in-20250730-IR-045250356NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE MEMORANDUM OF DECISION: 01-20241773 Individual Indiana Income Tax For the Year 2022 HOLDING Missouri residents met the burden of proving that the Department’s refund denial 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 6-8.1-9-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Schmidt v. Indiana Dept. of State Revenue, 81 N.E.3d 705 (Ind. Tax Ct. 2017); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E. 2d 1138 (Ind. Tax Ct. 2010); 45 IAC 3.1-1-22; 45 IAC 3.1-1-22.5; Income Tax Information Bulletin 28 (November 2016). Taxpayers argued that the Department’s refund denial was incorrect. STATEMENT OF FACTS Taxpayers, a married couple, are Missouri residents. Taxpayers file jointly and previously resided in Indiana.  In September 2020, Taxpayers moved from Indiana to Missouri. One Taxpayer remained employed by an Indiana corporation (“Employer”) and worked remotely from Missouri during tax year 2022. For tax year 2022, Taxpayers filed federal, Missouri, and Indiana income tax returns.  On their 2022 Indiana Full-Year Nonresident income tax return (“Form IT-40PNR”), Taxpayers calculated that they were owed a refund of approximately $800.  After review, the Indiana Department of Revenue (“Department”) adjusted Taxpayers’ return and reduced the refund to approximately $300. Taxpayers disagreed with the recalculated refund and submitted a protest to that effect. Taxpayers requested a hearing, but following discussions with the Department regarding documentation, they decided to waive their right to a hearing. This Memorandum of Decision results.  Additional facts will be provided as necessary.

I. Indiana Individual Income Tax – Residency.

DISCUSSION Taxpayers protested the Department’s reduction of the calculated refund, claiming that they are not Indiana residents and should not owe income tax to Indiana because they paid income taxes in Missouri. 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.  The Indiana Tax Court has noted that poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E. 2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480, 486 (Ind. Tax Ct. 2012).  “[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).  More generally, IC 6-8.1-9-1(a) affords a taxpayer a statutory right to file a claim for refund. 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 [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).  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).  In determining if a taxpayer has changed his or her domicile status, the Department must weigh countervailing evidence such as continued occupation of a permanent place of residence or employment; however, these are rebuttable presumptions the taxpayer may overcome with contrary evidence.  See 45 IAC 3.1-1-22.5(c); see also Schmidt v. Indiana Dept. of State Revenue, 81 N.E.3d 705, 710-11 (Ind. Tax Ct. 2017). Taxpayers were originally Indiana residents.  In September 2020, Taxpayers moved from Indiana to Missouri.  By October 2020, Taxpayers sold their home in Indiana and stated that they had no intention of returning to live within the state.  For the entirety of tax year 2022, Taxpayers lived exclusively in Missouri. During this timeframe, one of the Taxpayers remained employed by Employer through remote work.  Taxpayers submitted Form IT-40PNR attesting that neither of their wages were attributable to Indiana and that they lacked Indiana income.  Concurrently, Taxpayers submitted a 2022 Missouri individual income tax return (“Missouri Form MO-1040”) where Taxpayers identified both of their wages as being taxable in Missouri. In December 2023, the Department informed Taxpayers that adjustments were being made to their 2022 Form IT-40PNR. The Department recategorized the remote working Taxpayer’s income as taxable Indiana income.  Taxpayers argue that the Department was incorrect in making this adjusted and reducing their refund, as neither Taxpayer resided nor worked in Indiana for tax year 2022. Additionally, both Taxpayers’ incomes were already taxed on their Missouri Form MO-1040. In support of the protest, Taxpayers provided copies of their 2021 Form IT-40PNR, Missouri Form MO-1040, and other related documentation. After review, the Department agrees that Taxpayers were Missouri residents and domiciliaries for the entirety of tax year 2022.  Taxpayers moved to Missouri in September 2020, and the subsequent sale of their home in Indiana in October 2020 established that Taxpayers intended to make Missouri their permanent domicile no later than October 2020.  Given the absence of contrary evidence as discussed in 45 IAC 3.1-1-22.5(c), it is clear that Taxpayers moved to Missouri and intended to remain there indefinitely.  The Department notes that Employer was unable to provide a corrected Federal Wage and Tax Statement (“Form W-2”) to Taxpayers. However, the Department also notes that Taxpayers correctly filed their IT-40PNR for tax year 2022. This filing accurately reflects their wages attributable to Indiana.  This is confirmed by a review of Taxpayers’ Missouri Form MO-1040.  The Form IT-40PNR also reflects that Taxpayers are owed a refund for tax year 2022.  The Department will review Taxpayers’ IT-40PNR and issue any refund still owed. FINDING Taxpayers’ protest is sustained. May 2, 2025 Replaces Finding Document: New