Income Tax










v. ) Appeal No. 01-1282



THE UTAH STATE TAX ) Tax Type: Income Tax


) Judge: Phan

Respondent. )




Jane Phan, Administrative Law Judge



For Petitioner: PETITIONER


For Respondent: Laron Lind, Assistant Attorney General





This matter came before the Utah State Tax Commission for a Formal Hearing on November 6, 2002. Based upon the evidence and testimony presented at the hearing, and considering Petitioner's post hearing filing, the Tax Commission hereby makes its:


1. Petitioner is appealing an income tax, penalty and interest audit deficiency issued against him by Respondent for the 2000 tax year. The Statutory Notice of Audit Change was issued to Petitioner on July 26, 2001. Petitioner timely filed a Petition for Redetermination with the Utah Tax Commission and the matter proceeded to the Formal Hearing.

2.                   As of the date of the Statutory Notice of Audit Change, the amount of the deficiency was $$$$$ in tax, $$$$$ in interest and a penalty of $$$$$. Interest continues to accrue on the unpaid balance.

3.                   The penalty was assessed pursuant to Utah Code Ann. '59-1-401 (7).

4. Petitioner filed a Utah Individual Income Tax Return for the tax year 2000 on which he claimed $$$$ federal adjusted gross income and $$$ total adjusted income. On the return Petitioner requested a refund of $$$$ for the total amount of withholding Petitioner's employer had paid to the Utah Tax Commission on Petitioner's behalf. Petitioner also filed a U.S. Individual Income Tax Return for the 2000 tax year on which he claimed $$$$ in total income and requested a full refund of all federal withholding. These returns were both erroneous as Petitioner received taxable income during the tax year at issue.

5. Petitioner received $$$$$ in federal adjusted gross income during the tax year 2000. This amount is supported by a W-2 filed with the Internal Revenue Service by Petitioner's employer. Petitioner provided no evidence to dispute that he received this income from his employer as wages, nor did he present evidence to dispute the dollar amount of the wages received during the tax year at issue.

6. Petitioner was a Utah "resident individual" for purposes of Utah Code Ann. Sec. 59-10-104 as he remained domiciled in Utah during the year in question. Petitioner had been a Utah resident prior to the period at issue. Petitioner maintains that he changed his domicile from Utah to STATE. However, he failed to abandon his Utah ties and took no meaningful steps toward establishing a new domicile in STATE during the period at issue. Throughout 2000, Petitioner was an interstate truck driver and most of the time he resided in his truck. During the tax year 2000 Petitioner retained his Utah drivers license, his mailing address was the Utah address of his parents, he voted in Utah, and he obtained a resident fishing license. He maintained that it was more convenient for him to vote and get his mail in Utah because he was in Utah more often than STATE. However, this points to the position that he was domiciled in Utah, not STATE. Utah was the place to which he returned whenever he was absent. Petitioner did not rent or purchase a residence in STATE for any period during 2000. He did not receive mail in STATE. He did not obtain a STATE drivers license or register to vote in STATE. He did not establish a domicile in STATE during 2000.

7. The audit deficiency tax amount was based on Respondent's assertion that Petitioner was a Utah resident during the year 2000.

8. Returns such as the one filed by Petitioner, which are clearly erroneous and request a refund when one is not due, impede the administration of the tax law.

9. Before filing his returns in the manner in which he did, Petitioner states that he researched the matter and gave it serious consideration. Filing a $$$$$ income return was an intentional act on his part.


Utah imposes income tax on individuals who are residents of the state, in Utah Code Ann. '59-10-104 as follows:

...a tax is imposed on the state taxable income, as defined in Section 59-10-112, of every resident individual...


"Resident individual" is defined in Utah Code Ann. '59-10-103(1)(k) as:

(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 mores 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.

For purposes of determining whether an individual is domiciled in this state the Commission has defined "domicile" in Utah Administrative Rule R865-9I-2(D) as follows:

the place where an individual has a true, fixed, permanent home and principal establishment, and to which place he has (whenever he is absent) the intention of returning. It is the place in which a person has voluntarily fixed the habitation of himself or herself and family, not for a 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 or her domicile, a new domicile must be shown.


