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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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.

Individual provided enough documentation to establish that he was not an Indiana resident for 2011 and 2012. Therefore, Individual was 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; 45 IAC 3.1-1-21; 45 IAC 3.1-1-22; IC § 6-8.1-5-1; 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); Croop v. Walton, 157 N.E. 275 (Ind. 1927); State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988).

Taxpayer protests the Department's proposed assessment for 2011 and 2012.

II. Tax Administration - Non-Filer Penalty and Interest.

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

Taxpayer protests the imposition of the penalty and interest.

Taxpayer is an individual currently living in Ohio. The Indiana Department of Revenue ("Department") determined that Taxpayer was an Indiana resident for tax years 2011 and 2012 and that Taxpayer failed to file 2011 and 2012 Indiana income tax returns. The Department therefore, issued a proposed assessments for 2011 and 2012 income tax, penalty, and interest.

Taxpayer protested the assessment. An administrative phone hearing was held. This Letter of Findings ensues and addresses Taxpayer's protest of the proposed assessment for tax years 2011 and 2012. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax - Residency.

The Department assessed Taxpayer income tax for the 2011 and 2012 tax years on the ground that Taxpayer was domiciled in Indiana or was an Indiana resident in 2011 and 2012 and that he failed to file his 2011 and 2012 Indiana income tax returns. The Department based its assessment on the fact that Taxpayer maintained an Indiana driver's license, renewed vehicle registration, was registered Indiana voter, and tax documents with Taxpayer's Indiana address as the payee address. The issue is whether, for tax years 2011 and 2012, Taxpayer was an Indiana resident or was domiciled in Indiana and was therefore subject to Indiana income tax.

As a threshold issue, all tax assessments are prima facie evidence that the Department's claim for the unpaid tax is valid; 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, 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 taxpayer's taxable income and to calculate what their Indiana income tax would be after applying certain additions and subtractions to that starting point.

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:

For guidance in determining a taxpayer's domicile, the Department refers to Croop v. Walton, 157 N.E. 275 (Ind. 1927). In Croop a taxpayer, Mr. Walton, moved from Sturgis, Michigan to Elkhart, Indiana by selling his Michigan residence and purchasing a residence in Indiana, where he and his wife lived for several years for the benefits of his wife's health. Indiana assessed Mr. Walton state income tax on his intangible property. Id. at 276-78. Mr. Walton disagreed, arguing that his intangible property was not subject to Indiana taxes because he was domiciled in Michigan. Id. The court found that Mr. Walton: owned and managed a company and stores in Michigan; maintained his membership with lodges, clubs, and a church; on various occasions exercised his civil and political rights; and that Sturgis was used in his legal documents, including insurance policies, mortgages, leases, contracts, and other instruments. Ruling in favor of Mr. Walton, the court concluded that Mr. Walton did not change his domicile from Michigan to Indiana and his intangible property was not subject to certain Indiana taxes. The court explained, in relevant part, that:

In State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988), the Indiana Supreme Court reiterated similar analysis and 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 court illustrated, in relevant part, that:

In short, any individual who was domiciled in this state during the taxable year is a resident. IC § 6-3-1-12(a). "A change of domicile requires an actual moving with intent to go to a given place and remain there. It must be an intention coupled with acts evidencing that intention to make the new domicile a home in fact. . . . [T]here must be the intention to abandon the old domicile; the intention to acquire a new one; and residence in the new place in order to accomplish a change of domicile." Bayh, 521 N.E.2d at 1317.

In this instance, Taxpayer explained that in 2003 he and his family moved to Mexico for work from Indiana. He stated that his employer only had four offices globally (Indiana is not one of the locations). Taxpayer also explained that prior to his move he made one of his relatives in Indiana his power of attorney. This allowed the relative to file his taxes, receive mail, and engage in other business if necessary while he was abroad. He explained that he needed a power of attorney because it is was difficult to receive mail, especially tax information, from outside Mexico to his location there.

In 2013, Taxpayer and his family returned to the United States to reside in Ohio, where he still resides. Taxpayer documented his move to Ohio with tax documents with Taxpayer's Ohio payee address, Mortgage application for the purchase of his Ohio home, mover quote, home owner's insurance policy for his Ohio home, Ohio vehicle registration, and Ohio driver's license.

During the protest process, Taxpayer submitted additional documentation to support the assertion that he was not an Indiana resident and did not owe any Indiana income tax for the tax years 2011 and 2012. The documents included Taxpayer's visa and temporary resident card for Mexico, school absentee reports for his children, and evidence he participated in Mexico's social security plan. All of the factors weigh in favor of Taxpayer's argument that he was not domiciled in or a resident of Indiana during 2011 and 2012, as explained by Croop and Bayh.

Pursuant 45 IAC 3.1-1-22 Taxpayer has documented relevant facts that establish him new domicile out of state. Therefore, Taxpayer has met the burden of proving the proposed assessment wrong, as required by IC § 6-8.1-5-1(c).

Taxpayer's protest is respectfully sustained.

II. Tax Administration - Non-Filer Penalty and Interest.

Taxpayer requests that the Department abate the penalty and interest. Pursuant to IC § 6-8.1-10-3(a), the Department may assess a penalty if the taxpayer "fails to file a return on or before the due date . . . ."

In addition, Indiana imposes interest on overdue tax pursuant to IC § 6-8.1-10-1(a), which states:

Taxpayer established that he will not owe the proposed tax assessment, as discussed in Issue I. Taxpayer has been sustained on his protest of the imposition of assessed income tax, therefore, the issue of penalty and interest assessed is moot.

Taxpayer's protest of the negligence penalty and interest is sustained.

For the reasons discussed above, Taxpayer's protest of the Department's proposed assessment for the 2011 and 2012 tax years is sustained. Taxpayer's protest of the negligence penalty and interest is moot since Taxpayer does not owe any of the proposed assessment.