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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 was a resident of Indiana for 2014 but not 2012 nor 2013. Therefore, Individual was required to file 2014 individual Indiana income tax return.

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 § 6-1.1-12-37; 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); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 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 the tax years 2012-2014.

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 non-filer penalty and interest.

Taxpayer is an individual with property in both Indiana and Florida. In 2015 the Indiana Department of Revenue ("Department") conducted an audit of Taxpayer's business. During that time the Department also investigated Taxpayer's individual income and determined that Taxpayer was an Indiana resident for the tax years 2012-2014 and that Taxpayer failed to file 2012-2014 Indiana income tax returns. The Department therefore, issued proposed assessments for 2012-2014 income tax, penalty, and interest.

Taxpayer protested the assessments. An administrative phone hearing was held. This Letter of Findings ensues and addresses Taxpayer's protest of the proposed assessment for the tax years 2012-2014. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax - Residency - Domicile.

The Department assessed income tax for the 2012-2014 tax years on the grounds that Taxpayer was an Indiana resident and that she failed to file her 2012-2014 Indiana income tax returns. Taxpayer contends that she was not required to file 2012-2014 Indiana income tax returns because she was not an Indiana resident. The issue is whether, for the tax years 2012-2014, Taxpayer was an Indiana resident and therefore was 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 her 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 would be her Indiana income tax after applying certain additions and subtractions to that starting point.

For Indiana income tax purposes, 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 . . . ." 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:

A person who leaves his place of residence temporarily, but with the intention of returning, has not lost his original residence.

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.

The Department determined that Taxpayer was an Indiana resident based on both tests: Taxpayer was domiciled in Indiana for 2012 and 2013 and Taxpayer was in Indiana for 183 days while maintaining a permanent residence in Indiana for the year 2014.

The Department determined that Taxpayer was domiciled in Indiana for the tax years 2012 and 2013. The Department based this determination on the fact that Taxpayer owned a home in Indiana. Taxpayer operated her Indiana based business in throughout the Midwest and stayed in her Indiana home instead of a hotel, and was in Indiana more than 183 days in 2014. Taxpayer only needed to meet one part of the two tests to be considered an Indiana resident.

Taxpayer provided several documents to support her position that she is domiciled in Florida. Taxpayer purchased a home in Florida in 1994. Taxpayer provided documentation that she is taking the Florida homestead credit on her Florida property tax. Taxpayer also provided her Florida driver license, Florida vehicle registration, Florida voter registration, Florida guardianship papers, Florida trust documents, and a Florida club membership.

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 1317-18. Taxpayer provided sufficient documentation to show that she was not domiciled in Indiana for 2012 and 2013. Therefore, Taxpayer has met the burden of proving the proposed assessment wrong for the years 2012 and 2013, as required by IC § 6-8.1-5-1(c).

The Department determined that Taxpayer was in Indiana for over 183 days during 2014. The Department confirmed this through flight records and credit card purchases. Furthermore, Taxpayer admitted to being in Indiana for more than 183 days. Taxpayer explained she was in Indiana for an extended period of time dealing with family situations. She claimed that she did not always reside in her home in Indiana, and was attending to family. Taxpayer claims that her time in Indiana therefore does not fall under IC § 6-3-1-12(b).

Taxpayer however is mistaken. "[A]ny 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(b). Therefore, to be a resident under this statute, a taxpayer only needs to be in Indiana for 183 and have a permanent place of residence. As previously explained, Taxpayer maintains a home in Indiana. Also, Taxpayer was in Indiana for more than 183 days in 2014. Both criteria of IC § 6-3-1-12(b) have been met and so Taxpayer was an Indiana resident in 2014. Taxpayer has not met her burden under IC § 6-8.1-5-1(c). Therefore, Taxpayer's protest that she was not an Indiana resident in 2014 based on being in Indiana less than 183 days is denied.

Taxpayer's protest is sustained on her protest for the years 2012 and 2013. Taxpayer is denied on her protest for 2014.

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

Taxpayer requested that the Department abate the non-filer penalty.

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 . . . ." Since Taxpayer demonstrated that she was not a resident for 2012 and 2013, her penalty will only be imposed on the amount of income tax due for 2014.

Taxpayer asserts that she does not owe interest. Indiana imposes interest on overdue tax pursuant to IC § 6-8.1-10-1(a), which states:

In the case of the interest assessed, the Department has no discretion to abate or adjust the amount of interest owed. IC § 6-8.1-10-1(e). Taxpayer's request to abate interest is denied. However, since base tax will be reduced, the interest will also be reduced

Taxpayer's protest of the non-filer penalty is sustained for the years 2012 and 2013 while it is denied for the year 2014. Taxpayer's protest of interest is denied.

For the reasons discussed above, Taxpayer's protest of the Department's proposed assessment for the 2012 and 2013 tax years is sustained, while the proposed assessment for 2014 is denied. Taxpayer's protest of the non-filer penalty is sustained for 2012 and 2013 while Taxpayer's protest is denied for 2014. Taxpayer's protest on interest is denied.