in-20250528-IR-045250238NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20232332 Income Tax For Tax Year 2022 HOLDING Nonresident Partner of a partnership, which does business in Indiana, failed to meet his burden of proof, demonstrating that the proposed assessment was incorrect. ISSUE

I.  Individual Income Tax – Burden of Proof.

Taxpayer protests the assessment, claiming that the proposed assessment was incorrect. STATEMENT OF FACTS Taxpayer resides in Texas and is a nonresident partner of a partnership, which conducts business in Indiana. Taxpayer filed an Indiana Part-Year or Full-Year nonresident individual income tax return (IT-40PNR) and included an Indiana Schedule K-1 to claim a refund of tax withheld on distributions he received from that partnership for the tax year 2022. The Indiana Department of Revenue (“Department”) denied Taxpayer’s claim. That denial resulted in an assessment of additional tax, interest, and penalty. Taxpayer paid the assessment under protest and requested that the Department make the “[f]inal determination without a hearing.” This Letter of Findings results based on the documentation submitted by Taxpayer and, the Department’s records, and the information within the file.

I.  Individual Income Tax – Burden of Proof.

DISCUSSION The Department denied Taxpayer’s refund claim and assessed additional tax, interest, and penalty. In a letter, the Department explained: Taxpayer, to the contrary, contended that he did not owe any tax and was entitled to the refund according to the 2022 Schedule K-1 he received from the partnership doing business in Indiana. The issue is whether Taxpayer’s documentation demonstrated that the Department’s 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 an adjusted gross income tax on all residents. IC 6-3-2-1. For corporations and nonresidents, IC 6-3-2-2(a) provides what is income derived from Indiana sources and subject to Indiana income tax. When a partnership – a pass-through entity – conducts business in Indiana and has nonresident partners, IC 6-3-4-12(i) mandates that the partnership files a composite tax return on behalf of and withholds the tax on distributions made to its nonresident partners: After the partnership files such tax return and remits the tax withheld, its nonresident partners, such as Taxpayer in this case, file their individual income returns to report their pass-through income attributable to Indiana sources and claim their refunds if there are overpayments. Taxpayer in this case is a nonresident partner of a partnership doing business in Indiana under IC 6-3-4-12. Taxpayer filed his IT-40PNR and included a Schedule IN K-1 he received from that partnership to claim his refund. However, a review of the Department’s records showed that the partnership in question was required – but failed – to file the prerequisite composite adjusted gross income tax return and remit the tax withheld on behalf of Taxpayer. Without partnership’s filing and remittance, Taxpayer’s filing was insufficient to substantiate that he had a tax credit or an overpayment of income tax with respect to such pass-through income. In other words, in the absence of the partnership’s filing and remittance, the Department correctly assessed Taxpayer the income tax on his pass-through income attributable to Indiana sources due to insufficient withholding tax credit. To conclude, given the totality of the circumstances, in the absence of the partnership’s tax filing and remittance on Taxpayer’s behalf, as statutorily required, the Department is not able to agree that Taxpayer met his burden of proof under IC 6-8.1-5-1 and that he was entitled to a refund. Finding Taxpayer’s protest is denied. March 28, 2025 Replaces Finding Document at: New