DEPARTMENT OF STATE REVENUE 01-20160119.LOFLetter of Findings: 01-20160119 Individual Income Tax For the Year 2011
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 issue. This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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.
HOLDING
Despite retaining ownership of their former Indiana home, Individuals provided documentation indicating their intention to abandon their Indiana domicile and establish a permanent place of residence in Florida for purposes of Individuals' 2011 Indiana income tax.
ISSUE
I. Individual Income Tax - Residency.
Authority: IC § 6-1.1-12-37(a)(2); IC § 6-1.1-12-37(f); IC § 6-3-2-1(a); IC § 6-3-1-12; IC § 6-8.1-5-1(c); Dept. 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); State Election Board v. Bayh, 521 N.E.2d 1313 (Ind. 1988); In the Matter of Evrard, 333 N.E.2d 765 (Ind. 1975); Board of Medical Registration and Examination v. Turner, 168 N.E.2d 193 (Ind. 1960); Croop v. Walton, 157 N.E. 275 (Ind. 1927); Culbertson v. Bd. Of Comm'rs of Floyd County, 52 Ind. 361 (1876); 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); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007);45 IAC 3.1-1-22 .
Taxpayers argue that they were not residents of Indiana in 2011 and not required to file Indiana income tax returns as full-time Indiana residents that year.
STATEMENT OF FACTS
Taxpayers are a married couple who own a home in Indiana and a home in Florida. Taxpayers formerly filed Indiana individual income tax returns as fulltime residents of this state.
In July 2015, the Indiana Department of Revenue ("Department") sent Taxpayers a letter requesting their 2011 Indiana income tax return. That same month, Taxpayers responded in writing. Taxpayers explained that they had moved to Florida and became residents of that state in June 2010. Taxpayers provided documentation purporting to establish that they were fulltime Florida residents during 2011.
In August 2015, the Department issued Taxpayers a notice of tax due for 2011. Responding to Taxpayers' continued concerns, the Department requested additional documentation including Taxpayers' 2011 federal tax return.
Taxpayers submitted a protest challenging the assessment of additional Indiana income tax. An administrative hearing was conducted during which Taxpayers' representative explained the basis for their protest. This Letter of Findings results.
I. Individual Income Tax - Residency.
DISCUSSION
The issue is whether Taxpayers were residents of Indiana during 2011 requiring them to file Indiana income tax returns reflecting that residency status.
Tax assessments are prima facie evidence that the Department's claim for the tax is valid, and each taxpayer bears the burden of proving that any 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. 2007). Thus, a taxpayer is required to provide documentation explaining and supporting his or her 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). In reviewing a taxpayer's argument, the Indiana Supreme Court has held, that when it examines a statute that an agency is "charged with enforcing . . . we 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).
Indiana imposes an income tax on "the adjusted gross income of every resident person . . . ." IC § 6-3-2-1(a). For income tax purposes, "The term '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.
To establish a domicile, a taxpayer "must be physically present at a place, and must have the simultaneous intent of establishing a home at that place."45 IAC 3.1-1-22 . For income tax purposes, "a person has only one domicile at a given time even though that person maintains more than one residence at that time." Id. Additionally, "Once a domicile has been established, it remains until the conditions necessary for a change of domicile occur." Id. "To effect a change of domicile, there must be an abandonment of the first domicile with an intention not to return to it, and there must be a new domicile acquired by residence elsewhere with an intention of residing there permanently, or at least indefinitely." Croop v. Walton, 157 N.E. 275, 278 (Ind. 1927).
In State Election Board v. Bayh, 521 N.E.2d 1313 (Ind. 1988), the Indiana Supreme Court considered the standard by which a "domicile" is established. The court determined that Mr. Bayh met the residency requirement for the office of Governor because Mr. Bayh's domicile remained in Indiana even though he moved to different states for various reasons for many years. Specifically, the court stated, in relevant part, that:
Once acquired, domicile is presumed to continue because "every man has a residence somewhere, and . . . he does not lose the one until he has gained one in another place." Establishing a new residence or domicile terminates the former domicile. A change of domicile requires an actual moving with an intent to go to a given place and remain there. "It must be an intention coupled with acts evidencing that intention to make the new domicile a home in fact . . . . [T]here must be the intention to abandon the old domicile; the intention to acquire a new one; and residence in the new place in order to accomplish a change of domicile." A person who leaves his place of residence temporarily, but with the intention of returning, has not lost his original residence. Id. 1317 (Internal citations omitted).
The supreme court concluded that:
Residency requires a definite intention and "evidence of acts undertaken in furtherance of the requisite intent, which makes the intent manifest and believable." A self-serving statement of intent is not sufficient to find that a new residence has been established. Intent and conduct must converge to establish a new domicile. Id. at 1318 (Internal citations omitted).
