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New Yorkers: Determining State Residency Can Have Substantial Tax Consequences

Sarah Kim, Principal, Citrin Cooperman Advisors LLC / Berdon Advisors LLC

07.18.22 | SALT Chat

If you have been reading Berdon blogs regularly, you may be familiar with the importance of state residency for state income tax purposes. Determining residency matters because a resident is subject to tax on all income regardless of the source, while a nonresident is taxed on state source income only.

Generally, an individual is taxed as a resident for state income tax purposes based on domicile or statutory residency. Domicile means the place an individual regards as his or her permanent home where the individual intends to return after a period of absence. Read this article if you are interested in what factors are considered by New York Tax Department in making a domicile determination.

Under the statutory residency test, a non-domiciliary who maintains a permanent place of abode (“PPA”) in the state and spends a portion of the tax year in the state is a resident. In New York, an individual who is not domiciled in New York, but (i) maintains a PPA in the state and (ii) spends more than 183 days is a tax resident (unless such individual is a member of the armed forces of the US). Both the PPA test and the 183-day rule must be satisfied in determining statutory residency.

Any part of a day spent within New York counts as a day toward the 183-day rule except in cases where your presence is incidental to travel or for medical treatment.

Regarding the meaning of maintaining a PPA, New York case law and nonresident audit guidelines provide that a dwelling place must be suitable for year-round use, and an individual must have some residential relationship to the dwelling (e.g., having unfettered access, contributing living expenses, keeping personal items, etc.). A recent New York State Appellate Division decision clarifies that maintaining a vacation home that could be a PPA is not enough to establish a statutory resident status, and the individual must have utilized the dwelling as a residence. In this case, the Court determined that the vacation home in Upstate New York owned by a New Jersey domiciliary but not used as their residence did not constitute a PPA. The decision could be appealed and reversed by the New York State Court of Appeals. For more about the decision and a potential refund opportunity, read this article.

If you have any questions about state residency, you can reach me at 646.346.6467 | skim@berdon.com or contact your Berdon tax advisor.

Sarah S. Kim is a Senior Tax Manager in Berdon’s State and Local Tax Group with nearly 10 years of professional experience. Sarah advises Fortune 500 and middle market businesses across an array of industries. She has experience with various types of taxes, including corporate income and franchise tax, sales and use tax, personal income tax, unincorporated business tax, commercial rent tax, and real estate transfer tax.

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