20160928-IR-045160389NRA Letter of Findings: 01-20150533 Individual Income Tax For the Tax Year 2011
DEPARTMENT OF STATE REVENUE 01-20150533.LOFLetter of Findings: 01-20150533 Individual Income Tax For the Tax 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 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 This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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.
HOLDING
Individual established that he was not domiciled in Indiana in tax year 2011 but had effectively abandoned his Indiana domicile and established a new one in Michigan. Therefore, Taxpayer was not required to file a 2011 Indiana income tax return.
ISSUE
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; Dep't of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2011); State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988); Croop v. Walton, 157 N.E. 275 (Ind. 1927); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2011); 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 .
Taxpayer protests the imposition of Indiana individual income tax for the 2011 tax year.
STATEMENT OF FACTS
Taxpayer is an individual who did not file a 2011 Indiana individual income tax return. Based on the best information available to it, the Indiana Department of Revenue ("Department") determined that, for the 2011 tax year, Taxpayer had Indiana income and utilized the homestead exemption on his Indiana property. As such, the Department concluded that Taxpayer was an Indiana resident who should have filed his Indiana income tax return and paid the income tax that was due. The Department thus assessed Taxpayer income tax, interest, and penalty for tax year 2011.
Taxpayer timely protested the assessment. An administrative phone hearing was held. This Letter of Findings results. Additional facts will be provided as necessary.
I. Income Tax-Residency.
DISCUSSION
The Department determined that Taxpayer was an Indiana resident during tax year 2011 because he had Indiana income and took the homestead exemption on his Indiana property. The Department therefore concluded that Taxpayer was domiciled in Indiana in 2011, and his income was subject to Indiana income tax. The Department thus assessed Taxpayer Indiana income tax, interest and penalty.
Taxpayer contends he has made his home in Michigan his principal place of abode. Taxpayer claims that because he moved to Michigan, he requested that the homestead exemption be removed from his Indiana property. Thus, Taxpayer stated that his new domicile is Michigan and he does not owe any Indiana income tax for tax year 2011.
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 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. 2011); Lafayette Square Amoco, Inc. v. Indiana Dep't 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 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. 2011). 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). IC § 6-3-2-2(a) specifically outlines what is income derived from Indiana sources and subject to Indiana income tax. 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.
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. In this case, Taxpayer uses his Indiana residence sparingly to visit his son and stay overnight when traveling from Illinois. Therefore, Taxpayer was able to establish that he did not spend more than 183 days in Indiana during 2011. Therefore, in order to be considered a resident of Indiana during 2011, Taxpayer must have been domiciled in Indiana.
Domicile is defined by45 IAC 3.1-1-22 , which states:
For the purposes of this Act, a person has only one domicile at a given time even though that person maintains more than one residence at that time. Once a domicile has been established, it remains until the conditions necessary for a change of domicile occur.
In order to establish a new domicile, the person must be physically present at a place, and must have the simultaneous intent of establishing a home at that place. It is not necessary that the person intend to remain there until death; however, if the person, at the time of moving to the new location, has definite plans to leave that new location, then no new domicile has been established.
The determination of a person's intent in relocating is necessarily a subjective determination. There is no one set of standards that will accurately indicate the person's intent in every relocation. The determination must be made on the facts present in each individual case. Relevant facts in determining whether a new domicile has been established include, but are not limited to:
(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.
(Emphasis added).
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.
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. The taxpayer lived in the Indiana home "on account of the mental and physical condition of his wife, and continued to occupy it until such time as she could safely return to [Michigan] to live." Id. at 276. The court concluded that, based on the level of activity he maintained in Michigan and lack of intention to abandon his domicile, taxpayer did not change his domicile from Michigan to Indiana. The court explained, in relevant part, that:
"If [a] taxpayer has two residences in different states, he is taxable at the place which was originally his domicile, provided the opening of the other home has not involved an abandonment of the original domicile and the acquisition of a new one."
'[D]omicile' . . . is the place with which a person has a settled connection for legal purposes, either because his home is there or because it is assigned to him by the law, and is usually defined as that place where a man has his true, fixed, permanent home, habitation, and principal establishment, without any present intention of removing therefrom, and to which place he has, whenever he is absent, the intention of returning.
(Internal citations omitted) (Emphasis added.)
In explaining the difference between "residence" and "domicile," the court in Croop stated:
'Domicile' "is a residence acquired as a final abode. To constitute it there must be (1) residence, actual or inchoate; (2) the nonexistence of any intention to make a domicile elsewhere." "The domicile of any person is, in general, the place which is in fact his permanent home, but is in some cases the place which, whether it be in fact his home or not, is determined to be his home by a rule of law."
"Residence is preserved by the act, domicile by the intention." "Domicile is not determined by residence alone, but upon a consideration of all the circumstances of the case." "While a person can have but one domicile at a time, he may have concurrently a residence in one place . . . and a domicile in another."
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.
(Internal citations omitted) (Emphasis added).
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:
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."
Residency requires a definite intention and "evidence of acts undertaken in furtherance of the requisite intent, which makes the intent manifest and believable." Intent and conduct must converge to establish a new domicile. Id. at 1317 - 18. (Emphasis added).
Taxpayer was an Indiana resident who, for several years, maintained a primary home in Indiana and a vacation home in Michigan, all while working in Illinois. According to Taxpayer he went into semi-retirement in 2008, and at that time began making his Michigan home his primary home. He currently maintains his Indiana home as his "stop over home," where he may stay the night if he needs to do some work at his Illinois job. Other than the property in Indiana and a family member, Taxpayer has no other contacts in Indiana; he has no doctors in Indiana and no social activities.
Taxpayer spends the bulk of his time in Michigan as that is where his family lives and where his social contacts are. As of 2011, Taxpayer was able to prove that his vehicle was registered in Michigan, and he had both a driver's license and operator's license issued in Michigan. Taxpayer provided documentation that his 2011 Form W-2 was mailed to his Michigan address. His form 1099 from an investment he held was addressed to his Indiana property, however, Taxpayer explained that he had forgotten to update his address with his investment firm. Taxpayer also provided his 2011 federal tax return on which he listed his Michigan address as his home address. He also provided a copy of his 2011 Michigan income tax return.
Taxpayer provided evidence that he took the homestead exemption on his Indiana home in 2010 but it was removed for tax year 2011. The Department contacted the Indiana County Auditor in which Taxpayer's property is located and confirmed that Taxpayer did not receive the homestead exemption on his Indiana property for tax since tax year 2011. Because Taxpayer does not receive the benefit of the homestead exemption, has little contact in Indiana and has established his domicile in Michigan, Taxpayer is sustained.
Residency cases are particularly fact sensitive thus the position relayed within this document pertains only to this case and its specific set of facts.
FINDING
Taxpayer's protest is sustained.
Posted: 09/28/2016 by Legislative Services Agency
DIN: 20160928-IR-045160389NRAComposed: Nov 01,2016 2:18:07AM EDTA PDF version of this document.
