in-20260729-IR-045260231NRA: LETTER OF FINDINGS: 01-20251336

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 01-20251336 Income Tax For the Year 2023 HOLDING Individual demonstrated that the proposed assessment was overstated. ISSUE

I. Income Tax - Proposed Assessment.

Authority: 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 6-3-3-3; IC 6-8.1-5-1; IC 6-8.1-5-4; IC 6-8.1-9-1; Stinson Est. v. United States, 214 F.3d 846 (7th Cir. 2000); Indiana Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Miller Brewing Co. v. Indiana Dept. of State Revenue, 903 N.E.2d 64 (Ind. 2009); Express Scripts Inc. v. Indiana Dept. of State Revenue, 170 N.E.3d 273 (Ind. Tax Ct. 2021); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Indiana Dept. of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 100 (Ind. Ct. App. 1974); 45 IAC 15-9-2; Income Tax Information Bulletin 28 (February 2022); Income Tax Information Bulletin 28 (November 2023). Taxpayer claimed that the assessment was incorrect and that she was entitled to a tax refund for 2023. STATEMENT OF FACTS Taxpayer is an individual who currently resides in Indiana. Taxpayer filed a nonresident return (Form IT-40PNR) for the tax year 2023 to request a refund in 2024. The Indiana Department of Revenue (“Department”) reviewed the return, denied her refund request, and assessed additional tax plus interest and penalty in July 2024. Taxpayer protested the assessment and requested that the Department make the final decision without an administrative hearing based on the documents submitted. This final determination ensues.

