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 Indiana Department of Revenue'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 This document is effective as of its date of publication and remains in effect until the date it is superseded by the publication of another document in the Indiana Register.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.

Individual was not entitled to a refund of individual income tax because he did not follow departmental procedures for filing a claim for refund prior to filing a legal protest; Individual was not entitled to abatement of late payment penalties and interest because he failed to show that the late payment was due to reasonable cause.

I. Tax Administration - Refunds.

Authority: IC § 6-8.1-9-1; Dep't of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Wendt LLP v. Ind. Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Ind. Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); UACC Midwest, Inc. v. Indiana Dep't of State Revenue, 629 N.E.2d 1295 (Ind. T.C. 1994); 45 IAC 15-9-2; Commissioner's Directive 13 (August 2010).

Taxpayer protests the payment of individual income tax.

II. Tax Administration - Penalties and Interest.

Authority: IC § 6-8.1-10-1; IC § 6-8.1-10-2.1; 45 IAC 15-11-2.

Taxpayer protests the imposition of late payment penalties and interest.

Taxpayer is a non-resident individual and member of an Indiana limited liability company ("Company"). The Company purchased a retail center in Terre Haute, Indiana in 2003 by assuming the mortgage and note on the property. Taxpayer was a guarantor on the mortgage and note. In December 2009, the Company defaulted on the mortgage. In December 2010, Taxpayer and the noteholder entered into a Discounted Payoff Agreement whereby the noteholder agreed to accept a lesser amount in satisfaction of the existing note.

In May 2016, Taxpayer filed his Indiana IT-40PNR individual income tax return for tax year 2011. He paid a total of $18,681 in individual income tax. The Indiana Department of Revenue ("Department") subsequently assessed Taxpayer additional amounts for late payment penalty and interest and issued Taxpayer a proposed assessment.

Taxpayer filed the instant protest and requested that the Department review the tax imposed and previously paid, and also asked the Department to abate the penalties and interest. A telephonic administrative hearing was held and this Letter of Findings results. Further facts will be supplied as necessary.

I. Tax Administration - Refunds.

Taxpayer protests the amount of tax paid for the 2011 tax year and asks the Department to review the tax reported by Taxpayer. 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." Dep't of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). In addition, 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. Ind. Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Ind. Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012).

IC § 6-8.1-9-1 provides:

Furthermore, 45 IAC 15-9-2 provides, in relevant part:

The Department further reiterates the requirements for properly claiming a refund in Commissioner's Directive 13 (August 2010), 20100728 Ind. Reg. 045100472NRA, which states, in relevant part:

A claim for refund may also be made by filing an amended return with the Department containing the information required by IC 6-8.1-9-1 within the statutory time period for filing a refund claim. UACC Midwest, Inc. v. Indiana Dep't of State Revenue, 629 N.E.2d 1295, 1299 (Ind. T.C. 1994).

In this instance, Taxpayer submitted a protest letter to "request a review of the tax imposed[.]" Taxpayer argues that the reduction in value of the real property should offset the gain he received with the reduction of the loan amount on the property. However, Taxpayer never filed a GA-110L form requesting a refund of the amount he believed he overpaid, nor did he file an amended return to request a refund of any alleged overpayment. Thus, Taxpayer did not trigger a right to protest payment of the tax. Furthermore, even if Taxpayer had followed the proper procedure for requesting a refund, he has provided no argument or documentation to show what he believes the correct amount of tax should have been, or upon what basis he believes he is entitled to a refund. Generally requesting a "review" is not sufficient for the Department to determine whether Taxpayer correctly filed and paid individual income tax.

In the absence of the designated form or an amended return requesting a refund, the Department has no legal authority to issue a refund in response to Taxpayer's request to review the tax paid, and the Department cannot address the merits of the Taxpayer's request for a "review." Thus, the Department is not able to agree that Taxpayer met its burden of showing that it is entitled to a refund of the tax paid.

Taxpayer's protest is respectfully denied.

II. Tax Administration - Penalties and Interest.

Taxpayer protests the imposition of penalties pursuant to IC § 6-8.1-10-2.1 and the imposition of interest pursuant to IC § 6-8.1-10-1. The Department notes that waiver of interest is not permitted under IC § 6-8.1-10-1(e). Penalty waiver is permitted if the taxpayer shows that the failure to pay the full amount of the tax was due to reasonable cause and not due to willful neglect.

The standard for waiving the negligence penalty is given at 45 IAC 15-11-2(c) as follows:

Taxpayer provided no explanation for the late filing of his Indiana IT-40PNR individual income tax return, and therefore has not shown that he had reasonable cause for the late payment. Taxpayer has not affirmatively established that he exercised ordinary business care in this case. Therefore, waiver of penalties is not warranted under 45 IAC 15-11-2(c).

Taxpayer's protest with respect to the abatement of late payment penalties and interest is respectfully denied.

Taxpayer's Issue I protest regarding the imposition of individual income tax is denied. Taxpayer's Issue II protest regarding the imposition of penalties and interest is denied.