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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 owning an Indiana home during certain of the years at issue, Current Indiana Resident presented substantial contrary evidence sufficient to establish that she was not an Indiana resident during 2002 through 2010 and was not required to file income tax returns as a full-time resident of the state.

I. Indiana Individual Income Tax - Residency.

Authority: IC § 6-1.1-12-37(a)(2); IC § 6-1.1-12-37(e); IC § 6-1.1-12-37(f); IC § 6-3-1-3.5(a); IC § 6-3-1-12; IC § 6-3-1-13; IC § 6-3-2-1(a); IC § 6-3-2-2(a); IC § 6-8.1-5-1(c); 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); Miller Brewing Co. v. Indiana Dep't of State Revenue, 903 N.E.2d 64 (Ind. 2009); 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); 45 IAC 3.1-1-21; 45 IAC 3.1-1-22(a); 45 IAC 3.1-1-22(b); 45 IAC 3.1-1-22(c); 45 IAC 3.1-1-22.5; 45 IAC 3.1-1-22.5(c)(5); 45 IAC 3.1-1-23; 50 IAC 24-2-5.

Taxpayer protests the Department's assessment of additional 2002 through 2010 individual income tax on the ground that she was not an Indiana resident during those years.

Taxpayer is an individual who formerly lived in Indiana, moved to an out-of-state location, and subsequently returned to Indiana. The Indiana Department of Revenue ("Department") contacted Taxpayer in a December 2016 letter. The letter stated that "[b]ased on our records you have unreported income for tax year(s) 2002-2010." The letter directed Taxpayer to file 2002 through 2010 Indiana tax returns, send a copy of previously filed 2002 through 2010 Indiana tax returns, or "[s]end a letter that explains why you were not required to file the Indiana returns."

Taxpayer responded that she was a California resident from 1996 through 2010. The Department responded by requesting copies of Taxpayer's federal and state tax returns for 2009 and 2010. Taxpayer provided copies of her 2010 federal, California, and Indiana tax returns explaining that she did "not have previous tax returns from 2002, and 2004 to 2009" because she had "shredded the earlier returns."

The Department issued Taxpayer proposed assessments of 2002 through 2010 income tax. Taxpayer disagreed with the assessments and submitted a protest to that effect. An administrative hearing was conducted during which Taxpayer explained the basis for her protest. This Letter of Findings results.

I. Indiana Individual Income Tax - Residency.

The issue is whether Taxpayer has established that she was not an Indiana resident during 2002 through 2010 and - as a result - not required to file Indiana income tax returns as a full-time resident during those years.

In this instance, Taxpayer's protest stems from the Department's proposed assessments of additional income tax. As a threshold issue, all such tax assessments are prima facie evidence that the Department's claim for the unpaid tax is valid; the 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). "[E]ach assessment and each tax year stands alone." Miller Brewing Co. v. Indiana Dep't of State Revenue, 903 N.E.2d 64, 69 (Ind. 2009). Thus, the taxpayer is required to provide documentation explaining and supporting its challenge that the Department's assessment 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).

Indiana imposes a tax "upon 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. For Indiana income tax purposes, the presumption is that taxpayers file their federal income tax returns as required pursuant to the Internal Revenue Code. Thus, to efficiently and effectively compute what is considered the taxpayer's Indiana income tax, the Indiana statute refers to the Internal Revenue Code. IC § 6-3-1-3.5(a) provides the starting point to determine the taxpayers' taxable income and to calculate what would be their Indiana income tax after applying certain additions and subtractions to that starting point.

For Indiana income tax purposes, 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.

Recently, the Department revised the Adjusted Gross Income Tax regulations. Some of the revisions intended to clarify the definition of a person's domicile for Indiana income tax purposes and afford more considerations in determining a person's domicile. This decision thus applies the new regulations accordingly.

