in-20250528-IR-045250245NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20241720 Individual Income Tax For The Year 2020 HOLDING Individual failed to establish that the assessment for additional Indiana income tax was incorrect. ISSUE

I. Individual Income Tax – Retirement Account Distributions.

Authority: I.R.C. § 61; I.R.C. § 62; I.R.C. § 408; IC 6-3-1-3.5; IC 6-3-2-1; IC 6-8.1-5-1; 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); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Income Tax Information Bulletin 119 (February 2021); Coronavirus-related relief for retirement plans and IRAs questions and answers, https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers. Taxpayer protests the Department’s assessment of additional Indiana individual income tax. STATEMENT OF FACTS In 2020, Taxpayer was an Indiana resident who filed an Indiana individual income tax return. In 2023, Taxpayer received a Notice of Proposed Assessment from the Indiana Department of Revenue (“Department”) indicating that he owed additional Indiana individual income tax for the 2020 tax year. Taxpayer disagreed and submitted a protest to that effect. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Individual Income Tax – Retirement Account Distributions.

DISCUSSION The Department determined that Taxpayer owed additional Indiana income tax after reviewing his 2020 Indiana individual income tax return. Taxpayer protested the assessment. In the hearing, Taxpayer explained that he took an early distribution from his retirement account during the 2020 tax year. 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. Consequently, a taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. See 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). Additionally, “[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 a tax “upon 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. 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 the modifications outlined in IC 6-3-1-3.5. I.R.C. § 62 defines adjusted gross income as gross income minus certain deductions which are enumerated under I.R.C. § 62. I.R.C. § 61 defines gross income as “all income from whatever source derived…” I.R.C. § 408 notes that, “[e]xcept as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee…" When Taxpayer initially filed his Indiana individual income tax return, he did not include the funds he received from his retirement account in his adjusted gross income. Pursuant to I.R.C § 408, I.R.C. § 62, and IC 6-3-2-1, distributions from a retirement account are to be included in gross income and are therefore subject to Indiana income tax. During the hearing, Taxpayer stated that he believed the distribution did not need to be included in his adjusted gross income because of the 2020 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provided special rules for distributions which are considered “coronavirus-related distributions.” A “coronavirus-related distribution” is “a distribution that is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.” Coronavirus-related relief for retirement plans and IRAs questions and answers, https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers (last visited March 6, 2025). The Internal Revenue Service further explains: Coronavirus-related distributions from a retirement account are “generally [] included in income ratably over a three-year period, starting with the year in which [the individual] receive[s] the distribution.” Id. While the CARES Act lays out treatment of coronavirus-related distributions with respect to federal law, Indiana did not initially adopt these provisions. However, the Department’s Income Tax Information Bulletin 119 (February 2021), 20210331 Ind. Reg. 045210100NRA provides: In this case, Taxpayer stated he believed he did not have to include distributions from his retirement account in his adjusted gross income. This was incorrect. Per the CARES Act, any coronavirus-related distributions had to be included in calculating gross income but could be spread out over three years. Per the Department’s Income Tax Information Bulletin 119, Indiana adopted the federal treatment of coronavirus-related distributions and agreed to follow the federal provisions to the same extent. Taxpayer’s failure to include the retirement distribution in his adjusted gross income resulted in the Department issuing a proposed assessment for tax on the unreported income. Taxpayer has not met the burden of proving that the Department’s assessment was incorrect. FINDING Taxpayer’s protest is denied. March 24, 2025 Replaces Finding Document at: New