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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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

Individuals failed to establish that they abandoned their Indiana residency status during 2012 and 2013; Individuals retained ownership of their Indiana home during those years and claimed the Homestead Credit when they paid property tax on that home.

I. Individual Income Tax - Residency.

Authority: IC § 6-1.1-12-37(a)(2); IC § 6-1.1-12-37(f); IC § 6-3-2-1(a); IC § 6-3-1-12; IC § 6-8.1-5-1(c); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); State Election Board v. Bayh, 521 N.E.2d 1313 (Ind. 1988); In the Matter of Evrard, 333 N.E.2d 765 (Ind. 1975); Board of Medical Registration and Examination v. Turner, 168 N.E.2d 193 (Ind. 1960); Croop v. Walton, 157 N.E. 275 (Ind. 1927); Culbertson v. Bd. Of Comm'rs of Floyd County, 52 Ind. 361 (1876); Yonkey v. State, 27 Ind. 236 (Ind. 1866); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 3.1-1-22.

Taxpayers argue that they were not residents of Indiana during 2012 and 2013 and not required to file Indiana individual income tax returns as full-time residents.

Taxpayers are a married couple who formerly lived in Indiana. During 2012 and 2013, Taxpayers filed IT-40PNR ("Part-Year and Full-Year Nonresident") Indiana income tax returns.

The Indiana Department of Revenue ("Department") concluded that Taxpayers were full-time Indiana residents during 2012 and 2013. The Department issued Taxpayers proposed assessments of additional Indiana income tax which resulted from that conclusion.

Taxpayers disagreed with that decision and submitted a protest to that effect. An administrative hearing was conducted during which Taxpayers explained the basis for their protest. A Letter of Findings was issued March 14, 2016, sustaining Taxpayers' protest in part and denying it in part.

Taxpayers requested and were granted a rehearing. A second hearing was conducted during which Taxpayers restated their objections. This Supplemental Letter of Findings results.

I. Individual Income Tax - Residency.

Taxpayers argued that they were and are full-time Florida residents and that - after selling their Indiana home - they had no intention of ever returning to Indiana. Taxpayers explained they purchased their Florida home in 2011 and have lived in that home since that date. Taxpayers concede that they previously owned an Indiana home, were owners of that home during 2012 and 2013, but that they sold the home in November 2013.

Tax assessments are prima facie evidence that the Department's claim for the tax is valid, and each taxpayer bears the burden of proving that any assessment is incorrect. IC § 6-8.1-5-1(c); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Thus, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. 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); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). In reviewing a taxpayer's argument, the Indiana Supreme Court has held, that when it examines a statute that an agency is "charged with enforcing . . . we 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 an income tax on "the adjusted gross income of every resident person . . . ." IC § 6-3-2-1(a). For income tax purposes, "The term '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.

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

The supreme court concluded that:

In an earlier case, the Indiana Supreme Court stated that in order to establish a new residence, a taxpayer "must show . . . evidence of acts undertaken in furtherance of the requisite intent, which make that intent manifest and believable." In the Matter of Evrard, 333 N.E.2d 765, 768 (Ind. 1975).

The Department's regulation provides that "[t]here is no one set of standards that will accurately indicate the person's intent in every relocation." 45 IAC 3.1-1-22. Instead, the determination is made on a case by case basis. Id. Facts to be considered include:

In addition, courts have considered a taxpayer's contemporaneous declarations identifying that taxpayer's "home;" insurance policies, mortgages, contracts or other instruments indicating the taxpayer's home; and membership in clubs, churches, or other social groups in a place. Croop v. Walton, 157 N.E. 275. 278-79 (Ind. 1927). Finally, courts have considered the location of taxpayer's household goods and mailing address. Board of Medical Registration and Examination v. Turner, 168 N.E.2d 193, 197 (Ind. 1960); See also, Culbertson v. Bd. Of Comm'rs of Floyd County, 52 Ind. 361 (1876). However, a taxpayer "seeking to establish his claim of exemption from taxation on the ground of nonresidence is not required to show that his property was assessed elsewhere." Croop, 157 N.E. at 276.

In order to change one's domicile from Indiana to an out-of-state location, the law requires the "intent of establishing a home at that place," 45 IAC 3.1-1-22, along with "acts evidencing [an] intention to make the new domicile a home in fact . . . ." Bayh, 521 N.E.2d at 1317.

As explained in the March 2016 Letter of Findings:

However, Taxpayers face the same obstacle they faced in their original protest. Taxpayers not only retained ownership of their Indiana home during 2012 and 2013, they claimed the Indiana Homestead Credit when they paid the property taxes on that home.

The Department does not dispute Taxpayer's argument that they were simply unable to sell their Indiana home until November 2013. However, during that time they were not required to claim the benefit of the Indiana Homestead Credit which necessarily relies on their assertion that Indiana was their "principal place of residence." IC § 6-1.1-12-37(a)(2).

As the Indiana Supreme Court held in Yonkey v. State, 27 Ind. 236 (Ind. 1866), a change of residency "requires an intention in order to change the domicile, and . . . if a person leaves his place of residence temporarily, on business or otherwise, but with the intention of returning, he does not thereby lose his domicile . . . ."

Taxpayers did not establish that they abandoned their Indiana domicile during 2012 and 2013. Taxpayers did not change their residency status for purposes of the Indiana individual income tax during those two years and remain subject to the privileges and duties of that status.

Taxpayers were required to file Indiana full year income tax returns for 2012 and 2013.

Taxpayers' protest is respectfully denied.