in-20250528-IR-045250237NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20231800 Indiana Individual Income Tax For the Tax Year 2021 HOLDING  Individuals failed to provide verifiable supporting documents to substantiate that the assessment was incorrect. ISSUE

I. Indiana Individual Income Tax – Residency.

Authority: 50 U.S.C. § 4001; IC 6-3-1-3.5; IC 6-3-1-12; IC 6-3-1-13; IC 6-3-2-1; IC 6-3-2-2; IC 6-8.1-5-1; IC 6-8.1-5-4; Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014); Miller Brewing Co. v. Indiana Dep’t of State Revenue, 903 N.E.2d 64 (Ind. 2009); Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); 45 IAC 3.1-1-21; 45 IAC 3.1-1-23; Income Tax Information Bulletin 27 (July 2020). Taxpayers protest the Department’s assessment of individual income tax for 2021. STATEMENT OF FACTS Taxpayers (Husband and Wife) together filed a 2021 Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return (IT-40PNR). Taxpayers received a $140 refund in April 2022. In early 2023, the Indiana Department of Revenue (“Department”) determined that Taxpayers were required – but failed – to file the Indiana resident return, include Schedule CT-40 (County Tax Schedule for Indiana Residents), and remit the $773 Indiana county income tax. Thus, the Department adjusted that return, billed back the prior refund, and assessed Taxpayers Indiana county income tax, penalty, and interest. In June 2023, the Department requested that Taxpayers provide additional documents, including (i) IT-40 and all supporting schedules, (ii) all income statements and (iii) other state return(s). Taxpayer protested but did not provide the above documents. Taxpayers asked the Department to make the “[f]inal determination without a hearing.” This Letter of Findings ensues based on the information provided and available within the file.

I. Indiana Individual Income Tax – Residency.

DISCUSSION Taxpayers protested the Department’s adjustments of their Indiana tax filing for 2021. The issue is whether Taxpayer provided sufficient documents to substantiate that they correctly filed their return and the assessment was wrong. IC 6-8.1-5-4(a) provides, “[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.” If the Department “reasonably believes that a person has not reported the proper amount of tax due,” it “shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to [D]epartment” IC 6-8.1-5-1(b). Importantly, “each tax year stands alone.” Miller Brewing Co. v. Indiana Dep’t of State Revenue, 903 N.E.2d 64, 69 (Ind. 2009). IC 6-8.1-5-1(c) provides that 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. Further, the taxpayer is required to provide documents explaining and supporting his challenge that the Department’s assessment is wrong. Generally, 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.’” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). 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). 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(a). IC 6-3-2-2(a) specifically outlines what is income derived from Indiana sources and subject to Indiana income tax. For Indiana income tax purposes, the presumption is that taxpayers file their federal income tax returns as required pursuant to the Internal Revenue Code.  Thus, to efficiently and effectively compute what is considered the taxpayers’ Indiana income tax, the Indiana statute refers to the Internal Revenue Code. IC 6-3-1-3.5(a) provides the starting point to determine the taxpayers’ taxable income and to calculate what would be their Indiana income tax after applying certain additions and subtractions to that starting point. For Indiana income tax purposes, resident “includes (a) any individual who was domiciled in this state during the taxable year, or (b) any individual who maintains a permanent place of residence in this state and spends more than one hundred eighty-three (183) days of the taxable year within this state . . . .” IC 6-3-1-12; see also 45 IAC 3.1-1-21. Nonresident is “any person who is not a resident of Indiana.” IC 6-3-1-13. Nonetheless, when a person is a servicemember, the servicemember’s residence or domicile is determined under the federal law. 50 U.S.C. § 4001(a) provides: In addition, 45 IAC 3.1-1-23(5) provides, Indiana residents who become members of the military service remain Indiana residents regardless of their geographical assignments. Military members can change their legal residence only by filing DD Form 2058, State of Legal Residence Certificate. (Emphasis added). Further, Income Tax Information Bulletin 27 (July 2020), 20200729 Ind. Reg. 045200396NRA, explains, in part: In this case, Taxpayers seemingly argued that the Department erred in assessing Indiana tax on their income, which was attributable to California. Taxpayers stated, in part: Upon review, undisputedly, during 2021, Husband’s home of record was Indiana. Thus, without a properly executed Form DD 2058 changing his Indiana residency to California prior to January 1, 2021, Husband remained an Indiana resident pursuant to the above-mentioned applicable law. As such, Husband’s income – according to his home of record – was subject to Indiana state and county income tax. Taxpayers were required to file an Indiana full-year resident return (IT-40), include a Schedule CT-40 (County Tax Schedule for Indiana Residents), and report the county income tax because Husband was an Indiana resident as of January 1, 2021. But Taxpayers failed to do so. Rather, Taxpayers incorrectly filed the IT-40PNR and reported Husband’s income for Indiana state income tax purposes only, excluding the Indiana county income tax. It was Indiana county income tax on Husband’s wage income that the Department sought to collect in 2023. To conclude, the assessment in question was based on Husband’s income and home of record. Without the above-mentioned Form DD 2058 to change his Indiana residency to California prior to January 1, 2021, and without the requested documents, the Department is not able to agree that Taxpayers met their burden of proof demonstrating the assessment was incorrect. FINDING Taxpayers’ protest is denied. March 28, 2025 Replaces Finding Document at: New