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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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

Despite retaining ownership of their former Indiana home, Individuals provided documentation indicating their intention to abandon their Indiana domicile and establish a permanent place of residence in Tennessee for purposes of Individuals' 2011 and 2012 Indiana income tax.

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); 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 full-time residents of Indiana during 2011 and 2012 and not required to file Indiana income tax returns as full-time Indiana residents during those years.

Taxpayers are a married couple who own a home in Indiana and a home in Tennessee. Taxpayers formerly filed Indiana individual income tax returns as fulltime residents of this state.

In July 2015, the Indiana Department of Revenue ("Department") sent Taxpayers a letter stating that "[b]ased on information reported to the [Department] we have determined that you have unreported income for the tax year 2011." The letter asked Taxpayers to "[s]end a letter that explains why you were not required to file a 2011 income tax return" The Department sent Taxpayers a separate but identical letter addressing the 2012 tax year.

Taxpayers responded that same year providing the Department copies of their 2011 and 2012 IT-40PNR ("Part-Year and Full-Year Nonresident") Indiana returns along with copies of their corresponding federal returns. Taxpayers also forwarded copies of their Tennessee drivers' licenses.

The Department acknowledged receipt of the Indiana returns, the federal returns, and the Tennessee drivers' licenses. However, in the Department's written response, the Department found that Taxpayers had "taken the Indiana Homestead Tax Credit at the [Indiana address]." The Department concluded that because Taxpayers had "taken the Homestead credit you're considered a full-year Indiana resident, which makes your W2's and 1099's taxable to the state of Indiana return."

Taxpayers disagreed with the Department's determination that they were full-time Indiana residents requiring them to file Indiana IT-40 ("Full-Year Resident") tax returns and submitted a protest to that effect. An administrative hearing was conducted by telephone during which Taxpayers' representative explained the basis for the protest. This Letter of Findings results.

I. Individual Income Tax - Residency.

The issue is whether Taxpayers were residents of Indiana during 2011 and 2012 requiring them to file Indiana income tax returns reflecting that full-time residency status.

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.

To establish a domicile, a taxpayer "must be physically present at a place, and must have the simultaneous intent of establishing a home at that place." 45 IAC 3.1-1-22. For income tax purposes, "a person has only one domicile at a given time even though that person maintains more than one residence at that time." Id. Additionally, "Once a domicile has been established, it remains until the conditions necessary for a change of domicile occur." Id. "To effect a change of domicile, there must be an abandonment of the first domicile with an intention not to return to it, and there must be a new domicile acquired by residence elsewhere with an intention of residing there permanently, or at least indefinitely." Croop v. Walton, 157 N.E. 275, 278 (Ind. 1927).

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, 157 N.E. at 278-79. 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.

However, the law also requires a simultaneous manifestation of an intent to abandon the Indiana domicile. Id. As the law states, "[A] person has only one domicile at a given time . . . ." 45 IAC 3.1-1-22. Significantly, Taxpayers own an Indiana home and benefited from a Homestead Credit claimed on that home. In doing so, Taxpayers necessarily verified that the Indiana home was their "principal place of residence" and, by doing so, took advantage of the typically significant tax advantage associated with claiming the credit. IC § 6-1.1-12-37(a)(2).

Taxpayers admit that they retained ownership of this Indiana home and make annual visits to that home. Taxpayers also admit that they previously claimed a "Homestead Credit" on that home. IC § 6-1.1-12-37(f) in part requires:

Taxpayers point out that in accordance with IC § 6-1.1-12-37(f) they took positive steps to revoke the Homestead Credit on the Indiana property after they moved from Indiana to Tennessee. Documentation from the Hamilton County Auditor provided by Taxpayers established that they removed the credit. The auditor's letter dated May 2013 stated that:

Accompanying the auditor's May 13 letter were bills for additional property tax attributable to forfeiture of the Homestead Credit.

As noted previously, Taxpayers provided a copies of their 2011 and 2012 federal returns listing their Tennessee address and copies of their 2011 and 2012 Tennessee ('INC 250") individual income tax returns.

Evaluating the documentation on a "case by case basis" in order to determine Taxpayers' "requisite intent," Taxpayers have established that they intended to abandon their Indiana domicile, and manifested "intent and conduct . . . to establish a new domicile." As explained in 45 IAC 3.1-1-22, "a person can only have one domicile at a given time . . . ." In this case, Taxpayers have established that their one domicile is in Tennessee, that it was so in 2011 and 2012.

Taxpayers are not required to file 2011 and 2012 Indiana income tax returns as residents of this state.

Taxpayers' protest is sustained.