in-20250625-IR-045250289NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241541 Individual Income Tax For the 2018 and 2019 Tax Years HOLDING Married couple successfully established that the Department’s assessment was incorrect. ISSUE

I. Individual Income Tax – Federal Discrepancy.

Authority: I.R.C. § 62; IC 6-3-1-3.5; 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 (Ind. Tax Ct. 2007). Taxpayers protest the Department’s adjustments to their federal adjusted gross income (“FAGI”), which resulted in increased Indiana state income tax owed. STATEMENT OF FACTS Taxpayers are a married couple who filed joint income tax returns with the Indiana Department of Revenue (“Department”) for the 2018 and 2019 tax years. The Department received information that Taxpayers had underreported their FAGI for these tax years, so it adjusted Taxpayers’ returns accordingly. This resulted in additional Indiana income tax due, so the Department issued a Notice of Proposed Assessment. When Taxpayers did not respond to the Notice of Proposed Assessment, the Department issued a Demand for Payment. Taxpayers 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 – Federal Discrepancy.

DISCUSSION Taxpayers state that the Internal Revenue Service (“IRS”) audited Taxpayers’ federal returns for the 2018 and 2019 tax years, and this audit resulted in an increase in Taxpayers’ FAGI. Taxpayers argue that they successfully challenged the IRS’ audit, and that their FAGI was adjusted back to what they reported on their 2018 and 2019 Indiana tax returns. Taxpayers provided a copy of the federal audit report and a copy of letters they received from the IRS showing that their FAGI had been changed back to the number originally reported. 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) and Lafayette Square Amoco, Inc. v. Indiana Dept. 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. The starting point for determining Indiana income tax is the taxpayer’s federal adjusted gross income as defined in I.R.C. § 62, which taxpayers are directed to enter on their Indiana return before making modifications that are outlined in IC 6-3-1-3.5. Taxpayers demonstrated that after they protested their federal audit, the IRS restored their FAGI to what it was before the audit. Because the Department’s adjustments were predicated on a federal discrepancy, and Taxpayers have shown that there is no longer a federal discrepancy, there is no longer a basis for the Department’s adjustments. Taxpayers have therefore carried their burden to show that the Department’s assessment is incorrect as provided by IC 6-8.1-5-1. FINDING Taxpayers’ protest is sustained. April 24, 2025 Replaces Finding Document: New