William E. Schmidt, Jr. and Danielle Schmidt v. Indiana Department of State Revenue
2017 Ind. Tax LEXIS 29
| Ind. T.C. | 2017Background
- William and Danielle Schmidt moved from Indiana to a furnished house in West Palm Beach, Florida in May 2008 and moved most important belongings there; they obtained Florida driver’s licenses, registered to vote in Florida, received Florida homestead exemption, and spent fewer than 30 days in Indiana in 2009 and 2010.
- Mr. Schmidt remained employed by an Indiana-based business (CopyCo/Global/Xerox) after sale/acquisitions; he performed most duties from his Florida home office in 2009–2010, returned to Indiana for interim operations in mid-2011 through Dec. 2011, and performed only a few hours of work in Indiana in 2012 before retiring.
- The Schmidts filed Indiana part-year/nonresident returns for 2008, 2011, and 2012 listing Florida residency; they did not file Indiana returns for 2009–2010.
- Indiana Department of State Revenue assessed adjusted gross income tax (AGIT) for 2009 and 2010, and denied a 2012 refund claim and assessed additional tax/penalties for 2012 (withholding of $2,542.99 on stock award).
- The Schmidts protested, appealed to Indiana Tax Court; the court consolidated appeals, held trial, and reviewed de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were the Schmidts Indiana residents (domicile) for AGIT? | Schmidts: established new Florida domicile in 2008 (purchase home, homestead, voter reg., FL licenses, vehicles titled, intent to remain). | Dept.: retain Indiana domicile due to ownership of Indiana home/cars, ties to Indiana doctor/accountant, Mr. Schmidt’s ongoing services to Indiana company. | Held: Schmidts rebutted presumption; they were domiciled in Florida during years at issue and not Indiana residents. |
| Did Mr. Schmidt receive Indiana-source income for services in 2009–2010? | Schmidts: services were performed outside Indiana (from FL); no Indiana-source compensation because not physically present in Indiana. | Dept.: compensation from an Indiana company reflects Indiana-source income. | Held: Plain meaning of statute requires services to be rendered physically within Indiana; no Indiana-source income for 2009–2010. |
| Were Mr. Schmidt’s 2012 Indiana services taxable (de minimis)? | Schmidts: 2012 in-state work was minimal (about eight hours); stock proceeds not allocable/apportioned to Indiana. | Dept.: some services were rendered in Indiana; withholding was appropriate. | Held: 2012 in-state services were de minimis; stock proceeds not attributable to Indiana—no AGIT owed and refund due. |
| Did the Schmidts bear burden to rebut the assessment? | Schmidts: Presented evidence to overcome prima facie validity of assessments. | Dept.: Proposed assessments are prima facie valid; burden on taxpayers to prove wrong. | Held: Schmidts met their burden and rebutted the assessments. |
Key Cases Cited
- State Election Bd. v. Bayh, 521 N.E.2d 1313 (Ind. 1988) (defines domicile and the intent/residence test for change of domicile)
- Safayan v. Indiana Dep’t of State Revenue, 654 N.E.2d 270 (Ind. 1995) (tax statutes construed in taxpayer's favor when ambiguous)
- Horseshoe Hammond, LLC v. Indiana Dep’t of State Revenue, 865 N.E.2d 725 (Ind. Tax Ct. 2007) (standard that court reviews department determinations de novo)
- U-Haul Int’l v. Indiana Dep’t of State Revenue, 826 N.E.2d 713 (Ind. Tax Ct. 2005) (analysis of source of income and minimal/incidental services concept)
- Chief Indus. v. Indiana Dep’t of State Revenue, 792 N.E.2d 972 (Ind. Tax Ct. 2003) (uses plain reading to require income-producing activities "in this state")
- Convenient Indus. of Am., Inc. v. Indiana Dep’t of State Revenue, 299 N.E.2d 641 (Ind. Ct. App. 1973) (income must be attributable to activity within the state, not merely payer's location)