Income Tax

Signed 12/23/02





: Initial Hearing Decision and Order

Petitioners, :

: Appeal No. 02-0291

v. :

: Acct. No. #####

Auditing Division of the Utah State :

Tax Commission, : Tax Type Income


Respondent. : Tax Period 1995, 1996, 1998 & 1999





Irene Rees, Administrative Law Judge




For Respondent: John McCarrey, Assistant Attorney General, and Dan Engh, Auditing Division




This matter is before the Commission on Petitionersí objection to assessments issued against them for tax years 1995, 1996, 1998 and 1999. The parties appeared at an Initial Hearing on December 5, 2002.


Petitioners were domiciled in Utah and filed Utah resident tax returns prior to the audit period. Beginning in 1994, Petitioners left Utah to pursue employment opportunities outside of Utah, but they returned to their Utah home after absences from the state. Petitioners did not file Utah resident tax returns for tax years 1995 through 1999.[1] However, the Auditing Division identified the PETITIONERSí continuing ties to Utah and issued the assessments on the basis that the PETITIONERS remained domiciled in Utah during the years in question.




A determination about the domicile turns on whether the taxpayers abandoned their Utah domicile and established a new domicile elsewhere. A determination about a taxpayerís domicile does not rest merely on the taxpayersí declarations of intent after the fact, but turns on a fact-intensive inquiry into the taxpayersí actions and other indicia of domicile.




The PETITIONERíS recitation of the facts surrounding their movement into and out of Utah during these years is generally summarized as follows:


The PETITIONERíS moved to Utah in 1992 and purchased a home in CITY. PETITIONERíS Utah employer closed its business in 1993, and PETITIONER began exploring job opportunities outside of Utah. In 1994, PETITIONER accepted a position with COMPANY of COUNTRY. PETITIONERíS arrangement involved a renewable one-year work contract in COUNTRY, and he obtained a work permit that allowed him to remain in COUNTRY during the period of his employment. The PETITIONER family moved to COUNTRY, rented a home under a 3-year lease,[2] and made various unreimbursed improvements to the home. The PETITIONERíS children were placed in schools in COUNTRY and the family availed itself of language lessons so they could better assimilate into COUNTRY society. Petitioners surrendered their Utah driver licenses to COUNTRY officials and obtained Danish drivers licenses, registered their vehicles in COUNTRY and purchased COUNTRY car insurance.[3] The PETITIONER paid COUNTRY income tax and they were covered by COUNTRY health insurance.


PETITIONER anticipated that his employer would eventually expand operations in the United States and that he would be able to move his family to CITY 2, where the company already had a presence. However, PETITIONERíS employment with the COUNTRY company terminated in 1997 while he was still in COUNTRY. Thereafter, PETITIONER accepted a position with COMPANY 2 in COUNTRY 2 and the family moved to COUNTRY 2 in 1997. The PETITIONERS took a 3-year lease on a house in COUNTRY, put their children in COUNTRY schools and paid COUTNRY taxes. Soon after PETTIONER began working COMPANY 2 was acquired by another company and PETITONER was terminated. The PETTIONERS moved back to the United States and returned to their home in CITY in 1997.


Before moving to COUNTRY, Petitioners claim that they moved their household furnishings and other personal property out of Utah for storage in STATE. They shipped one of their vehicles to COUNTRY and stored the other car outside of Utah. With regard to the family home in CITY, PETITIONER testified that Petitioners put their CITY home on the market when they left Utah for COUNTRY and that they turned the task of marketing the home over to PETITIONERíS brother in STATE. He listed the property with various realtors at various prices during 1995 and 1996, but was unable to sell it.[4] The house remained vacant while the PETITIONERS were away, but the PETITIONERS maintained the utilities at the CITY home, including a telephone line used for monitoring the alarm and other environmental controls in the house.


PETITONERíS and one of the PETIONERSí sons returned to the CITY home in June of 1997 to arrange for roof repair and other maintenance on the CITY home. At that time, the PETITIONERíS son applied for a Utah driverís license. Mr. PETITIONER testified that his son obtained the Utah drivers license in order to surrender it to COUNTRY officials so he could obtain a COUNTRY license without submitting to the driver training requirements there. In any event, after PETITIONER was terminated from COMPANY, the family returned to their CITY home. Petitioner stated that the family returned to the home because they had been unable to sell the home and because they could not afford to live elsewhere while PETITIONER was unemployed.

In early 1999, PETITIONER secured employment in STATE 2, bought a home there, and moved the family. By October of 1999, PETITIONERíS employment was terminated. He stated that he returned to Utah for 30-40 days before he accepted employment in STATE in late 1999. The family moved into a rental home in STATE and sold their STATE home. PETTIONERíS employment there was also terminated.