State taxable income is defined in Utah Code Ann.'59-10-112 as follows:

"State taxable income" in the case of a resident individual means his federal taxable income (as defined by Section 59-10-111) with the modifications, subtractions, and adjustments provided in Section 59-10-114 . . .


Federal taxable income is defined in Utah Code Ann. '59-10-111 as follows:

"Federal taxable income" means taxable income as currently defined in Section 63, Internal Revenue Code of 1986.

Taxable income is defined in the Internal Revenue Code at 26 U.S.C. 63 as:

Except as provided in subsection (b), for purposes of this subtitle, the term Ataxable income@ means gross income minus the deductions allowed by this chapter (other than the standard deduction).


Gross income is defined in the Internal Revenue Code at 26 U.S.C. 61(a) as:

Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items; ...


The Utah Legislature has specifically provided that the taxpayer bear the burden of proof in proceedings before the Tax Commission. Utah Code Ann. '59-10-543 provides the following:

In any proceeding before the commission under this chapter, the burden of proof shall be upon the petitioner . . .

The Utah Legislature has determined that a $500 penalty is necessary in the following

circumstances as set out in Utah Code Ann. '59-1-401(7):

If any taxpayer, in furtherance of a frivolous position, has a prima facie intent to delay or impede administration of the tax law and files a purported return that fails to contain information from which the correctness of reported tax liability can be determined or that clearly indicates that the tax liability shown must be substantially incorrect, the penalty is $500.




This appeal presents two issues to the Utah Tax Commission. The first is whether or not Petitioner was domiciled in the state of Utah. The second issue is whether the wage income Petitioner received is subject to income tax.

Petitioner was a resident and domiciled in Utah during 1999. Once a Utah domicile has been established, Petitioner must show: 1) that he abandoned his Utah domicile; and 2) that he intended to, and did in fact, establish a new domicile in STATE. See Utah Admin. Rule Rule R865-9I-2(D). Upon consideration of the facts, Petitioner did not complete either and he, therefore, remained domiciled in Utah throughout the year at issue.

Petitioner acknowledges that he received wage income for his employment and does not dispute the amount of the income he received. He argues instead that his wage income was not subject to income tax. On several occasions, the courts have directly considered whether wages are included in federal taxable income and have clearly concluded that wages are taxable income.[1] Several of these cases and their holdings have been cited to Petitioner in an order issued previous to the Formal Hearing. However, in the Defense Outline Summary that Petitioner submitted at the Formal Hearing, he states in error, at Page 2-19, "Income has always been defined by the Courts as to exclude wages." He goes on in his summary to cite excerpts from several U.S. Supreme Court cases as support for this contention. However, he is taking the excerpts out of context, or failing to understand the holding of the cases. The law and case law are clear on this point. Wages are included in taxable income both for federal and for Utah individual income tax purposes. In fact, the statutes and case law clearly support individual income tax.[2]

The appeal at hand deals with Utah Individual Income Tax and Utah individual income tax is governed by Utah law. Petitioner's arguments as to why his wage income is not included as federal taxable income are without merit. However, for state tax purposes his arguments are largely irrelevant. The state tax provisions are clear. They are not difficult or ambiguous. Utah "resident individuals" are subject to state income tax on their state taxable income. Utah law does incorporate a specific section of the Internal Revenue Code to define state taxable income. "State taxable income" is defined at Utah Code Ann. '59-10-112 and Utah Code Ann. '59-10-111 as ""federal taxable income" as currently defined in Section 63, Internal Revenue Code of 1986." When the statutory links are followed, state taxable income is income from whatever source derived and specifically includes compensation for services. See Internal Revenue Code at 26 U.S.C. 63 and 61(a). Petitioner's wages are compensation for services.

Turning to the issue of the $$$$ penalty, Petitioner filed a return for the tax year 2000 which clearly indicated that the tax liability shown was incorrect. Petitioner intentionally filed this type of return in furtherance of a frivolous position and it impeded the administration of the income tax laws. Petitioner states that he did some research, but he disregarded all the information that indicated his wage income was taxable.


