in-20250430-IR-045250185NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20242174 Individual Income Tax For the Year 2022 HOLDING Individuals met their burden of establishing that their 2022 income was not subject to Indiana individual income tax because they were neither employed nor living in Indiana that year. ISSUE

I. Individual Income Tax – Out-of-State Income.

Authority: 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 assessment of Indiana individual income tax in 2022. STATEMENT OF FACTS Taxpayers are a husband and wife who were residents of Kentucky during the entire 2022 tax year. In March 2023, Taxpayers relocated to Indiana. The Indiana Department of Revenue (“Department”), after receiving a 2022 Indiana Individual Income Tax Return (“Form IT-40”), determined that Taxpayers owed Indiana income tax for the 2022 tax year. Taxpayers protested the assessment and waived their right to an administrative hearing. This Letter of Findings is written in reliance on documentation provided by Taxpayers and the Department’s own records. Additional facts will be provided as necessary.

I. Individual Income Tax – Out-of-State Income.

DISCUSSION After receiving a 2022 Form IT-40, the Department determined that Taxpayers owed Indiana income tax for that year. Taxpayers argue that they were Kentucky residents for all of 2022 and did not move to Indiana until early 2023. Additionally, they argue that neither of them physically worked in Indiana or for an Indiana employer. In support of their protest, Taxpayers provided their 2022 Kentucky Individual Income Tax Return, 2022 U.S. Individual Income Tax Return, and the warranty deed to their Indiana home. As a threshold issue, it is a taxpayer’s responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence the Department’s claim for the unpaid tax is valid.  IC 6-8.1-5-1(c). The burden of proving 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); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). 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 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(b). IC 6-3-2-2(a) specifically outlines what is income derived from Indiana sources and subject to Indiana income tax. The Department’s records reflect that, in 2024, Taxpayers’ tax representative filed a 2022 Form IT-40. This was filed in error. Based on the documentation provided by Taxpayers, the Department agrees that Taxpayers were not Indiana residents, working physically in Indiana, nor earning Indiana source income for the entire 2022 tax year. Taxpayers’ Kentucky Individual Income Tax Return and U.S. Individual Income Tax Return, both of which list their Kentucky address, reflect that Taxpayers reported all their income to Kentucky. Additionally, the warranty deed provided by Taxpayers confirms that they did not take possession of their Indiana residence until March 23, 2023. Thus, no Indiana income tax is due. However, because Taxpayers erroneously filed a 2022 Form IT-40 which reflects an amount due for Indiana income tax, Taxpayers will need to file an amended return showing $0 Indiana income to remedy this error. FINDING Taxpayers’ protest is sustained subject to Taxpayers filing an amended Form IT-40. February 5, 2025 Replaces Finding Document at: New