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 This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 established that he had no Indiana domicile during 2013. Therefore, the Department's assessments for 2013 Indiana income tax were proven incorrect. Penalty was also abated.

I. Income Tax–Residency.

Authority: IC § 6-3-1-12; IC § 6-8.1-5-1; State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); 45 IAC 3.1-1-22; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007).

Taxpayer protests the imposition of Indiana individual income tax.

II. Tax Administration–Penalty.

Authority: IC § 6-8.1-10-3.

Taxpayer protests the imposition of a penalty.

Taxpayer is an individual. The Indiana Department of Revenue ("Department") determined that Taxpayer was domiciled in Indiana for the tax year 2013 but that Taxpayer neither filed a 2013 Indiana individual income tax return nor paid any 2013 Indiana individual income tax. Taxpayer protested the Department's determination of domicile and the imposition of income tax plus penalty. An administrative hearing was held and this Letter of Findings results. Further facts will be supplied as required.

I. Income Tax - Residency.

Taxpayer protests the imposition of Indiana adjusted gross income tax for the 2013 tax year. The Department determined that Taxpayer was an Indiana domiciliary for 2013 based on the information that Taxpayer had claimed the homestead credit on an Indiana residence. Taxpayer states that he was domiciled in another state in 2013 and had not been a resident of Indiana since taking a job in another state in 2011. Furthermore, Taxpayer states that he did not claim the homestead credit in question. Therefore, Taxpayer argues, he did not need to file a 2013 Indiana income tax return nor did he owe any Indiana income tax for that year.

As a threshold issue, it is Taxpayer's responsibility to establish that the existing tax assessment is incorrect. As stated in IC § 6-8.1-5-1(c), "The notice of proposed assessment is prima facie evidence that the department's claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. Further, "[W]hen [courts] examine a statute that an agency is 'charged with enforcing. . .[courts] 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). Thus, all interpretations of Indiana tax law contained within this decision, as well as the preceding audit, shall be entitled to deference.

Pursuant to IC § 6-3-1-12, a resident is defined as follows:

In other words, a resident includes individuals who are domiciled in Indiana and/or maintain a permanent place of residence in Indiana and then spend more than 183 days in Indiana. In this case, Taxpayer was able to establish that he did not spend more than 183 days in Indiana during 2013. Therefore, in order to be considered a resident of Indiana during 2013, Taxpayer must have been domiciled here.

Domicile is defined by 45 IAC 3.1-1-22, which states:

Thus, a new domicile is not necessarily created when an individual moves to an address outside Indiana. Instead, the individual must move to the new non-Indiana address and have intent to remain at that non-Indiana address.

The Indiana Supreme Court considered the issue of the meaning of "domicile" in State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988), in which the court provided:

Therefore, an examination of Taxpayer's acts is required to determine if Taxpayer had the intention to acquire a new domicile outside Indiana and to abandon her domicile in Indiana.

A review of the domiciliary criteria listed under 45 IAC 3.1-1-22 is illuminating in this matter. Taxpayer was born and raised in Indiana. Taxpayer then attended college at an Indiana institution. As is typical of college students, Taxpayer had little of the tangible indicia of residence. Rather, Taxpayer continued the Indiana childhood domicile listed by the Court in Bayh throughout his college years. After graduating from college, Taxpayer accepted a job offer in another state in 2011. Taxpayer left Indiana to live and work in the other state. Taxpayer has included utility payments from November of 2011 through February of 2014 with no discontinuation of services for his non-Indiana residence. In 2012, Taxpayer purchased vehicle registration for his vehicle to be registered in another state. Additionally, Taxpayer has provided the Department documentation showing a renters insurance policy from November of 2012 through November of 2013. Finally, and most importantly, Taxpayer was able to establish that the homestead credit which formed the base of the Department's determination of domicile was actually claimed by Taxpayer's father. Taxpayer provided substantial documentation to show that his father, who has an identical name as Taxpayer, albeit with "Senior" as opposed to Taxpayer's "Junior," owned the residence upon which the homestead credit was claimed.

After review of these factors, the Department concludes that Taxpayer did take steps to establish a new domicile. As provided by the Indiana Supreme Court in Bayh, there 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 the change of domicile which is necessary to lose one's domicile in Indiana. Here, Taxpayer did intend to abandon the Indiana domicile of his childhood by establishing a new residence/domicile in another state. As provided by 45 IAC 3.1-1-22, the factors tethering Taxpayer to Indiana were outweighed by the factors showing his intent to establish new domiciles. Since Taxpayer was no longer domiciled in Indiana in 2013, he no longer qualified as an Indiana resident under IC § 6-3-1-12. Therefore, Taxpayer has met the burden imposed by IC § 6-8.1-5-1(c) of proving the proposed assessment wrong.

Taxpayer's protest is sustained.

II. Tax Administration - Penalty.

Taxpayer protests the imposition of penalties pursuant to IC § 6-8.1-10-3, which provides:

In this case, Taxpayer did not file a return for his 2013 Indiana income tax. However, as explained above in Issue I, Taxpayer was no longer domiciled in or a resident of Indiana and was not required to file an Indiana individual income tax return. Taxpayer has been sustained in whole on the imposition of Indiana income tax for 2013, therefore the imposition of penalty is moot.

Taxpayer's protest of the imposition of penalty is sustained.

Taxpayer's Issue I protest regarding the imposition of adjusted gross income tax is sustained. Taxpayer's Issue II protest regarding the imposition of penalty is sustained.