in-20250625-IR-045250286NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20221489 Indiana Individual Income Tax For the Year 2018 HOLDING Married couple protested the Indiana Department of Revenue’s (“Department”) proposed assessment of additional Indiana individual income tax for the year 2018. Couple were able to meet their burden of proof. ISSUE

I. Individual Income Tax – Proposed Assessment.

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 Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007). Taxpayers protest the proposed assessment of additional Indiana income tax for the year 2018. STATEMENT OF FACTS Taxpayers are a married couple. Husband filed a Protest Submission Form (“Form”) protesting the Department’s proposed assessment of additional Indiana individual income tax for the tax year 2018. On the Form, Husband checked the box indicating that Taxpayers wanted an administrative hearing regarding the protest. A telephone hearing was scheduled and held. This written ruling results from that hearing. Additional facts will be provided as necessary below.

I. Individual Income Tax – Proposed Assessment.

DISCUSSION The Department’s Notice of Proposed Assessment (“NOPA,” dated December 14, 2021) stated that a “review of your Indiana Individual Income tax for the tax period ending December 31, 2018, indicates you owe an additional $167.61.” The “Explanation for this Assessment” on the NOPA states the Department “has determined your reported federal adjusted gross income is understated based on information received from external third-party sources” such as “information received from the Internal Revenue Service.” Additionally, the NOPA states that the “bill is for the state and county tax amount due for this unreported income.” As a threshold issue, it is Taxpayer’s responsibility to establish that the existing tax assessment is incorrect. As stated in IC 6-8.1-5-1(c), “[t]he notice of proposed assessment is prima facie evidence that the [D]epartment’s claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” 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). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Further, “[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 an adjusted gross income tax on all residents. IC 6-3-2-1(a). Taxpayer’s Indiana income is determined by starting with the federal adjusted gross income and making certain adjustments. IC 6-3-1-3.5(a). IC 6-3-2-2(a) specifically outlines what is income derived from Indiana sources and subject to Indiana income tax. At the hearing, Taxpayers noted that their 2018 federal and state returns had been amended. From an examination of the information provided and the Department’s records, the following can be reconstructed: The confusion, as it were, arose from a gap in timing—the Department received federal matching information for Taxpayers, but that federal information did not reflect that they had amended for federal purposes too. This caused the Department to issue a NOPA to reverse, so to speak, the refund that the Department believed had been issued in error. In the present case, Taxpayers have met the burden of proving the proposed assessment is wrong, as required under IC 6-8.1-5-1(c). If the Department has used a subsequent refund of Taxpayers’ to offset the 2018 NOPA, then Taxpayers are entitled to a refund not to exceed the amount applied against the NOPA. FINDING Taxpayers’ protest is sustained. April 17, 2025 Replaces Finding Document: New