NOTICE: IC § 6-8.1-3-3.5 and IC § 4-22-7-7 require the publication of this document in the Indiana Register. This document provides the general public with information about the Department's official position concerning a specific set of facts and issues. This document is effective as of its date of publication and remains in effect until the date it is superseded by the publication of another document in the Indiana Register. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Letter of Findings.

Married couple provided sufficient documentation to establish that they were not residents of Indiana for the year 2011, and therefore were not subject to Indiana income tax.

I. Indiana Individual Income Tax - Residency.

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 § 6-3.1-20-1; IC § 6-8.1-5-1; IC § 6-1.1-12-37; Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); 45 IAC 3.1-1-21; 45 IAC 3.1-1-22; 45 IAC 3.1-1-23.

Taxpayers' protest the Department's proposed assessment of Indiana income tax.

II. Tax Administration -Penalty and Interest.

Authority: IC § 6-8.1-10-3; IC § 6-8.1-10-1.

Taxpayers' protest the imposition of the penalty and interest.

In 2014 the Indiana Department of Revenue ("Department") sent Taxpayers letters that stated that the Department had "determined that you have unreported income for tax year 2011." Taxpayers protested the Department's proposed assessments for Indiana income tax, penalty, and interest. An administrative telephone hearing was held; this Letter of Finding results. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax - Residency.

The Department's tax assessments are prima facie evidence that the Department's claim for the unpaid tax is valid; a taxpayer bears the burden of proving that any assessment is incorrect. IC § 6-8.1-5-1(c); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012). Thus, a taxpayer is required to provide documentation explaining and supporting their challenge that the Department's assessment is wrong.

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. 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. Furthermore, IC § 6-3.1-20-1 defines Indiana income as "adjusted gross income of an individual taxpayer, and the individual's spouse, if the individual files a joint adjusted gross income tax return."

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.

Additionally, 45 IAC 3.1-1-22 states:

Under Indiana law "[h]omestead" is defined as "an individual's principal place of residence that is located in Indiana" and that "the individual owns . . . ." IC § 6-1.1-12-37(a)(2). A taxpayer is entitled to claim a property tax deduction, known as the homestead deduction, against taxes imposed on his or her homestead property pursuant to IC § 6-1.1-12-37(e). When the taxpayer is no longer qualified for the homestead deduction, the taxpayer must notify the auditor of the county where the homestead is located within sixty days after the dated of that change. IC § 6-1.1-12-37(f).

The Department also notes 45 IAC 3.1-1-23, which states in relevant part:

In State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988), the Indiana Supreme Court determined that Mr. Bayh met the residency requirement for the office of Governor because Mr. Bayh's domicile remained in Indiana even though Mr. Bayh moved to different states for various reasons for many years. Specifically, the Supreme Court stated in relevant part:

Id. at 1317-18. (Internal citations omitted) (Emphasis added).

Taxpayers state that in 2008 they bought property in Florida with the intention of making Florida their state of residence, and for Indiana to be a place where they vacation for "about four to six weeks a year." Taxpayers provided the Department with various documentation to show that they had in fact changed to a Florida domicile. That documentation included a utility bill from a Florida utility company, voter registration information showing that the husband registered to vote in Florida in 2008, voting history information for Florida, driver's licenses for Florida for both husband and wife issued in 2008, a letter from the residential community in Florida where they live stating that they "have been residents and stockholders in [the] park since March, 2008," and information from an Indiana county auditor's office showing the repayment of a homestead deduction.

Pursuant to Bayh and 45 IAC 3.1-1-22, Taxpayers have documented relevant facts to establish that their domicile in 2011 was Florida and not Indiana.

Taxpayers' protest is sustained.

II. Tax Administration -Penalty and Interest.

Taxpayers were assessed a penalty under IC § 6-8.1-10-3, and interest per IC § 6-8.1-10-1. Since Taxpayers prevailed in their protest, as discussed in Issue I supra, the assessment of penalty and interest is moot.

Taxpayers' protest of the penalty and interest is sustained.

For the reasons discussed above, Taxpayers' protest of the Department's proposed assessment for the 2011 tax year is sustained. Taxpayers' protest of the penalty and interest is moot.