocated to Indiana and are subject to Indiana income tax under IC 6-3-2-2. The Department correctly adjusted Taxpayer’s Form IT-40PNR to include the gambling winnings as Indiana income resulting in a reduced refund. FINDING Taxpayer’s protest is denied. June 13, 2025 Replaces Finding Document: New