Statutory Residency, Permanent Place of Abode, May Hinge on Love or Loneliness

SALT Chat

01.07.19 | SALT Chat

I start this blog with a disclaimer. The same disclaimer provided by the New York State Department of Taxation and Finance (“Department”) at the end of every Advisory Opinion issued. The disclaimer states in part:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth therein and is binding on the Department only with respect to the person or entity to whom it is issued and only if the person or entity fully and accurately describes all relevant facts.

Why would I disavow the conclusion before even reaching one? Keep reading (and go back and read my posts from 11.9.15 through 12.28.15) and you will understand:

• 11.9.15 – Golf and a Little Bit of Residency Planning, Anyone?
• 11.16.15 – Where You Rest Your Weary Bones May Have No Impact on Tax Residency
• 11.23.15 – Success and Failure Are Not Permanent, So Why Is My Abode?
• 11.30.15 – Permanent Place of Abode: Can I Call a Plumber?
• 12.7.15 – Permanent Place of Abode: Let’s Eat Out
• 12.14.15 – Permanent Place of Abode: The Nature of the Relationship
• 12.21.15 – Permanent Place of Abode: Taking Ownership
• 12.28.15 – Permanent Place of Abode: Year End Shopping Tips

We have discussed many times in the past that in New York State (and City) as well as numerous other tax jurisdictions there are two ways to be considered a resident (and thereby taxed on worldwide income) for income tax purposes. First, the domicile test. It is the “touchy-feely” test of what your intentions are and where you intend your home to be. Then there is the arguably more objective statutory resident test. If you have a “permanent place of abode” (“PPA,” a term of art, which is at the center of this blog) and are “present” in the jurisdiction for more than 183 days, you are a resident.

Why is the concept of PPA so important? A simple example is in order. I live in New York State and it is clear that I am not domiciled in New York City. I travel to NYC (for work and other reasons) well in excess of 183 days a year, yet I am not a New York City resident since I have no living quarters in New York City, let alone anything that would rise to the level of a PPA. In my situation, I clearly do not need to worry about the number of days in NYC resulting in residence.

However, for most clients the facts are not so clear-cut. Situations can range from owning an entire floor of a building for your personal use, to having a closet to hang some clothes and anything in between. In the past, I have mentioned the following factors to keep in mind when determining what you need to know about PPAs:

• It doesn’t matter who or what owns the living quarters. If it is available to you and you have unfettered access, it could be a PPA
• It doesn’t matter if you never stay overnight in the living quarters (see unfettered access, above)
• Not having a kitchen or bathroom (especially if you have removed them) may not be enough to prevail in living quarters not rising to the level of a PPA
• You don’t have to pay the rent (mortgage, maintenance, etc.) in order to have a PPA. You can contribute to living expenses in some other way
• The highest court in New York has injected an element of common sense into the PPA debacle by stating that simply having a right or interest in a property isn’t enough to constitute a PPA. There must be some basis to show that the property was in fact used as a resident

So now that Department has issued an Advisory Opinion (see disclaimer above) holding that a taxpayer’s office did not constitute a PPA, I am waiting for the calls to start about the “office exemption.” The taxpayer lived in Washington D.C. with his wife, but travelled to Long Island, typically arriving on Monday morning and leaving on Thursday evenings. He had a cot in his office, which he slept on Monday through Wednesday nights.

The Department reviewed the typical issues in determining whether the office was a PPA, but emphasized one I have not seen before; the fact that he was prohibited from having overnight guests in his office on any night. Lonely as he may be, the Advisory proclaims under the facts as submitted, no PPA exists and accordingly there cannot be a finding of statutory residency.

If I have raised questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.