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 This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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

Married couple established that they had no Indiana domicile during 2013. Therefore, the Department's assessment 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); 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); 45 IAC 3.1-1-22.

Taxpayers protest the imposition of Indiana individual income tax.

II. Tax Administration–Penalty.

Authority: IC § 6-8.1-10-3.

Taxpayers protest the imposition of a penalty.

Taxpayers ("Husband" and "Wife") are a married couple. The Indiana Department of Revenue ("Department") determined that Taxpayers were domiciled in Indiana for the tax year 2013 but that Taxpayers neither filed a 2013 Indiana individual income tax return nor paid any 2013 Indiana individual income tax. Taxpayers 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.

Taxpayers protest the imposition of Indiana adjusted gross income tax for the 2013 tax year. The Department determined that Taxpayers were Indiana domiciliaries for 2013 based on the information that Taxpayers had claimed the homestead credit on an Indiana residence. Taxpayers state that they were domiciled in another state in 2013 and had not been residents of Indiana since taking a job in another state in 2007. Furthermore, Taxpayers state that they did not claim the homestead credit in question, but rather that their adult daughter claimed the homestead credit in question. Therefore, Taxpayers argue, they did not need to file a 2013 Indiana income tax return nor did they 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, Taxpayers were able to establish that they did not spend more than 183 days in Indiana during 2013. Therefore, in order to be considered a resident of Indiana during 2013, Taxpayers 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, 1317 (Ind. 1988), in which the court provided:

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

In this case, the Department explained to Taxpayers that, since they were listed as having claimed a homestead credit on an Indiana residence, they were considered to have been domiciled in Indiana. In the course of the protest process, Taxpayers were able to establish that the homestead credit, was actually claimed by their daughter. The County Clerk in Taxpayer's former Indiana county of residence provided written confirmation that Taxpayers' daughter, and not Taxpayers themselves, received the benefit of the homestead credit on the Indiana property and residence in question. Since this was the only reason given by the Department, and since Taxpayers have successfully addressed the Department's concerns, Taxpayers have met the burden imposed by IC § 6-8.1-5-1(c) of proving the proposed assessment wrong.

Taxpayers' protest is sustained.

II. Tax Administration–Penalty.

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

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

Taxpayers' protest of the imposition of penalty is sustained.

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