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A Comparison of State Residency Rules

This article originally appeared in the February 2017 TaxStringer and is reprinted with permission from the New York State Society of Certified Public Accountants.
By: Brian Gordon, CPA
February 1, 2017

All states agree that you are taxed as a resident in the state where you are domiciled, although some exemptions apply for extended absences. They also agree on the definition of "domicile"–which, in simple terms, is your primary residence. States don't, however, uniformly agree on the factors that determine your domicile. If you have one residence, this is a simple issue, but if you have two or more residences, how do you determine which is your domicile or primary residence?

This question usually comes into play when someone acquires a second residence and claims a change of domicile. The burden is on the party claiming the change to make a clear and convincing case that this change in domicile took place. To begin with, you must make a conscious decision as to where you intend to make your permanent home –and the facts must support your stated intention.

New York is well known as a state that has consistently engaged in residency audits over a long period of time. With the state's vast experience, and with many of these cases going to court, precedents have been established. Based on this experience, New York has established guidelines indicating which factors should carry the most weight in determining domicile. Both auditors and practitioners can reasonably rely on the guidelines.

These are the five primary factors that New York has identified for determination of domicile:

1. Home: Comparison of the two residences in terms of size, value, and how they are used.
2. Business Ties: In which locations do you have active business involvement? Courts will not consider passive investments.
3. Time Spent: How much time is spent at each location?
4. Family Ties: Where do your spouse and minor children live? This could include other family members if they are an important factor in your life.
5. Near and Dear Items: In which residence do you keep valuable or sentimental items that are important to you?

Habit of life or lifestyle is also an important issue that permeates all of these factors. For example, it is not just the number of days spent, but also the quality of the time. What are your hobbies or interests? What is the focus of your life? In one case, for example, the court determined that the family was not domiciled in New York City, where they spent most of their time–but rather their weekend Hamptons home, which was the focus of their life.

New York's guidelines also list other factors; however, if the primary factors clearly indicate the location of domicile, it should not be necessary to examine these other factors. If, on the other hand, domicile cannot be clearly determined by the primary factors, the other factors take on more significance. Some of these other factors are: the state of your driver's license, car registration, and voting registration. You probably realize that these factors (which are addresses on documents) can be easily changed without significantly altering one's lifestyle.

Some other states' regulations look like New York's secondary factors. For example, these are the first five items listed as factors for Arkansas:

  • address used on federal income tax returns
  • address used on telephone, utility bills
  • address used on voter registration
  • address used on driver's license
  • address used on motor vehicle, boat and trailer registration

These items could be indicators of domicile, but they would not be clear and convincing in New York because they are too easy to change without actually moving. I do, however, recommend changing these documents if you are intending to change your domicile: While changing them does not prove that you moved, failure to change them would be an indication that you didn't move.

New York's guidelines also list items that they will not consider in determination of domicile:

  • where your will is probated
  • passive investments in businesses
  • location of bank accounts
  • political or charitable contributions
  • place of interment

These items are listed here specifically so as not to discourage conduct of business in New York or donations to worthy causes.

The state of Ohio has its own political considerations. The location of the individual's friends, dependents, and family members other than his or her spouse are not considered in a domicile determination for Ohio. In New York, the location of a taxpayer's minor children's school is an important factor, but Ohio has chosen to include only a taxpayer's spouse in its analysis, due to the intrusive nature of residency audits.

New York also has a statutory resident law for people domiciled in other states. You are taxed as a resident of New York if you have a residence in New York, and you spend (any part of) 184 days or more in New York. Ohio doesn't have this law; however, they will presume you are domiciled if you spend 213 nights in Ohio.

California also does not have a statutory resident law, but they presume you're a resident if you spend more than nine months there during a year. This presumption, however, can be rebutted if you can prove that you were there only temporarily. For example, you could show proof that you were in California on a one-year temporary assignment from your employer. If, however, you are in California for an indefinite period of time–not fixed or limited–the state will consider you a resident.

To learn more about Sanders Thaler Viola & Katz, LLP, visit www.st-cpas.com.

© 2017 Sanders Thaler Viola & Katz, LLP- Certified Public Accountants and Advisors - New York
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