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 This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 did not abandon her Indiana domicile despite international travel for her job. Individual had an Indiana driver's license, co-owned an Indiana home and took the homestead deduction, and her spouse lived in Indiana for the year at issue.

I. Income Tax–Domicile.

Authority: IC § 6-1.1-12-37; IC § 6-3-1-12; IC § 6-8.1-5-1; IC § 6-3-3-3; 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; 50 IAC 24-2-5.

Taxpayer protests the imposition of Indiana individual income tax.

II. Tax Administration–Penalty and Interest.

Authority: IC § 6-8.1-10-3; IC § 6-8.1-10-1.

Taxpayer protests the imposition of a penalty and interest.

Taxpayer is an individual. The Indiana Department of Revenue ("Department") determined that Taxpayer was an Indiana resident for tax year 2013 and thus owed Indiana individual income tax. Taxpayer protested the Department's determination of residency and the imposition of a penalty and interest. An administrative telephone hearing was held and this Letter of Findings results. Further facts will be supplied as required.

I. Income Tax–Domicile.

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 of Indiana and to abandon his domicile in Indiana.

The Department, in a letter dated August 21, 2017, stated that Taxpayer had to "file an Indiana Individual Income Tax Return Form" for 2013. The Department's letter also stated Taxpayer "established [her] domicile in Indiana . . . by taking the Homestead Exemption deduction on [her] property taxes" at an Indiana home. The applicable law for homestead is found at IC § 6-1.1-12-37(a)(2), which states in relevant part:

Additionally, when a taxpayer claims the homestead exemption, the dwelling has to be their principal place of residence, as provided by IC § 6-1.1-12-37(a)(2). 50 IAC 24-2-5 defines that as:

And, as the court in Bayh explained, "A change of domicile requires an actual moving with an intent to go to a given place and remain there." Bayh, at 596.

Taxpayer's representative states the following in correspondence: (1) Taxpayer "co-owns" the Indiana property with her husband; (2) Taxpayer's employer was an airline and that she "resided in London from 1997 until her retirement in 2015[;]" (3) Taxpayer purchased a home in another state in 2014 and currently resides there; and (4) Taxpayer's husband "remains in his home" in Indiana. Taxpayer argues that her employer was based in the United Kingdom, that she "held a United Kingdom, Permanent Resident Permit," and that she resided at her most recent address in England from "2011 to November 2015." Taxpayer further states that she "did not commute from Indiana to England to work," that she "paid United Kingdom taxes every year of her residence" and that she paid federal income tax in the United States. Taxpayer states that her "husband lived with her in the U.K. for a short time until 2007" when he returned to Indiana "due to health concerns," but that she "continue[d] to live and work, full time, in England." Taxpayer, for 2013, filed a separate federal return from her husband. Taxpayer's representative also provided various documents in support of Taxpayer's argument–e.g. copies of federal tax returns, pay statements from her employer, etc.

Even if Taxpayer did not "spend[] more than one hundred eighty-three (183) days of the taxable year within" Indiana, there is still the question of domicile. According to Taxpayer, she moved to Indiana as an adult. She began working for an airline "in 1990, flying out of Chicago, living in Indiana." In the late 1990s she met her husband. Taxpayer states that her husband was a resident of England and that "they lived in England almost full time for 10 years, visiting [Indiana] during the summer months" until her husband's medical issues began in 2007. According to Taxpayer, her husband then returned to Indiana for medical treatment. As noted, Taxpayer took the homestead exemption for the Indiana home for 2013. Taxpayer also had an Indiana driver's license, with Taxpayer stating that "[t]o fly domestically within the U.S., you need a U.S. driver's license, a U.K. driver's license cannot be used as ID within the U.S.A." Taxpayer's husband continued to live in Indiana, including for the year at issue–2013. On Taxpayer's 2013 federal form 2555 ("Foreign Earned Income"), at line 15, the form states:

Taxpayer checked the box for "Yes" and then listed the Indiana home's address. Additionally, after Taxpayer retired she "move[d] back to the US, closer to her family." For the year 2014, Taxpayer filed an Indiana PNR return.

Taxpayer in the 1990s lived in Indiana and thus had an Indiana domicile. For 2013 Taxpayer's domicile remained Indiana: Taxpayer owned Indiana property; Taxpayer took the homestead exemption for that Indiana property; Taxpayer listed the Indiana address on federal form 2555; Taxpayer maintained an Indiana driver's license; Taxpayer received mail at the Indiana address, including banking and investment records; Taxpayer's spouse lived in Indiana; and when Taxpayer retired, she initially returned to Indiana, filing an Indiana PNR return. For the foregoing reasons, the Department finds that Taxpayer has not established for the year at issue that she abandoned her Indiana domicile.

Taxpayer's protest is denied.

II. Tax Administration–Penalty and Interest.

Taxpayer protests the imposition of a penalty. IC § 6-8.1-10-3 provides:

Taxpayer did not develop any specific argument regarding the penalty, although Taxpayer states that she did not believe she had a filing requirement. Taxpayer has not met her burden of proof found in IC § 6-8.1-5-1(c) regarding the penalty. Interest, per IC § 6-8.1-10-1(e), cannot be waived.

Taxpayer's protest of the imposition of penalty and interest is denied.

Taxpayer's protest of Issue I is denied; Taxpayer's protest of Issue II is also denied.

August 31, 2018