in-20250625-IR-045250290NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241941 Individual Income Tax For the 2022 Tax Year HOLDING Individual established that she did not owe Indiana income tax but failed to establish that she did not owe local income tax. ISSUE

I. Individual Income Tax – Reciprocity.

Authority: IC 6-3-2-1; IC 6-3-1-12; IC 6-3-5-1; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007); 45 IAC 3.1-1-22; Income Tax Information Bulletin 28 (February 2022). Taxpayer protests an assessment based on the Department’s determination that she owed taxes on income earned in Indiana.

II. Individual Income Tax – Local Taxes.

Authority: IC 6-3.6-4-1; IC 6-3.6-8-3; IC 6-3.6-2-13; 45 IAC 3.1-4-4; 45 IAC 3.1-4-8; Form CT-20 (2022). Taxpayer protests an assessment based on the Department’s determination that she owed local taxes on income earned in Indiana. STATEMENT OF FACTS Taxpayer, an individual, earned income through work in Indiana in the 2022 tax year. She originally filed an Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (“IT-40PNR”) in 2022 on which she claimed that she resided in an Indiana county. The Indiana Department of Revenue (“Department”) accordingly assessed Taxpayer county tax. Taxpayer timely protested, and the Department held an administrative hearing. This Letter of Findings results. Additional facts will be provided as necessary.

I. Individual Income Tax – Income Source.

DISCUSSION Taxpayer argues that she is not subject to Indiana income tax because she is a resident of Pennsylvania. 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 Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Where a taxpayer is challenging the Department’s final determination, the taxpayer is required to provide documentation explaining and supporting its challenge. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). Additionally, “when [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.’” Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision are entitled to deference. 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. Indiana law considers someone to be a resident of Indiana for tax purposes if they “[were] domiciled in this state during the taxable year[.]” IC 6-3-1-12. A taxpayer is “domiciled” in “the state or other place in which [they] intend[] to reside permanently or indefinitely and to return to whenever [they] leave[.]” 45 IAC 3.1-1-22(a). Once a taxpayer has established a domicile, they keep that domicile until they “voluntarily take[] affirmative action to become domiciled in another place.” 45 IAC 3.1-1-22(b). A taxpayer must do two things to establish a new domicile: they must (1) “be physically present at a place,” and (2) “have the simultaneous intent of establishing a permanent place of residence at that place.” 45 IAC 3.1-1-22(c) (emphasis added). The Department must determine whether a taxpayer has changed domicile based on “the totality of facts, supported by objective evidence, in each individual case.” 45 IAC 3.1-1-22(d). The Department presumes that a person is domiciled in a certain place when the person has a permanent residence in that place and has done more than one of the following five things: 45 IAC 3.1-1-22.5(c). Nonresident taxpayers do not owe income tax to Indiana on income earned in Indiana if the laws of the state where they are domiciled “contained a reciprocal provision by which residents of this state were exempted from taxes imposed by such state on income earned in such state.” IC 6-3-5-1. Pennsylvania has such a reciprocal provision. See Income Tax Information Bulletin 28 (February 2022), 20220223-IR-045220044NRA. Taxpayer submitted documentation establishing that she was domiciled in Pennsylvania for the entire 2022 tax year. Specifically, Taxpayer showed that her permanent residence is in Pennsylvania, that she voted there, and that she occupied her home there for more days than she lived in any other state. Because Taxpayer is a resident of a state with a reciprocal agreement with Indiana under IC 6-3-5-1, Taxpayer is not subject to Indiana income tax on her Indiana wage income. FINDING Taxpayer’ protest is sustained on this issue.

II. Individual Income Tax – Local Taxes.

Indiana counties may impose an income tax, and each Indiana county did so for the 2022 tax year. IC 6-3.6-4-1; see Form CT-40 (2022). Local income taxes are imposed “on the adjusted gross income of local taxpayers[.]” IC 6-3.6-4-1(a). A “local taxpayer” is someone who is domiciled or has their “principal place of business or employment” in an Indiana county on January 1 of the tax year. IC 6-3.6-2-13; IC 6-3.6-8-3(b). “A taxpayer's county of residence and principal place of business or employment on this date alone determine whether he or she is subject to local income tax (LIT) for the entire year.” 45 IAC 3.1-4-4. A taxpayer’s principal place of employment is the county “where the taxpayer receives the greatest percentage of his or her gross income from salaries, wages, commissions, fees, and similar income.” 45 IAC 3.1-4-8(a). However, “[i]f an individual resides outside Indiana, but his or her principal place of business or employment is in an Indiana adopting county, only the adjusted gross income derived from the principal place of business or employment is subject to local income tax[.]” 45 IAC 3.1-4-8(b). Reciprocal agreements do not exempt a taxpayer from local income tax. Id. IC 6-8.1-5-4(a) requires that “[e]very person subject to a listed tax must keep books and records so that the [D]epartment can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records. The records [] include all source documents necessary to determine the tax, including invoices, register tapes, receipts, and canceled checks.” The person also “must allow inspection of the books and records and returns by the [D]epartment or its authorized agents at all reasonable times.” IC 6-8.1-5-4(c). When the person subject to the listed tax fails to keep books and records, under IC 6-8.1-5-1(b), the Department “shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment” if the Department “reasonably believes that a person has not reported the proper amount of tax due.” All tax assessments are prima facie evidence that the Department’s claim for the unpaid tax is valid; the taxpayer bears the burden of proving that any assessment is incorrect. IC 6-8.1-5-1(c). Taxpayer has not demonstrated that her “principal place of employment” was outside of Indiana in 2022. To start, Taxpayer submitted her original 2022 return stating that her principal place of employment was an Indiana county. Further, Taxpayer’s W-2 shows that well over half her income in 2022 is properly sourced to Indiana. Taxpayer was unable to present any documentation that would suggest otherwise. The Department therefore must conclude that Taxpayer’s principal place of employment was in an Indiana county. Taxpayer thus owes income tax to that Indiana county. Taxpayer has established that she is a tax resident of a state that has a reciprocal agreement with Indiana. However, Taxpayer did not show that she does not maintain her principal place of employment in any Indiana county. While IC 6-3-5-1 provides that residents of states with a reciprocal agreement with Indiana pay income tax to their state of residence, that provision does not extend to local income tax imposed at the county level. The Department therefore finds that Taxpayer does not owe Indiana state income tax but does owe local income tax to an Indiana county. FINDING Taxpayer’ protest is denied on this issue. SUMMARY Taxpayer is sustained on Issue I regarding the assessment of state income tax. Taxpayer is denied on Issue II regarding the assessment of local income tax. April 4, 2025 Replaces Finding Document: New