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 This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 provided sufficient documentation to establish that he did not owe 2013 individual income tax in Indiana.

I. Income Tax–Residency.

Authority: IC § 6-8.1-5-1; IC § 6-3-2-1; IC § 6-3-2-2; IC § 6-3-1-3.5; IC § 6-3-1-12; IC § 9-24-1-1.5; 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); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Croop v. Walton, 157 N.E. 275 (Ind. 1927); State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); 45 IAC 3.1-1-22.

Taxpayer protests the imposition of Indiana individual income tax.

Individual was previously a resident of Indiana. The Indiana Department of Revenue ("Department") determined that Taxpayer was an Indiana full-year resident for the Tax Year 2013, and that he did not file an Indiana income tax return reporting his Indiana income tax, and that Indiana income tax was due for 2013.

Taxpayer timely protested the assessment. Taxpayer requested a final determination without a hearing. The Letter of Findings (01-20182217.LOF) was issued denying Taxpayer his protest. He requested a rehearing and provided additional documentation. His rehearing request was granted and this Supplemental Letter of Findings ensues. Additional facts will be provided as necessary.

I. Income Tax - Residency.

The Department, based on verifiable information, found that Taxpayer was an Indiana resident for 2013, 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. The Department based its reasoning on Taxpayer having an Indiana driver's license for the year at issue, a vehicle registration with Indiana for the year at issue, and tax documents with an Indiana address. Taxpayer disagreed. Taxpayer claimed that he was not an Indiana resident for 2013. The issue is whether Taxpayer was an Indiana resident or domiciliary for 2013.

As a threshold issue, all tax assessments are prima facie evidence supporting the Department's claim for unpaid tax is; the taxpayer bears the burden of proving any assessment incorrect. IC § 6-8.1-5-1(c); 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, the taxpayer is required to provide documentation explaining and supporting its challenge to the Department's assessment. 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.

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. 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.

Pursuant to IC § 6-3-1-12, a 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. . . ." 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, the evidence suggests that Taxpayer's residence in Indiana constituted a domicile for the 2013 tax year.

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 with intent to remain, while abandoning the Indiana address.

For example, in Croop v. Walton, 157 N.E. 275 (Ind. 1927), a taxpayer 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. Indiana assessed the taxpayer, Mr. Walton, income tax based on the fact that he owned and managed a company and stores; maintained his membership with lodges, clubs, and a church; exercised his civil and political rights on multiple occasions; and used his Michigan address on legal documents. 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:

Taxpayer argued that he was not an Indiana resident for the year at issue. Taxpayer currently resides in Massachusetts. Taxpayer stated he lived and worked in Connecticut and New York for 2013. The Department based its proposed assessment on the fact that Taxpayer had an Indiana driver's license, a vehicle registered in Indiana, and tax documents with an Indiana address. Taxpayer stated that he used his parent's Indiana address while he was in school, thus his 2011 W2 had an Indiana address. Taxpayer also states that he did not even own a vehicle in 2013. Taxpayer also provided his school transcripts showing he attended school outside Indiana, a job offer letter with a Connecticut employer, and his Connecticut and New York income tax returns.

The possession of an Indiana driver's license is not conclusive of a finding of Indiana residency, as the Indiana Bureau of Motor Vehicles is authorized to issue driver's licenses to non-residents. IC § 9-24-1-1.5. Furthermore, Taxpayer did not own a car for the year at issue, and provided sufficient documentation to show that Taxpayer did abandon his Indiana domicile for the year at issue. Taxpayer has met his burden as required by IC § 6-8.1-5-1(c).

Residency cases are particularly fact sensitive, thus the position relayed within this document pertains only to this case and its specific set of facts.

Taxpayer's protest is sustained.

August 31, 2019