Although PETITIONER stated that he discussed or entered relocation buyout arrangements with his various employers, the agreements never resulted in the sale of the CITY. In short, Petitionerís retained ownership of their CITY home from 1992 until present. Petitioners moved out of Utah to pursue various employment opportunities, but they returned to live in the home in between Mr. PETITIONERíS jobs and assignments. The home was vacant from the time Petitioners left for COUNTRY in 1994 until their return in 1997.[5] Petitioners lived in the home from the time of their return in 1997 until they moved to STATE in 1999. Petitioners moved back to the home briefly after Mr. PETITIONER lost his job in STATE until the family moved to STATE. The family returned to live in the home at some time during 2000. The PETITIONER still own the home and they are not actively marketing it.


PETITONER argues that he was not domiciled in Utah from 1995 through 1997. He states that he was subject to Utah tax in 1998, but that he changed his domicile changed to STATE, then STATE during 1999 and, because he was in Utah less than 183 days during 1999, that he was not a Utah resident during in that tax year.


There is no dispute that the PETITIONERíS were domiciled in Utah prior to the audit period, that they maintained a home in Utah throughout the audit period and that they returned to that home after absences. Respondent offered a variety of additional facts in support of its argument that Petitioners did not abandon their Utah domicile or establish a new domicile outside of Utah for tax years 1995 and 1996 and that they maintained continued domicile during the other years included in the audit period. The additional pertinent facts are summarized as follows:


1. PETITIONER worked in COUNTRY under temporary, renewable contracts and his work permits were conditioned upon his continued employment. The PETITIONER could not have remained in either COUNTRY or COUNTRY permanently or independently from the contracts and work permits.

2.                   Petitioners maintained a post office box in CITY throughout the audit period. Records indicate that various financial institutions and parties from whom PETITIONER received compensation mailed 1099s to the PETITIONERSí CITY address.


With regard to the post office box, Mr. PETITIONER claimed that after living in COUNTRY for a time, he learned that the familyís financial statements were routinely opened and examined by COUNTRY government officials. The PETITIONERS decided to route their financial mail through their CITY post office box where a mail forwarding service could sort and repackage the mail before forwarding. The COUNTRY officials could not identify the repackaged mail as financial statements, so they did not open it. This explanation implies that the PETITIONER arranged the post office box to cure a problem that developed after they arrived in PETITIONER. However, Petitioners do not claim that they initially placed a change of address with the U.S. Postal Service or otherwise attempted to reroute their mail from the Utah address, as one normally would do after leaving the state with no intention to return.


3. In 1996, Petitioners submitted a letter to the COUNTY Assessor claiming their CITY residence as their primary residence. The letter, which was dated August 26, 1996, was written on personal letterhead bearing Petitionersí CITY address. In the letter, the PETITIONERS ďrestatedĒ a similar letter of the previous year. Although PETITIONER claims that he submitted the letter at the urging of his mortgage company and that he had no idea why the letter was necessary, he cannot document that claim or offer any explanation as to why his mortgage company would concern itself with this issue. In any event, the letter demonstrates that PETITIONER made a conscious declaration that he considered the CITY property to be his primary place of residence during 1995 and 1996.


4. The PETITIONERS maintained two Utah bank accounts in the name of PETITIONER. PETITIONER stated that the accounts were intended as savings accounts for the PETITIONER children, and it appears that there was no activity in the accounts from the time the PETITIONER left Utah in 1994 until 1998.


5.                   Utah driver license records indicate the following:


a.                  PETITIONER renewed his Utah license January 28, 1997, one week before it was due to expire. Respondent submitted a copy of PETITIONERíS renewal application and license, each indicating PETITIONERíS place of residence to be ADDRESS in CITY. This address appears to be in the CITY business district and it is different from the address of the PETITIONERSí CITY home, suggesting an additional link between the PETITIONERS and CITY in 1997.


We also note that the renewal application and the copy of the license submitted suggest that PETITIONER renewed his license in person rather than by mail. First, the license application contains markings that, although not clearly readable on the copy submitted, appear to indicate that PETITIONER took the rules test at the time of renewal. Second, the copy of the driver license submitted bears the dates of renewal and expiration and bears PETITIONERíS signature. Had PETITIONER renewed online or via mail, the driver license division would have mailed him a renewal sticker to place on his old license. Respondent did not specifically address whether PETITIONER renewed his license in person, and the Commission makes no findings based on these observations. However, if these observations are correct, PETITIONER was physically present in Utah as early as January 1997, contrary to his testimony otherwise.


b. PETITIONER B renewed her Utah driver license in February of 1997, and it appears from the driver license record submitted that she obtained a duplicate license in January 2000. PETITIONER Bís license also bears the address of ADDRESS in the CITY.


c. The PETITIONERSí son applied for a Utah driver license in 1997. His license application bears the address of ADDRESS in CITY. Although it is difficult to read on the copy of the application submitted at the hearing, the application appears to indicate that he took the rules test in February of 1997 and the road test in July. The health questionnaire was signed in June 1996. There was no direct testimony concerning these dates, and the Commission makes no findings specific to this issue. Again, we merely note that the documentary evidence seems to place the PETITIONERSí son in Utah for a period of months beginning in early 1997 and calls into question PETITIONERíS claim that no family member was in Utah until June of 1997.


