In a decision that will undoubtedly generate further debate regarding the statutory residency rule, the New York State Tax Appeals Tribunal, in a majority decision, has taken the rare step of withdrawing its earlier decision, which involved the “permanent place of abode” definition, and reversing itself by holding that an individual’s Staten Island home occupied by his parents was, after all, his permanent place of abode for statutory residency purposes. Matter of John Gaied, DTA No. 821727 (N.Y.S. Tax App. Trib., June 16, 2011).
As we reported in the April 2011 issue of New York Tax Insights, on February 24, 2011, the Tribunal granted the Department’s motion for reargument of the Tribunal’s July 8, 2010 decision in Gaied. In that decision, the Tribunal held that a New Jersey domiciliary’s second home in Staten Island, part of which was occupied by his parents (and part leased to tenants), was not his permanent place of abode. The Tribunal had concluded that, in making its determination, it was appropriate to look to “the physical attributes of an abode, as well as its use by a taxpayer.” The Department, in seeking reargument, asserted that the Tribunal had failed to reconcile the Gaied decision with its decision in Matter of Robert & Judith Roth, DTA No. 802212 (N.Y.S. Tax App. Trib., Mar. 2, 1989), where it held that “there is no requirement that the petitioner actually dwell in the abode, but simply that he maintain it.”
Now, following reargument, two of the Tribunal’s three Commissioners have reversed the July 8, 2010 Tribunal decision, and instead held that the Staten Island property was the taxpayer’s permanent place of abode. The Tribunal first concluded that its July 8, 2010 decision was in error:
We have concluded upon further reflection that our July 8, 2010 decision is an improper departure from the language of the statute, regulations, and controlling precedent. A review of our decisions from both prior to and [in Matter of Barker] subsequent to our July 8, 2010 decision, indicates that where a taxpayer has a property right to the subject premises, it is neither necessary nor appropriate to look beyond the physical aspects of the dwelling place to inquire into the taxpayer’s subjective use of the premises.
The Tribunal then proceeded to address afresh what it considered to be the relevant factors:
- Maintenance. The Tribunal concluded that Mr. Gaied maintained the Staten Island house, both owning it and paying expenses for its upkeep. The Tribunal held it did not matter whether or not the premises were maintained for the taxpayer’s own use.
- Access to Premises. The Tribunal held that the taxpayer did not establish that the Staten Island home was maintained exclusively for his parents, noting that the ALJ (who had ruled that the home was a permanent place of abode) found the taxpayer’s claim that he did not have unfettered access was not credible.
- Investment Purpose. The Tribunal also concluded that the taxpayer did not prove that the home was maintained solely as an investment, inasmuch as he occasionally stayed over, and he did not receive rent from his parents.
Stating that its prior decisions in Matter of Roth (“there is no requirement that petitioner dwell in the abode were controlling”) and Matter of Boyd (holding that a home owned and occupied by the taxpayer’s mother, but for which the taxpayer paid over 50% of the expenses, was the taxpayer’s permanent place of abode) were controlling, the majority held that the taxpayer permanently maintained the Staten Island home, which had the requisite physical attributes as a dwelling. This was sufficient for the Tribunal majority to find it was a permanent place of abode.
The dissent found that the July 8, 2010 decision correctly applied the legal standards regarding “maintenance” and “permanent place of abode.” The dissent pointed out that “maintenance” has been interpreted in a practical manner, generally based on a taxpayer doing what is necessary to live in the dwelling. The term “permanent” is not based solely on the physical attributes of the dwelling, or on ownership, but also on the taxpayer’s ability to access the dwelling. Here, the fact that the taxpayer occasionally stayed at his parents’ residence did not prove he had unfettered access. The dissent distinguished the case from Matter of Barker (involving a vacation home in the Hamptons), because the taxpayer here did not have unfettered access to the Staten Island home.
Additional Insights. Having granted the Department’s a motion for reargument, the Tribunal’s reversal of its earlier decision should come as no great surprise. However, the Tribunal’s decision appears to say, as no prior decision did before, that a taxpayer’s access to the abode is irrelevant, and that the taxpayer’s ownership and maintenance of a fully usable dwelling is determinative.
The decision certainly raises many questions. For instance, what if the taxpayer leases the property to a tenant? Under the Tribunal’s holding, a taxpayer’s actual use (or, put another way, non-use) of the abode appears to be irrelevant. Will the Department now view even an abode that the taxpayer leases to a third party as the taxpayer’s permanent place of abode (and also the third-party tenant’s permanent place of abode)?
The Gaied decision may still be appealed to the Appellate Division. As we went to press, the Tribunal denied a motion for reargument — this time made by the taxpayer — in Matter of John J. and Laura Barker, DTA No. 822324 (N.Y.S. Tax App. Trib., June 23, 2011), perhaps an even more controversial decision. As we discussed in the February 2011 issue of New York Tax Insights, the Tribunal previously held in Barker that a Connecticut couple’s vacation home in the Hamptons constituted a permanent place of abode causing the husband, who worked in New York City, to be considered a New York State resident.
Given the well-known inequities regarding application of the permanent place of abode rule for statutory residency, going far beyond the original purpose for the rule, the Tribunal’s decision will likely fuel efforts to substantially change, or eventually eliminate altogether, the current statutory residency rules.