I. Income Tax - Proposed Assessment.

DISCUSSION Taxpayer claimed that she was not an Indiana resident for the tax year at issue, her income was not attributable to an Indiana source, and she was entitled to a refund. The issue thus is whether Taxpayer demonstrated that the assessment was incorrect and that she was entitled to a refund for 2023. If a person has paid more tax than the person determines is legally due for a particular taxable period, the person may file a claim for a refund with the Department subject to applicable statute of limitations. IC 6-8.1-9-1(a). The Department “has no legal method of generating a claim for refund. A claim for refund can only be initiated pursuant to IC [§] 6-8.1-9-1.” 45 IAC 15-9-2(b). Additionally, IC 6-8.1-5-4(a) states that “[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, including invoices, register tapes, receipts, and canceled checks.” The person also “must allow inspection of the books and records and returns by the [D]epartment or its authorized agents at all reasonable times.” IC 6-8.1-5-4(c). The Department “shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment” if it “reasonably believes that a person has not reported the proper amount of tax due[.]” IC 6-8.1-5-1(b). Notices of proposed assessment issued by the Department are prima facie evidence that the assessments are correct; the burden of proving the assessment is incorrect rests with the taxpayer. IC 6-8.1-5-1(c). Crucially, “each tax year stands alone.” Miller Brewing Co. v. Indiana Dept. of State Revenue, 903 N.E.2d 64, 69 (Ind. 2009). When submitting evidence as part of her protest, the taxpayer needs to specify and explain the portions of the evidence that she believes to be relevant. As the Indiana Tax Court has previously noted (in the context of a summary judgment motion): “the Court will not consider” exhibits “on the off chance that it might find, on its own and undirected, some fact that supports” a claim, and “the Court is not required to search for specific facts on which” a party relies. Express Scripts Inc. v. Indiana Dept. of State Revenue, 170 N.E.3d 273, 279 (Ind. Tax Ct. 2021). When an agency is charged with enforcing a statute, courts defer to the agency's reasonable interpretation of that statute “over an equally reasonable interpretation by another party.” Indiana Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Poorly developed or non-cogent arguments are subject to waiver. Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). Further, Indiana imposes an adjusted gross income 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(b). The Indiana statute refers to the Internal Revenue Code to compute what is considered the taxpayer's Indiana income tax. A resident's income is determined by starting with the federal adjusted gross income and making certain adjustments. IC 6-3-1-3.5. The “adjusted gross income derived from sources within Indiana” is provided under IC 6-3-2-2. According to IC 6-3-1-12, a 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.” A “nonresident” is “any person who is not a resident of Indiana.” IC 6-3-1-13. A taxpayer may be able to claim certain deductions or credits to reduce his or her tax liability. For example, a nonresident taxpayer may be permitted to claim a credit for taxes he or she paid to reduce her Indiana or local income tax liability pursuant to IC 6-3-3-3(b), which provides: Statutory provisions dealing with deductions or credits are “matters of legislative grace.” Stinson Est. v. United States, 214 F.3d 846, 848 (7th Cir. 2000). The taxpayer thus bears the burden of proof to substantiate her claim for such tax deductions or credits. To that end, the taxpayer is required to provide documentation to explain and support her claim. Where such deduction is claimed, “the party claiming the same must show a case, by sufficient evidence, which is clearly within the exact letter of the law.” Indiana Dept. of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96, 100 (Ind. Ct. App. 1974). Income Tax Information Bulletin 28 (February 2022) (“Information Bulletin 28”), 20230510-IR-045230265NRA, further provides, in part: The Department adjusted Taxpayer's IT-40PNR for 2023 and assessed approximately $1,200 plus interest and penalties. The Department in a Notice of Proposed Assessment explained, in part, the following: In short, the Department reviewed Taxpayer's tax filing, IT-40PNR, and determined that she was responsible for additional tax due because her W-2 income was attributable to an Indiana source. Taxpayer disagreed and protested that the Department erred in denying her refund because for the tax year 2023, she lived and worked in Washington, D.C. and her income was not subject to Indiana state and local income tax. In a letter, Taxpayer stated in part: Taxpayer contended that “the W-2 is clearly incorrect as filed” and that she was entitled to the full refund because her income was not subject to Indiana income tax. To support her protest, Taxpayer offered her W-2 as well as copies of her federal, Washington D.C., and Indiana income tax returns for the tax year 2023. Taxpayer further provided her lease agreements to substantiate that she lived in Washington D.C. during 2023. As mentioned, the Department's assessment is presumed to be correct and the burden of proving the assessment is incorrect rests with the taxpayer. Taxpayer in this case claimed that she filed her IT-40PNR claiming the refund because (i) she lived and worked in Washington D.C. during 2023 and (ii) her W-2 income for 2023 was not attributable to an Indiana source and not subject to Indiana and local income tax. The issue is whether Taxpayer demonstrated that the assessment was wrong. Here, Taxpayer's W-2 demonstrated that she worked for a company based in Washington D.C. and that state income tax was withheld on her behalf and remitted to Indiana according to the mailing address Taxpayer provided to her employer. As such, there is a rebuttable presumption that Taxpayer's W-2 income was attributable to an Indiana source and was subject to Indiana and local income tax. Throughout the protest process, Taxpayer contended that the Department erred in adjusting her tax filing because “the W-2 is clearly incorrect as filed.” Taxpayer was requested, but failed, to provide the Corrected Wage and Tax Statement, Form W-2c (“W-2c”) to substantiate her protest. As such, her W-2 income in question remains attributable to the Indiana source. Nonetheless, Taxpayer's supporting documents indicate that for 2023, she was a Washington D.C. resident who filed a resident tax return reporting the same income to Washington D.C. and filed the IT-40PNR to request a refund from Indiana. Taxpayer may qualify for a tax credit pursuant to the reverse credit agreement between Washington D.C. and Indiana outlined under Information Bulletin 28. In other words, Taxpayer, as a resident of Washington D.C. with income from Indiana, was required to file a resident return with Washington D.C. and include the Indiana income. Taxpayer was also required to “file an Indiana Form IT-40PNR and claim a credit for taxes paid to Washington D.C. for the Indiana source income.” Id. To properly claim such credit, Taxpayer was required, but failed, to include a Schedule G: Offset Credits to the IT-40PNR. To conclude, Taxpayer failed to substantiate her protest that her W-2 income for 2023 was not subject to the Indiana income tax. Without the requested W-2c to rebut the presumption of her income source, Taxpayer's W-2 income was attributable to the Indiana source and thus subject to the Indiana income tax. However, given the totality of the circumstances, the Department is prepared to agree that the assessment was overstated. Taxpayer's documents demonstrated that she was entitled to a tax credit pursuant to the reverse credit agreement. To properly claim such tax credit to reduce her Indiana income tax liability for 2023, Taxpayer is required to amend her IT-40PNR to include the Schedule G: Offset Credits within 30 days. Upon receiving Taxpayer's amended IT-40PNR and Schedule G, a supplemental review to revise the assessment will be performed. If Taxpayer fails to provide the amended IT-40PNR and Schedule G by the 30 day deadline, the protest file will be closed, the Department will not conduct a supplemental review, and Taxpayer will be denied due to the lack of supporting documentation for her protest. FINDING To the extent that Taxpayer provides the amended IT-40PNR including the Schedule G within 30 days, Taxpayer's protest is sustained. Otherwise, Taxpayer's protest is denied. May 15, 2026 Replaces Finding Document: New