G. Blaine Davis, Administrative Law Judge

Appearances:

For Petitioner: PETITIONER REP

PETITIONER 2

For Respondent: Ms. Susan Barnum, Assistant Attorney General

Mr. Dan Engh, Auditing Division

Ms. Brenda Salter, Auditing Division

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5 on May 1, 2002.

Petitioners are appealing the Statutory Notices of Audit that were issued on March 2, 2001 for the tax year 1997 and October 17, 2001 for the tax year 1998. They claim that the audits were wrongly assessed and they do not owe any additional tax. The additional tax resulted from the determination that PETITIONER 2 was a Utah resident and his income should be included on the resident tax return filed by his wife.

Petitioners were both born and raised in STATE, and their children were born and raised in STATE until September 1995. PETITIONER 1 and two of the three children of Petitioners moved to Utah in September 1995 as a result of a change in her employment. Her employer in STATE decided to relocate his medical practice to Utah and offered PETITIONER a position in Utah, so she chose to move to Utah until she retires in 2005.

PETITIONER 2 remained in STATE and continued his employment as a truck driver. He is blind in one eye and was concerned that he could not be licensed in Utah as a truck driver. Petitioners’ oldest child also remained in STATE with PETITIONER 2. PETITIONER 2 maintained a STATE residence, phone number, drivers license, and continued to register his vehicle in STATE. He continued to work in STATE full time until May 1999 when the company he worked for went out of business, so he moved to Utah to live with his wife. PETITIONER 2 represented that he did not spend more than 60 days per year in Utah visiting his family until he moved to Utah in 1999.

The Utah accountant for Petitioners in Utah filed their tax returns reflecting PETITIONER 2 as a resident of STATE and PETITIONER 1 as a resident of Utah. Due to a computer software problem the box indicating PETITIONER 2 was a full time resident of STATE was not checked on the STATE tax return. As a result the impending audit was issued. Petitioners’ accountant has amended the return to reflect PETITIONER 2 as a resident of STATE on the STATE tax return.

The parties acknowledge that PETITIONER 1 was domiciled in Utah for the years at issue, and she filed a Utah return for those years using the special instruction for couples who are married, with one spouse domiciled in Utah and the other spouse domiciled in another state.

Respondent argued that both Petitioners were residents of Utah. The evidence presented was the STATE tax returns for 1997 and 1998, which did not show PETITIONER 2’s state of residence. The state of residence on the STATE tax return was shown as Utah for both PETITIONER 2. and PETITIONER 1.

Respondent also submitted copies of the 1996/1997 and 1997/1998 White & Yellow Page listings for the CITY telephone directory listing PETITIONER 2. Property tax notices were presented listing a home owned in CITY by both Petitioners. Vehicle registration information was presented for two vehicles, one listing both Petitioners as owners and another listing only PETITIONER 2 as the owner of the vehicle. However, PETITIONER 2 represented that the vehicle registered on September 28, 1998 in the name of PETITIONER 2 was actually the vehicle of their son whose name is also PETITIONER 2. PETITIONER 2 did not obtain a Utah Drivers license during 1997 and 1998, nor did he register to vote in Utah. The bills of the parties, the tax returns, W-2s, and financial documents were sent to the Utah address. It was represented that was because PETITIONER 1 handled all of the financial matters for the parties.

APPLICABLE LAW

In order to qualify as a resident of the state of Utah for income tax purposes the following conditions must be met: “(i) an individual who is domiciled in this state for any period of time during the taxable year, but only for the duration of such period; or (ii) an individual who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate 183 or more days of the taxable year in this state. For purposes of this Subsection (1) (k) (ii), a fraction of a calendar day shall be counted as a whole day.” Utah Code Ann. §59-10-103.

“ ‘Federal taxable income’ means taxable income as currently defined in Section 63, Internal Revenue Code of 1986.” Utah Code Ann. §59-10-111.