Indiana law further defines "[h]omestead" as "an individual's principal place of residence . . . that is located in Indiana" and that "the individual owns . . . ." IC § 6-1.1-12-37(a)(2). "'Principal place of residence' means an individual's true, fixed, permanent home to which the individual has the intention of returning after an absence." 50 IAC 24-2-5. A taxpayer is entitled to claim a deduction, known as homestead deduction (or exemption), against taxes imposed on his or her homestead property pursuant to IC § 6-1.1-12-37(e). When the taxpayer is no longer qualified for the homestead deduction (or exemption), the taxpayer must notify the auditor of the county where the homestead is located within sixty days after the date of that change. IC § 6-1.1-12-37(f).

Thus, a new domicile is not necessarily created when an individual moves to a place outside of Indiana. Instead, the individual must move to the new location and have an intent to remain there indefinitely.

In Croop v. Walton, 157 N.E. 275 (Ind. 1927), a taxpayer, Mr. Walton, who was domiciled in Michigan sold his home in Michigan and moved to a new residence in Indiana where he and his wife lived for several years for the benefit of his wife's health. Mr. Walton lived in the Indiana home "on account of the mental and physical condition of his wife, and continued to occupy it until such time as she could safely return to [Michigan] to live." Id. at 276. The court concluded that, based on the level of activity he maintained in Michigan and lack of intention to abandon his domicile, Mr. Walton did not change his domicile from Michigan to Indiana. The court explained, in relevant part, that:

In explaining the difference between "residence" and "domicile," the court in Croop stated:

In State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988), the Indiana Supreme Court considered the issue of the meaning of "domicile" in determining that Mr. Bayh met the residency requirement for the office of Governor. Mr. Bayh's domicile remained in Indiana even though he moved to different states for various reasons for many years. The court stated, in pertinent part:

In this instance, the Department determined that Taxpayer was a 2002 though 2010 Indiana resident because she claimed the "homestead credit" on an Indiana home owned by Taxpayer. Taxpayer explains that she moved to California in 1996 and that she acquired the Indiana home which she intended to use as her permanent retirement home. Taxpayer further explains that she was unaware the mortgage provider had claimed the homestead credit. In support of her argument, Taxpayer provided a copy of her original mortgage application establishing that the homestead credit portion of the application was never completed. In addition, Taxpayer provided a letter from the Marion County Auditor's Office indicating that Taxpayer "was found to be ineligible for the Homestead Deduction around Sept. of 2015," that she was billed additional property tax for the years 2012 through 2014, that Taxpayer paid the additional property tax, and that "the statute for billing fraudulent Homestead deduction" precluded Marion County from billing additional property tax for years prior to 2012.

Taxpayer requested that the California Franchise Tax Board provide copies of her 2004 through 2009 California tax returns. The Board responded in a letter dated March 2017 stating "the tax returns are no longer available" but verifying that California income tax returns were filed by Taxpayer "for tax years 2004, 2005, 2006, 2007, 2008, and 2009 . . . ."

Taxpayer also provided a written certification from the Los Angeles County Registrar that she had voted in California elections starting in 1996 until 2008. The Registrar's office also provided a copy of Taxpayer's original voter's registration card dated September 1996.

In addition, Taxpayer provided documentation from the California Department of Motor Vehicles indicating that Taxpayer had applied for a California driver's license in 1998. Taxpayer's current Indiana driver's license indicates that the license was issued in 2011.

Given the totality of the circumstances, the Department is prepared to agree that for the years 2002 through 2010, Taxpayer has met her burden of establishing that she was not an Indiana resident during those years because she changed her domicile to California prior to 2002 and that she did not spend more than 183 days in Indiana even though she owned a house in this state. IC § 6-3-1-12; see also 45 IAC 3.1-1-21. Taxpayer has presented "substantial contrary evidence" contradicting the Department's determination that she was an Indiana resident during the years at issue. 45 IAC 3.1-1-22.5(c)(5).

Taxpayer's protest is sustained.