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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 is not considered an Indiana resident for the tax year 2013.

I. Indiana Individual Income Tax - Non-filer - Residency.

Authority: IC § 6-1.1-12-37; 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 § 6-8.1-5-1; 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); Miller Brewing Co. v. Indiana Dep't of State Revenue, 903 N.E.2d 64 (Ind. 2009); 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; 45 IAC 3.1-1-22.5; 45 IAC 3.1-1-23; 50 IAC 24-2-5; South Carolina Code §§ 12-37-220(B)(47) and 12-37-250.

Taxpayer protests the Department's assessments of individual income tax for 2013.

Taxpayer is an individual who has resided in Indiana for the majority of his life. In 2009 Taxpayer moved to South Carolina on a "permanent basis." The Indiana Department of Revenue ("Department") determined that Taxpayer was Indiana full-year resident for the Tax Year at issue that he did not file the Indiana income tax returns reporting his Indiana income tax, and that Indiana income tax was due for 2013.

Taxpayer timely protested the assessments. An administrative phone hearing was held. This Letter of Findings ensues and addresses Taxpayer's protest of the proposed assessments. Additional facts will be provided as necessary.

I. Indiana Individual Income Tax - Non-filer - Residency.

The Department, based on verifiable information including Indiana real property records, found that Taxpayer was an Indiana resident for the Tax Year at Issue, that he failed to file his Indiana full-year resident individual income tax return (Form IT-40), and that Indiana income tax was due for 2013.

Taxpayer disagreed. Taxpayer claims that he was a South Carolina resident and was not an Indiana resident for 2013. The issue is whether Taxpayer was an Indiana resident for 2013.

As a threshold issue, all 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 "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. 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 taxpayers' 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 taxpayer's 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 revisions intend 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, based on verifiable records, Taxpayer was an Indiana resident during 2013 because Taxpayer owns an Indiana home and claimed an Indiana homestead credit during 2013. The Department also showed that Taxpayer had an Indiana address on several tax documents. Taxpayer however states he is a South Carolina resident. Taxpayer provided his Federal 1040 with a South Carolina address, his 2013 South Carolina state tax return, South Carolina vehicle registration, South Carolina voters' registration card, several businesses registered in South Carolina, and his South Carolina property card showing he is a resident taking the homestead exemption on his South Carolina home. Taxpayer stated that South Carolina residents get a four percent discount on property taxes if they are considered residents. According to South Carolina Code §§ 12-37-220(B)(47) and 12-37-250 provide the homestead exemptions for an individual's primary residence, not for a person's second home or vacation home.

Taxpayer stated he travels a lot throughout the country and uses his Indiana address, separate from the Indiana homestead address in order to have a reliable address to receive important tax documents. Taxpayer further explained that the Indiana home with the homestead, was owed by him and his wife; they divorced in 1985. The decree stipulates that his ex-wife is responsible for the mortgage and property tax payments; ex-wife still lives in the home. Taxpayer explained that his name is still on the deed because, per the divorce decree, when his ex-wife decides to sell the house he gets half the proceeds. Thus, the Department is convinced that Taxpayer intended to make South Carolina his domicile.

As discussed earlier, Taxpayers could have more than one residence and could be residents of more than one state, but they can only have one domicile at a given time. 45 IAC 3.1-1-22. Upon review of Taxpayer's supporting documentation and statements, it is clear that Taxpayer intended to abandon his Indiana domicile. Therefore, Taxpayer did establish an intention to abandon his Indiana domicile. Thus, Taxpayer met his burden as described in IC § 6-8.1-5-1(c).

Taxpayer's protest of the residency issue is sustained.

April 3, 2018