“ ‘State taxable income’ in the case of a resident individual means his federal taxable income (as defined by § 59-10-111) with modifications, subtractions and adjustments as set forth in §59-10-114.” . . . Utah Code Ann. §59-10-112.

Utah Administrative Code, Rule R865-9I-2D provides as follows: “A. ‘Resident’ or ‘resident taxpayer’ means ‘resident individual’ as defined in Utah Code Ann. Section 59-10-103. B. ‘Nonresident’ or ‘nonresident taxpayer’ means ‘nonresident individual’ as defined in Utah Code Ann. Section 59-10-103. C. ‘Part-year resident’ means an individual who changes his status during the tax year from a resident to a nonresident or from a nonresident to a resident. D. ‘Domicile’ means the place where an individual has a true, fixed, permanent home and principal establishment, and to which place he has (whenever his is absent) the intention of returning. It is the place in which a person has voluntarily fixed the habitation of himself and family, not for mere special or temporary purpose, but with the present intention of making a permanent home. After domicile has been established, two things are necessary to create a new domicile: first, an abandonment of the old domicile; and second, the intention and establishment of a new domicile. The mere intention to abandon a domicile once established is not of itself sufficient to create a new domicile; for before a person can be said to have changed his domicile, a new domicile must be shown.

DISCUSSION

It is clear that both PETITIONER 2 and PETITIONER 1 lived in and were domiciled in STATE until 1995, when PETITIONER 1 moved to Utah to continue her employment with her STATE employer. There is no evidence indicating that PETITIONER 2 moved to Utah prior to 1999.

There is no evidence indicating that PETITIONER 2 spent “in the aggregate 183 or more days of the taxable year in this state.” Utah Code Ann. §59-10-103 (ii). Therefore, his income for the years at issue is taxable in this state only if he is domiciled in this state. Because it is clear that Petitioners were both domiciled in STATE until 1995, “two things are necessary to create a new domicile: first, an abandonment of the old domicile; and second, the intention and establishment of a new domicile.” Utah Administrative Code, Rule R865-9I-2D (D). There is no evidence to indicate that PETITIONER 2 abandoned his domicile in STATE prior to 1999, and very little evidence to indicate he intended to establish a new domicile prior to 1999.

Prior to 1999, PETITIONER 2, did not reside in Utah, he maintained a full-time job in STATE, a place of residence in STATE, a vehicle registered in STATE, a telephone and a driver’s license in STATE. There is nothing, which indicates he had any intention of living in Utah or changing his residency to Utah prior to 1999. The only reason his wife moved to Utah was to continue working for her employer.

Petitioners did purchase a home and vehicle, which was titled in both of their names in Utah, and the telephone was listed under PETITIONER 2’s name in the 1996/1997 and 1997/1998 directories. Additionally, the STATE tax returns did state that Petitioners were Utah residents during the years of 1997 and 1998. Although this evidence could possibly indicate the intention to reside in the state of Utah, all other factors indicate otherwise. The accountant for the parties represented that Utah was shown on the STATE return because of a “computer glitch.” The error has been corrected. PETITIONER 2 continued to work in STATE and maintain his residence. It is also reasonable and normal for a married couple to place both names on the title of homes and vehicles, which they own jointly, whether or not they both reside in the same state.

PETITIONER 1 handled all of the taxes and money matters. As a result, the correspondence, tax preparer and all of the relevant documents were taken care of in Utah. The handling of all of these matters do not alone constitute residency in Utah by PETITIONER 2.

DECISION AND ORDER

Based on the foregoing, the Commission determines PETITIONER 2 was not domiciled or a resident of Utah during 1997 and 1998. The audit assessments of tax and interest are not sustained and are abated and reversed. It is so ordered.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further appeal rights in this matter.

DATED this 24^th day of May , 2002.

____________________________________

G. Blaine Davis

Administrative Law Judge

BY ORDER OF THE UTAH STATE TAX COMMISSION.

The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 24^th day of May , 2002.

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner