in-20250827-IR-045250394NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242382 Individual Indiana Income Tax For The Year 2023 HOLDING Individual met the burden of proving the Department’s assessment was incorrect. ISSUE

I. Indiana Individual Income Tax – Residency.    

Authority: IC 6-3-1-3.5; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Income Tax Information Bulletin 28 (November 2016). Taxpayer protests the Department’s assessment of additional income tax was incorrect. STATEMENT OF FACTS Taxpayer is a Virginia resident.  Taxpayer previously resided in Indiana.  In 2023, Taxpayer moved to Virginia in mid-February and has resided there since that time.  Taxpayer was employed by an Indiana company (“Employer”) while he was an Indiana resident and remained employed by Employer in Virginia. For tax year 2023, Taxpayer filed an Indiana Part-Year Individual Income Tax Return (“Form IT-40PNR”).  After review, the Indiana Department of Revenue (“Department”) issued the Taxpayer an assessment for additional Indiana income tax plus penalty and interest.  Taxpayer protested the assessment and requested resolution with a hearing.  Taxpayer provided additional documents, and the Department reviewed the information and discussed the protest with Taxpayer’s representative.  Based on the discussions with the Department, the Taxpayer agreed to waive the hearing.  Additional facts will be provided as necessary.

I. Indiana Individual Income Tax – Residency.

DISCUSSION The Department issued a notice of proposed assessment for additional Indiana income tax.  Taxpayer protested the Department’s assessment claiming he only resided in Indiana through January and part of February in tax year 2023. Taxpayer further explained that Employer failed to update the information provided on his W-2. 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 the 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.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment is 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 [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(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. 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 [the 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). In tax year 2023, Taxpayer was an Indiana resident in January and part of February. Thereafter, Taxpayer resided in Virginia beginning on February 11, 2023. Taxpayer worked for Employer while he resided in Indiana and continued working for Employer after he moved to Virginia. Taxpayer filed his Form IT-40PNR attesting that his Indiana withholding for one month was correct, which showed he resided in Indiana for approximately six weeks during tax year 2023. The Department reviewed Taxpayer’s return and determined that his entire salary was subject to Indiana income tax and issued an assessment. Taxpayer contacted the Department and per the Department’s request, provided additional information, including a letter from Employer confirming that Taxpayer only worked in Indiana at the beginning of 2023. Taxpayer also submitted a copy of his apartment lease. After reviewing the documentation, Taxpayer has met his burden under IC 6-8.1-5-1. Taxpayer provided documentation confirming he was only a resident of Indiana at the beginning of tax year 2023. Taxpayer has established that the income in question was not earned in Indiana, which is required to be subject to Indiana Income tax under IC 6-3-2-1(a). Taxpayer’s IT-40PNR was correct as originally filed. The Department will review Taxpayer’s return and issue any necessary refund. The protest is sustained. The Department noticed discrepancies in Taxpayer’s reported income between his various returns. The error does not affect the outcome of this protest; however, Taxpayer should ensure these amounts match on any future returns. FINDING Taxpayer’s protest is sustained. June 10, 2025 Replaces Finding Document: New