in-20250827-IR-045250398NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242851 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 – Residency.

Authority: IC 6-8.1-5-1; IC 6-3-2-1; IC 6-3-1-3.5; IC 6-3-2-2; IC 6-3-1-13; State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); Schmidt v. Indiana Dept. of State Revenue, 81 N.E.3d 705, 710-11 (Ind. Tax Ct. 2017); 45 IAC 3.1-1-22; 45 IAC 3.1-1-22.5; Income Tax Information Bulletin 28 (November 2016); Income Tax Information Bulletin 27 (December 2023). 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. Taxpayers moved from Indiana to Florida in 2022 pursuant to Husband’s employment-related transfer. Taxpayers filed a 2023 Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“IT-40PNR”) and requested a refund of withholding taxes collected by Husband’s employer. After review, the Indiana Department of Revenue (“Department”) adjusted the return and issued a Notice of Proposed Assessment. Taxpayer protested the assessment and requested resolution with a hearing. An administrative hearing was held, and this Letter of Finding results. Additional facts will be provided as necessary.

I. Individual Income Tax – Residency.

DISCUSSION The Department determined that Taxpayers owed additional income tax after reviewing their IT-40PNR. Taxpayers disagreed and protested the assessment. During the hearing, Taxpayers provided an explanation and additional documentation. 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. Indiana imposes a tax “upon 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. 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. The Form IT-40PNR is required for all “[f]ull-year nonresidents who received income from Indiana sources[.]” Income Tax Information Bulletin 28 (November 2016), 20161228 Ind. Reg. 045160560NRA. 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). 45 IAC 3.1-1-22(a) defines “domicile” as the “state or other place in which a person intends to reside permanently or indefinitely and to return to whenever he or she leaves the place.” Once a person is domiciled in Indiana, “that status is retained until such time as he or she voluntarily takes positive action to become domiciled in another state or country and abandons the Indiana domicile[.]” 45 IAC 3.1-1-22(b). In other words, a new domicile is not necessarily created when an individual moves to a place outside of Indiana. To establish a new domicile, the taxpayer must both “be physically present at a place” and demonstrate “simultaneous intent of establishing a permanent place of residence at that place.” 45 IAC 3.1-1-22(c); see also State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988). In determining if a taxpayer has changed his or her domicile status, the Department must review factors such as continued occupation of a permanent place of residence or employment; however, these are rebuttable presumptions the taxpayer may overcome with contrary evidence. 45 IAC 3.1-1-22.5(c). The relevant regulation in determining domicile is 45 IAC 3.1-1-22.5. That regulation states: In the present case, Taxpayers were originally Indiana residents. In December 2022, Taxpayers moved from Indiana to Florida in response to Husband’s job-related transfer. Taxpayers sold their home in Indiana and have lived exclusively in Florida since late 2022. Taxpayers have stated that they had no intention of returning to live within the state. However, Husband’s Employer is located in Indiana. Thus, the W-2 issued from the Employer is from Indiana, and Husband’s Employer collected Indiana withholding tax. Taxpayers submitted Form IT-40PNR detailing that neither of their wages were attributable to Indiana and that they lacked Indiana income. Consequently, Taxpayers requested a refund of Indiana withholding taxes. Taxpayers explained that since they moved to Florida in late 2022 and have lived there since, they are not subject to Indiana income tax. The Department reviewed the return and the W-2 and issued an assessment for income tax. After reviewing the documentation provided by Taxpayers, the Department agrees that Taxpayers were Florida residents beginning in late 2022 and remained such during tax year 2023. A rental agreement shows that Taxpayers have lived outside of Indiana since December 2022. Taxpayers provided a copy of their federal return with their Florida address. Florida driver licenses, voter registration cards, vehicle registration, Florida bank accounts, and the sale of their Indiana residence all support Taxpayers’ position that they intended to abandon their Indiana domicile and establish a residence in Florida. Taxpayers’ conduct established a new domicile in Florida. Thus, Taxpayers’ incomes are not subject to Indiana income tax. Finally, military personnel who are in the armed forces as Indiana residents remain legal residents of Indiana regardless of change of station until official action is taken. Income Tax Information Bulletin 27 (March 2023), 20230426 Ind. Reg. 045230152NRA. “Official action” may include the filing of State of Legal Residence Certificate, Form DD 2058 (“DD 2058”). Taxpayers filed the DD 2058 in January 2024. While not directly related to the analysis of residency for tax year 2023, it is further evidence that once Taxpayers move to Florida they intended to reside there permanently and establish their domicile in Florida. Taxpayers have met their burden under IC 6-8.1-5-1. The Department will review Taxpayers’ IT-40PNR and issue any refund still owed. FINDING Taxpayers’ protest is sustained. June 10, 2025 Replaces Finding Document: New