BEFORE THE UTAH STATE TAX COMMISSION
) Appeal No. 01-1558
v. ) Account Nos. #####
AUDITING DIVISION OF ) Tax Type: Income
THE UTAH STATE TAX )
COMMISSION, ) Judge: Phan
Jane Phan, Administrative Law Judge
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. 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.
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
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.
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
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).