I’m just back from a bit of fun in the Sunshine State, where I visited with two different couples who relatively recently became Florida residents after fleeing the cold, snow and taxes of New York and Massachusetts. Of course, before moving, both couples wanted assurance they would not continue to be liable for New York or Massachusetts income taxes after their moves. Clouding the issue were the facts that both couples intended to occasionally visit their former home state, and both intended to continue maintaining residences there.
Both New York and Massachusetts (and numerous other states) have a set of rather mechanical rules to determine who will be subject to their income tax laws. If a taxpayer spends more than 183 days in the state and also maintains a permanent place of abode in the state, he or she will be deemed a resident of the state for income tax purposes. Pretty straightforward, but that’s not the end of the inquiry.
In addition to passing the number-of-days test, a taxpayer also needs to be able to demonstrate that there has been a change of domicile. Domicile is a bit of a tough concept to define, but descriptions include “the permanent residence to which a person intends to return,” or “where one’s permanent residence is located” or “the place an individual intends to be his permanent home, the place he intends to return to whenever he may be absent.” Thus, a person can have more than one residence, but only one domicile.
So the domicile test requires the taxpayer to demonstrate that he or she has abandoned the former home state and changed his or her domicile to another state. How does the taxpayer demonstrate that? By presenting as many indicators as possible of the change of domicile.
For example, New York’s Nonresident Audit Guidelines discuss five primary factors to be considered in connection with the domicile issue, including:
1) Home: the individual’s use and maintenance of a NY residence, compared to the nature and use pattern of a non-NY residence;
2) Active Business Involvement: the individual’s pattern of employment, as it relates to compensation derived by the taxpayer in a particular year;
3) Time: an analysis of where the individual spends time during the year;
4) Items near and dear: where are such items located; and
5) Family connections: an analysis of where family is located, typically considered in conjunction with the time factor. In addition, a slew of other, less significant, factors would be considered, such as where banking and other business statements are sent, the location of a safe deposit box, where various vehicles are registered, where the taxpayer votes, telephone services, the location where legal documents (such as a will) are captioned and where memberships in various organizations such as clubs, churches/synagogues and the like are maintained. Importantly, no one factor (be that a primary or secondary factor) is determinative, but certainly the primary factors carry more weight.
The bottom line is that there truly needs to be a change of domicile and even if one’s domicile has changed, the number-of-days test needs to be overcome.
For those of you who have moved, enjoy your “vacation time” in the north and safe travels when you return “home” to Florida!