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 Indiana Department of Revenue's (the "Department") 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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 successfully proved that he was a part-year resident of Indiana for the tax year 2018 and the law allows him to claim a credit for income tax paid in New York.

I. Individual Income Tax - Residency.

Authority: IC 6-3-1-12; IC 6-3-2-1; IC 6-8.1-5-1; Dep't of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2012); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); 45 IAC § 3.1-1-22; 45 IAC § 3.1-1-22.5; Income Tax Information Bulletin 28 (February 2022).

Taxpayer protests the assessment of Indiana individual income tax.

Taxpayer is an Indiana resident who moved outside of the state prior to the tax year at issue. He retained an Indiana homestead and worked for an out-of-state employer during 2018. He claimed no Indiana income and that taxes were withheld in New York (the state in which Taxpayer worked). Taxpayer filed an amended 2018 Indiana Part-Year Nonresident form after discovering that he originally filed a full-year resident return by mistake. On the amended return, Taxpayer noted that he lived in Indiana from January to April of 2018, and then lived in New York for the remainder of the taxable year. The Department determined that Taxpayer's reported federal adjusted gross income was understated based on information received from external third-party sources. At the hearing, Taxpayer provided additional documentation which included his (1) 2018 Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return; (2) 2018 New York Nonresident and Part-Year Resident Income Tax Return; (3) 2018 W-2 from his employer; and (4) a receipt from his tax preparer confirming that his income tax return would be e-filed and no Indiana tax was due.

After determining that Taxpayer had underreported his Indiana income for 2018, the Indiana Department of Revenue ("Department") issued a proposed assessment for additional Indiana income tax. Taxpayer protested the assessment. A hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Individual Income Tax - Residency.

Taxpayer protests the imposition of Indiana income tax for the 2018 tax year. The Department based its proposed assessment on Taxpayer's federally reported income and the amount of income reported on Taxpayer's Indiana return. Taxpayer protests that he filed a full-year return when he should have filed a part-year return.

As a threshold issue, all tax assessments are prima facie evidence that the Department's claim for unpaid tax is valid; the taxpayer bears the burden of proving that an assessment is incorrect. IC 6-8.1-5-1(c); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2012). Consequently, the taxpayer is required to provide documentation explaining and supporting its challenge that the Department's position 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). 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.'" Dep't 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, 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). 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 or maintain a permanent place of residence in Indiana and then spend more than 183 days in Indiana. Taxpayer provided sufficient evidence to show that he spent less than 183 days in Indiana in the 2018 taxable year. Thus, to be considered a resident of Indiana, Taxpayer must still have his domicile in Indiana, meaning he has not taken affirmative steps to change his domicile.

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 of Indiana. Instead, the individual must move to a new non-Indiana address and have intent to establish domicile at that address.

Based on publicly available property records, Taxpayer claimed a homestead credit in the tax year at issue. Without documentation to rebut the protest, Taxpayer is presumed to have domicile in Indiana. The Department's Income Tax Information Bulletin 28 (February 2022), 20220223 Ind. Reg. 045220044NRA, explains that:

• The amount of income tax actually paid to the other state, possession, or foreign country on income from that jurisdiction;

• An amount of equal to the Indiana income tax rate multiplied by the adjusted gross income taxed by both Indiana and the jurisdiction; or

• The amount of Indiana adjusted gross income tax due to Indiana for the tax year.

Indiana law requires that part-year Indiana residents must file an Indiana individual income tax return and are subject to tax on the part of their total federal income that was received while they were Indiana residents and on income from Indiana sources received while they were nonresidents of Indiana.

Given the factors above and Taxpayer's documentation showing tax due in and remitted to New York, the Department has determined that the Taxpayer was a part-year resident of Indiana in 2018. Based on Information Bulletin 28, Taxpayer may, however, receive credit on his Indiana tax return for taxes paid in New York. Taxpayer has met his burden as required by IC 6-8.1-5-1(c). His protest is sustained, and his liability will be recalculated based on taxes already remitted to New York. Department will issue a revised assessment based on that calculation.

Taxpayer's protest is sustained.

August 23, 2023