Trying to plug yawning budget deficits, states are fighting a never ending battle for revenue. One common weapon in this battle: the increased enforcement of tax laws. Areas that were overlooked in the past now face heightened scrutiny. One area under the microscope: analyzing individuals’ domiciles. The purpose of this analysis: to find more people to tax.
It may seem that determining an individual’s domicile is a pretty straightforward matter. But, states are reluctant to accept an individual’s claim of residency or lack thereof, so it’s important to have an understanding of the key terms used in residency statutes. Most states accept the common law definition of “domicile:” where one lives and intends to make his or her permanent home. But, this definition is subjective; so many states have created an objective definition for taxpayers. Those who meet the objective criteria are also referred to as “statutory residents.” Other key terms, such as “permanent place of abode,” “most of the year” and “day,” vary from state to state.
Analyzing a taxpayer’s domicile or whether they meet the definition of statutory resident is fact-intensive. While the factors considered by each state vary, the underlying common themes are:
- Place of homes, family, business and social affairs, and locations of sentimental items;
- Documentation showing new address, licenses, voter registration, vehicle registration, and estate planning documents.
State case law gives taxpayers an indication of which factors are given more credence when determining domicile. However, it also gives taxpayers another very important lesson – documentation evidencing domicile is important but the evidence concerning a taxpayer’s center of affairs trumps other evidence presented.
Change of Domicile
Some states, such as Florida, require basic documentation to establish a change of domicile such as a Declaration of Domicile. New York requires individuals to keep records of their daily whereabouts for several years to meet the burden of proof to change residency. Other states require documentation in order to relinquish your residency. For instance, Ohio requires taxpayers to sign an Affidavit of Non-Ohio Residency/Domicile.
Taxpayers should also be concerned about their official domicile at the time of death. Living in one state at the time of death but listing another state’s laws as the default rule in your estate planning documents can be interpreted in a manner inconsistent with a decedent’s desires.
Ohio Residency Determination Help
Want to change your domicile? It’s easier said than done. Think that you have changed your domicile? You might want to think again. States’ increased examination of domicile to collect taxes should cause you to double check; while you may think you’ve made a change, your former state might not agree – and might continue taxing you as a resident. If you need help determining your residency status, contact Rea & Associates. Our state and local tax professionals will help you determine whether you have met your new state’s residency requirements.