NYS Says A Vacation Home is Not a Permanent Place of Abode, and Refunds Could Follow
7.12.22 | Client Alert
A New York State Appellate Division ruling1 may present a refund opportunity for certain New York City/State residents with vacation homes. The ruling could be appealed and reversed, but as of this writing, it is binding authority.
What were the circumstances?
In the case, the taxpayer was, without question, domiciled in New Jersey, owned a vacation home in Upstate New York, and commuted daily to work in New York City. The taxpayer used the vacation home for no more than three weeks per year and stored no personal effects there aside from those brought in for the brief stays. The home had a separate area that was occupied full-time by another resident.
The Appellate Division reversed a Tax Appeals Tribunal case and the long-standing rule that treated ownership of a New York vacation home as a “permanent place of abode” for statutory residency purposes. A statutory resident is defined as one who has a “permanent place of abode” in New York and is present in New York for more than 183 days. In reversing the Tribunal, the Appellate Division concluded that it did not have a rational basis to determine that the taxpayer was a statutory resident merely because a dwelling could have been used as a permanent place of abode if, in fact, it was not used that way. It’s important to note that the taxpayer was not domiciled in New York. Had the taxpayer been domiciled in New York, he would have been subject to the New York resident income tax.
The upshot is that according to the Appellate Division, a vacation home exception is now within the purview of the New York State Tax Law.
While this is by no means a settled matter, a taxpayer who filed as a New York State/City resident based on the statutory residency test and spent little or no time at the property classified as a permanent place of abode in the State/City could consider filing for a refund. As always, we remind you that New York (and most jurisdictions) look to domicile in addition to the statutory residency test in determining whether one will be taxed as a resident. Any such decision should be made in light of your overall tax position and circumstances.