1. The Commission has made a finding of fact that Petitioner was a Utah resident during the tax year 2000. For this reason the Commission concludes that Petitioner is liable for Utah individual income tax on his state taxable income. Utah Code Ann. '59-10-104.

2. Petitioner did not dispute that he had received income during the year at issue, nor did he dispute the amount of the income as determined by Respondent. Petitioner's income was wage income and was compensation for services which he rendered. Compensation for services is clearly included in Utah taxable income. Utah Code Ann.'59-10-112; Utah Code Ann. '59-10-111; 26 U.S.C. 63; 26 U.S.C. 61(a). Petitioner's arguments that his income was not subject to state income tax are without merit and have no support in statute or case law.

3. The $$$$$ penalty assessed in this matter is appropriate pursuant to Utah Code Ann. '59-1-401(7).


Petitioner's claims have no merit. The Tax Commission sustains the audit assessments of additional income tax, $$$$$ penalty and interest against Petitioner for the 2000 tax year. It is so ordered.

DATED this _____ day of _____________________, 2002.



Jane Phan

Administrative Law Judge





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

DATED this _____ day of ____________, 2002.



Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner





Palmer DePaulis Marc B. Johnson

Commissioner Commissioner


[1]See United States v. Mann, 884 F.2d 532 (10th Cir. 1989). In that case, Mann offered many theories as to why he was not required to file income tax returns. The court stated, AHis many theories include the asserted beliefs that 1) the United States Supreme Court has declared that the sixteenth amendment applies only to corporations, 2) the Internal Revenue Service (IRS) has no jurisdiction over him, 3) he is not a Aperson@ within the meaning of 26 I.R.C. '7203, 4 ) wages are not income, 5) federal reserve notes are not legal tender, and 6) the income tax is voluntary.@ The court in Mann responded to these assertions as follows, A. . . each of the views offered by Mann, whether found in his published materials or articulated additionally at trial, falls somewhere on a continuum between untrue and absurd.@ See also United States v. Lonsdale, 919 F.2d 1440 (10th Cir. 1990)

The 5th Circuit stated "it is clear beyond peradventure that the income tax on wages is constitutional." Stelly v. Commissioner, 761 F.2d 1113, 115 (1985).

See also Granzow v. C.I.R., 739 F.2d 265, 267 (1984) in which the Seventh Circuit stated, AIt is well settled that wages received by taxpayers constitute gross income within the meaning of Section 61 (a) of the Internal Revenue Code . . . and that such gross income is subject to taxation.@ In United States v. Koliboski, 732 F.2d 1328, 1329 fn 1 (1984), the Seventh Circuit stated Athe defendant=s entire case at trial rested on his claim that he in good faith believed that wages are not income for taxation purposes. Whatever his mental state, he, of course, was wrong, as all of us already are aware. Nonetheless, the defendant still insists that no case holds that wages are income. Let us now put that to rest: WAGES ARE INCOME.@

[2]See United States v. Collins, 920 F.2d 619 (10th Cir. 1990), cert. denied, 500 U.S. 920, (1991); United States v. Hanson, 2 F.3d 942,945 (9th Cir. 1993); United States v. Studley, 783 F.2d 934, 937, n. 3 (9th Cir. 1986); United States v. Sloan, 939 F.2d 499, 501 (7th Cir. 1991), cert. den. 112 S.Ct. 940 (1992); United States v. Kruger, 923 F.2d 587, 587-588 (8th Cir. 1991); United States v. Gerads, 999 F.2d 1255 (8th Cir. 1993); United States v. Slater, 96 F.R.D. 53, 55-56 (D. Del. 1982); and United States v. Mundt, 29 F.3d 233,237 (6th Cir. 1994). Cox V. Commissioner of Internal Revenue, 99 F.3d 1149 (10th Cir. 1996); Baker v. Towns, 849 F. Supp. 775 (D.Utah 1993);and United States v. Hanson, 2 F.3d 942 (9th Cir. 1993);