01-1558
Income Tax
Signed 11/14/02
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, )
) ORDER
Petitioners, )
) Appeal No. 01-1558
v. ) Account Nos. #####
)
AUDITING DIVISION OF ) Tax Type:
Income
THE UTAH STATE TAX )
COMMISSION, ) Judge: Phan
)
Respondent. )
_____________________________________
Presiding:
Jane Phan,
Administrative Law Judge
Appearances:
For Petitioner: PETITIONER
For Respondent: Laron Lind, Assistant Attorney General
Angie Hillas, Manager,
Income Tax Auditing
Ryan Bradshaw, Senior
Auditor
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 October
23, 2002.
Petitioners are
appealing audit deficiencies of additional Utah individual income tax,
penalties and interest for the tax years 1995 through 1997. Respondent issued the assessment based on
the assertion that Petitioners were domiciled in Utah during this period. Petitioners assert that for the tax year
1995 PETITIONER was a resident of STATE and for the tax years 1996 and 1997
both PETITIONER and PETITIONER were residents of STATE.
The issue in this appeal
is whether Petitioners were "resident individuals" in the State of
Utah for the purposes of Utah Code Ann. '59-10-103(1)(k) for the years 1995 through
1997. From the information presented
Petitioners did not spend in the aggregate more than 183 days per year in the
State of Utah during the period in question.
A resident individual, in the alternative, is one who is
"domiciled" in the State of Utah.
Petitioners were clearly residents and domiciled in the State of Utah
prior to 1995. In order to show that
they were no longer domiciled in Utah during the period in question Petitioners
must show: 1) that they abandoned their Utah domicile; and 2) that they
intended to and did, in fact, establish a new domicile in STATE.
There was not a
significant dispute as to any of the relevant facts in this matter and the
matter before the Commission is merely to apply the facts to the applicable
law. Petitioners had been Utah
residents prior to 1995. They owned a
residence in Utah, had Utah drivers licenses and vehicles registered in
Utah. In 1995 PETITIONER left Utah to
work for a logging operation in STATE.
He stated that he did this because the wages were better than what he
could receive in Utah. While in STATE
during this year he stayed in a bunkhouse provided by his employer, although he
was charged a daily fee for the rent.
He did not get an STATE drivers license, he did not have a personal car
in STATE, and he did not open an STATE bank account. The logging camp closes down during December through February
because they can not work through the height of the winter.
In 1996 PETITIONER and
their son who was a minor at the time went to STATE with PETITIONER. PETITIONER also and worked for the same
employer and the employer provided a trailer for the PETTIONERS to reside in. As they were located in a remote location
and there were no other children in the camp, they home schooled their son
following a program provided by the State of STATE.
Petitioners did not
abandon their Utah domicile. Throughout
the audit period, they maintained their residence in Utah and returned there
during the winter months when the logging camp was closed. They maintained their bank account in Utah
and their Utah drivers license. They
had vehicles which were registered in Utah.
Their Utah phone number remained listed in the Utah telephone
directory.
The facts also indicate
that Petitioners did not establish a new domicile in STATE. They resided in employer provided
housing. They did not establish a
permanent residence in STATE. They did not
obtain an STATE drivers licenses. They
did not open an STATE bank account. The
state of STATE did not determine them to be residents of STATE as it denied
Petitioners payments from the STATE Permanent Resident Fund.
The facts clearly
indicate that Petitioners remained domiciled in Utah through the audit
period. They did not abandon their Utah
domicile and they did not establish a new domicile in STATE.
Petitioner argues that
is Amorally@ wrong for Utah to tax
wages that were earned out of state and suggests that the audit deficiency
against him was merely a means for Utah to make up some of its budget
shortfall. However, the applicable
statute and rule are longstanding laws which have been enforced in the same
manner for many years by the Auditing Division. Several of the Tax Commission=s decision on this issue have gone before the
Utah Supreme Court or the Utah Court of Appeals.[1] The Tax Commission must enforce the laws as
they are written by the Utah Legislature and based on the law and rule in
affect during the audit period Petitioners were domiciled in Utah and were,
therefore, residents of the state of Utah for purposes of Utah Code Ann. '59-10-104.
As for the penalties
assessed it appears that there is sufficient reasonable cause for their
waiver.
APPLICABLE
LAW
A tax is imposed on the
state taxable income of every resident individual for each taxable year. (Utah Code Ann. '59-10-104).
Resident individual is defined in Utah
Code Ann. '59-10-103(1)(k) as
follows:
A "resident individual" is
either:
(i) an individual who is domiciled in this state
for any period of time during the taxable year; 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
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.
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 Tax Commission is
granted the authority to waive, reduce, or compromise penalties and interest
upon a showing of reasonable cause.
(Utah Code Ann. '59-1-401(10).)
DECISION
AND ORDER
Based upon the
foregoing, the Commission finds that Petitioners were domiciled in Utah
throughout the audit period and the audit deficiencies of tax and interest are
sustained. The penalties assessed in
this matter are waived. 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 14th day of November
, 2002.
____________________________________
Jane Phan
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 14th day of November
, 2002.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner
[1]The issue of domicile for Utah individual income tax
purposes has been considered by the Utah Supreme Court and the Court of Appeals
in the following cases: Lassche v. State Tax Comm=n 866 P.2d
618 (Utah Ct. App. 1993); Clements v. State Tax Comm=n, 839 P.2d
1078 (Utah Ct. App. 1995), O=Rourke v. State Tax Comm=n, 830 P.2d 230 (Utah 1992),
and Orton v. State Tax Comm=n, 864 P.2d 904 (Utah Ct.
App. 1993).