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Larsen v. Indiana Department of State Revenue

Tax Court of Indiana

July 31, 2017

WILLIAM R. LARSEN, Petitioner,
v.
INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

          PETITIONER APPEARING PRO SE: WILLIAM R. LARSEN Fort Wayne, IN.

          ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR. ATTORNEY GENERAL OF INDIANA WINSTON LIN PARVINDER K. NIJJAR DEPUTY ATTORNEYS GENERAL Indianapolis, IN.

          ORDER ON RESPONDENT'S MOTION FOR SUMMARY JUDGMENT

          MARTHA BLOOD WENTWORTH, JUDGE

         William R. Larsen challenges the Indiana Department of State Revenue's assessment of adjusted gross income tax for the 2013 tax year (the "year at issue"). The matter is before the Court on the Department's Motion for Summary Judgment, asserting that it lawfully denied Larsen's dependency deductions from his Indiana adjusted gross income because he did not provide social security numbers for his three dependent children.[1] The Court denies the Department's Motion.

         FACTS AND PROCEDURAL HISTORY

         Larsen is a United States citizen who resides in Fort Wayne, Indiana. (Resp't Des'g Evid. Supp. Summ. J. ("Resp't Des'g Evid."), Ex. 2 ¶ 1.) Larsen has not sought and does not have social security numbers for any of his three dependent children because he has a religious objection to obtaining social security numbers for them. (Resp't Des'g Evid., Ex. 2 ¶¶ 15-16; see also Pet'r Des'g Evid. Supp. Den. Resp't Mot. Summ. J. ("Pet'r Des'g Evid."), Ex. 6.) Moreover, none of his dependent children have an IRS-issued individual taxpayer identification number ("TIN"). (See Resp't Des'g Evid., Ex. 5 at 5-7.)

         When Larsen filed his 2013 federal income tax return, he claimed federal dependency exemptions for each dependent child. (See Resp't Des'g Evid., Ex. 5 at 7.) Larsen, however, did not provide social security numbers or TINs for his children on his federal return. (See Pet'r Des'g Evid., Confd'l Ex. 23 at 3.) Subsequently, the IRS sent Larsen a letter requesting specific documentation to verify that his children were indeed his dependents if he had a "religious . . . objection to securing . . . Social Security Number[s]" for them. (Pet'r Des'g Evid., Ex. 6 ("Letter 3050C"); Hr'g Tr. at 83-85.) Specifically, Letter 3050C sought documents that would verify each child's birth and each child's identity. (See Pet'r Des'g Evid., Ex. 6 at 1-2.) After Larsen provided the requested documentation, the IRS granted his federal dependency exemptions. (See Pet'r Des'g Evid., Confd'l Ex. 23 at 7.)

         When Larsen filed his 2013 Indiana adjusted gross income tax return, he claimed Indiana dependency deductions for each of his three dependent children on the Department's schedule IN-DEP. (Resp't Des'g Evid., Confd'l Ex. 3 at Exs. 1-2.) In claiming these deductions, Larsen provided each child's name, but not social security numbers, stating his religious objection to obtaining social security numbers for them. (Resp't Des'g Evid., Confd'l Ex. 3 at Ex. 2.) The Department subsequently disallowed the deductions and assessed additional adjusted gross income tax. (Resp't Des'g Evid., Ex. 2 ¶¶ 6, 10.) On July 7, 2014, Larsen protested, and on January 2, 2015, the Department issued a Letter of Findings denying Larsen's protest. (Resp't Des'g Evid., Ex. 2 ¶¶ 11-12; Confd'l Ex. 3 at Ex. 4.)

         Larsen initiated this original tax appeal on March 3, 2015. On July 7, 2016, the Department filed this Motion, and on November 17, 2016, the Court held the hearing. Additional facts will be supplied as necessary.

         STANDARD OF REVIEW

         Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). "When any party has moved for summary judgment, the court may grant summary judgment for any other party upon the issues raised by the motion although no motion for summary judgment is filed by such party." T.R. 56(B).

         LAW

         For the purposes of Indiana's adjusted gross income tax, an individual's Indiana adjusted gross income begins with the taxpayer's federal adjusted gross income, as defined in IRC § 62. Ind. Code § 6-3-1-3.5(a) (2013). This starting point is then modified by various statutory add-backs and deductions. See generally I.C. § 6-3-1-3.5(a). For instance, the statute allows a taxpayer to deduct $1, 500 from his Indiana adjusted gross income for each federal dependency exemption allowed under the Internal Revenue Code. See I.C. § 6-3-1-3.5(a)(5)(A).

         In 2013, a federal dependency exemption was available for a taxpayer's dependent child who was younger than 19 or a student under the age of 24. See I.R.C. §§ 151(c), 152(a), (c)(1)(C), (c)(3) (2013). Eligibility for a federal dependency exemption required the taxpayer to provide the dependent's TIN. I.R.C. § 151(e). A TIN is generally a person's social security number, but the IRS allowed a variety of other numbers to serve as a TIN when a taxpayer does ...


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