In an earlier case, the Indiana Supreme Court stated that in order to establish a new residence, a taxpayer "must show . . . evidence of acts undertaken in furtherance of the requisite intent, which make that intent manifest and believable." In the Matter of Evrard, 333 N.E.2d 765, 768 (Ind. 1975).
The Department's regulation provides that "[t]here is no one set of standards that will accurately indicate the person's intent in every relocation."45 IAC 3.1-1-22 . Instead, the determination is made on a case by case basis. Id. Facts to be considered include:
(1) Purchasing or renting residential property(2) Registering to vote(3) Seeking elective office(4) Filing a resident state income tax return or complying with the homestead laws of a state(5) Receiving public assistance(6) Titling and registering a motor vehicle(7) Preparing a new last will and testament which includes the state of domicile. Id.
In addition, courts have considered a taxpayer's contemporaneous declarations identifying that taxpayer's "home;" insurance policies, mortgages, contracts or other instruments indicating the taxpayer's home; and membership in clubs, churches, or other social groups in a place. Croop, 157 N.E. at 278-79. Finally, courts have considered the location of taxpayer's household goods and mailing address. Board of Medical Registration and Examination v. Turner, 168 N.E.2d 193, 197 (Ind. 1960); See also, Culbertson v. Bd. Of Comm'rs of Floyd County, 52 Ind. 361 (1876). However, a taxpayer "seeking to establish his claim of exemption from taxation on the ground of nonresidence is not required to show that his property was assessed elsewhere." Croop, 157 N.E. at 276.
In order to change one's domicile from Indiana to an out-of-state location, the law requires the "intent of establishing a home at that place,"45 IAC 3.1-1-22 , along with "acts evidencing [an] intention to make the new domicile a home in fact . . . ." Bayh, 521 N.E.2d at 1317.
However, the law also requires a simultaneous manifestation of an intent to abandon the Indiana domicile. Id. As the law states, "[A] person has only one domicile at a given time . . . ."45 IAC 3.1-1-22 . Significantly, Taxpayers own an Indiana home and benefited from a Homestead Credit claimed on that home. In doing so, Taxpayers necessarily verified that the Indiana home was their "principal place of residence" and, by doing so, took advantage of the typically significant tax advantage associated with claiming the credit. IC § 6-1.1-12-37(a)(2).
Taxpayers admit that they retained ownership of this Indiana home and make annual visits to that home. Taxpayers also admit that they previously claimed a "Homestead Credit" on that home. IC § 6-1.1-12-37(f) in part requires:
If an individual who is receiving the deduction provided by this section or who otherwise qualifies property for a deduction under this section:(1) changes the use of the individual's property so that part or all of the property no longer qualifies for the deduction under this section; or(2) is no longer eligible for a deduction under this section on another parcel of property because:(A) the individual would otherwise receive the benefit of more than one (1) deduction under this chapter; or(B) the individual maintains the individual's principal place of residence with another individual who receives a deduction under this section; the individual must file a certified statement with the auditor of the county, notifying the auditor of the change of use, not more than sixty (60) days after the date of that change.
Taxpayers point out that in accordance with IC § 6-1.1-12-37(f) they took positive steps to revoke the Homestead Credit on the Indiana property after they moved from Indiana to Florida. The documentation from the Delaware County auditor provided by Taxpayers established that they removed the credit on July 22, 2010.
In addition, Taxpayers provided a copy of their 2011 federal return listing their Florida address, copies of 2011 W-2 statements listing that Florida address, and a copy of their 2010 Indiana IT-40PNR ("Part-Year and Full-Year Nonresident") income tax return listing that same Florida address. Taxpayers also provided copies of their 2010 Florida drivers' licenses, copies of the 2010 Florida voter registration cards, evidence of automobile insurance issued by a Florida insurer, and a copy of Taxpayers' executed wills indicating that they were both "domiciled in Lee County, Florida."
Evaluating the documentation on a "case by case basis" in order to determine their "requisite intent," Taxpayers have established that they intended to abandon their Indiana domicile, and manifested "intent and conduct . . . to establish a new domicile." As explained in45 IAC 3.1-1-22 , "a person can only have one domicile at a given time . . . ." In this case, Taxpayers have established that their one domicile is in Florida, that it was so in 2011, and that they were not in Indiana more than 183 days during 2011.
Taxpayers were not required to file a 2011 Indiana income tax return as residents of this state.
FINDING
Taxpayers' protest is sustained.
Posted: 08/31/2016 by Legislative Services Agency
DIN: 20160831-IR-045160346NRAComposed: Nov 01,2016 2:16:21AM EDTA PDF version of this document.
