NOTICE: IC § 4-22-7-7 permits the publication of this document in the Indiana Register. The publication of this document provides the general public with information about the Indiana Department of Revenue's official position concerning a specific set of facts and issues. The "Holding" section is provided for the convenience of the reader and is not part of the analysis contained in this document.

Individual qualifies for the income tax exemption. However, Individual did not properly fill out his Federal income tax return, and in turn did not properly fill out his Indiana amended return. Thus, Individual must file correct returns in order to receive the refund.

I. Individual Income Tax - Refund.

Authority: IC § 6-3-2-1; IC § 6-3-2-2; IC § 6-8.1-5-1; IC § 6-3-1-3.5; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); The Convention Between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-India, Sept. 12, 1989, 90 U.S.T. 1218.

Taxpayer argues that the Indiana Department of Revenue erred in its denial of Taxpayer's refund.

Taxpayer is an individual and filed a 2016 amended Indiana Individual Income Tax Return requesting a refund. Taxpayer requested a refund of $124. The Indiana Department of Revenue ("Department") denied the claim because Taxpayer needed to send in documentation providing support to verify eligibility. Taxpayer protested the Department's refund denial. Taxpayer waived his administrative hearing and this decision is based on the information provided by Taxpayer. This Final Order Denying Refund results.

I. Individual Income Tax - Refund.

Taxpayer requested a refund of Indiana individual income tax for 2016. Taxpayer claims he is due a refund under the U.S.- India Income Tax Treaty. Taxpayer's refund claim was timely received but was denied by the Department for not submitting additional information to verify his eligibility under the treaty.

As an initial point, the Department notes that, "[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 initial refund determination, shall be entitled to deference.

Indiana imposes an adjusted gross income tax on all residents. IC § 6-3-2-1(a). A taxpayer's Indiana income is determined by starting with the federal adjusted gross income and making certain adjustments. IC § 6-3-1-3.5(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 properly and correctly 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 taxpayer's taxable income and to calculate what would be their Indiana income tax after applying certain additions and subtractions to that starting point.

Taxpayer filed an amended return requesting a refund. Taxpayer explained his justification for the amended return is that "U.S.-India Income Tax Treaty (article 21) deduction was not claimed in the original return." The referenced portion of the treaty is listed below:

The Convention Between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-India, Sept. 12, 1989, 90 U.S.T. 1218.

Thus, based on the treaty, Taxpayer is entitled to a refund. Taxpayer however did not properly fill out his Federal income tax return for 2016, therefore, his Indiana income tax return is not correct. Taxpayer did not properly account for the deduction on his federal return. Taxpayer needs to file an amended federal return. Then Taxpayer must file an amended Indiana return claiming the refund. Until Taxpayer properly files the returns, Taxpayer's protest is denied.

Taxpayer's protest is denied.

December 9, 2019