7. PETITIONER B is listed in two area phone directories for 1997 under different phone numbers. One listing indicates the PETITIONERíS home address. The other listing does not include an address. This evidence appears to contradict testimony that the PETITIONERíS maintained a phone line into the house solely for the purpose of monitoring the alarm and environmental controls.


8.                   For tax year 1997, the PETITIONERíS filed a federal return bearing their CITY mailing address. On Schedule C of that return, PETITIONER B declared her CITY address to be her business address. The PETITIONER also filed a Utah part year tax return in 1997 bearing their CITY address.


9. For tax years 1998 through 2000, records indicate that PETITIONER received compensation from COMPANY C. The records indicate that COMPANY considered PETITIONER B to be employed in Utah and that it made quarterly Utah unemployment contributions on her behalf.


10. For tax year 1998, Petitionerís filed a Utah tax return bearing their CITY address. Petitionerís do not dispute that they resided in Utah during 1998.


11.               For tax year 1999, Petitionerís filed a part-year resident Utah return bearing their CITY address. In that year, Petitionerís made a prepayment of tax in the amount of $$$$$. The prepayment form and the check with which the payment was made both bear Petitionerís CITY address. The check, dated December 26, 1999, was drawn on a Utah bank account that the PETITIONERíS maintained while they were living abroad.


Petitionersí 1999 federal return bears their Utah mailing address as well as a CITY business address listed on Schedule C-EZ.


Included with Petitioners 1999 tax information is a STATE nonresident or part-year resident return bearing Petitionersí Utah address. The records also indicate the couple received compensation from COMPANY 2 and COMPANY 3 and that both withheld Utah state tax.


12. Petitioners registered and voted in COUNTY, Utah in 1999.




It appears that Petitioners have followed a number of employment opportunities over the years in question and that some of those opportunities took Petitioners out of Utah. That movement from job to job, however, is not determinative of the question before us. Petitionersí Utah domicile, once established, continued until they established a domicile elsewhere.

When Petitioners left Utah in 1994 they established a temporary residence outside of Utah, but they did not establish a new domicile in COUNTRY. Although the family rented accommodations in COUNTRY, drove cars in COUNTRY, put their children in school there, and attempted to learn the language, they did not establish themselves as anything other than foreign residents of COUNTRY and COUNTRY. The familyís stay in Europe was contingent on

PETITIONERíS temporary employment contracts and work permits, and the family returned to its home in CITY after that employment terminated. Although Petitioners state that their income was subject to tax in COUNTRY and COUNTRY, there is no evidence that they were taxed as domiciles of those countries rather than temporary foreign residents.


Furthermore, Petitioners maintained their home in CITY and sought to claim it as their primary residence during their absence in 1995 and 1996. Although they claim that it was on the market for a period of years, they left the home vacant and available for their occupancy at any time and, in fact, they returned to live in the CITY home upon returning from Europe in 1997. The evidence shows that the PETITIONERS maintained a post office box in CITY during the tax years at issue. There is no evidence to suggest that Petitioners ever submitted a change of address with the US Postal service or with various businesses and institutions from which they received regular mailings.


During the tax years in question, PETITIONER B received compensation from various companies that used her CITY mailing address on the 1099s and W-2s. One of these companies, COMPANY3, withheld Utah income tax and made Utah unemployment contributions on her behalf, indicating that she instructed COMPANY3 that she was a Utah resident. Tax records also indicate that PETITIONER received compensation in tax year 1999 from COMPANY 2. The income was sourced to Utah and COMPANY 2 withheld Utah income tax at PETITIONERíS direction.


The evidence indicates that Petitioners returned to CITY in 1997 and resumed their lives there. PETITIONERíS both renewed their Utah driver licenses and their son obtained a new Utah driver license. Telephone directories and tax returns indicate that the PETITIONER set up a separate business address in CITY. They placed their children in Utah schools and eventually registered to vote in COUNTY in 1999. In fact, Petitioners admit to being domiciled in Utah for tax year 1998.



The evidence indicates that Petitioners never established a new domicile outside of Utah during tax years in question. Therefore, the Commission upholds the audit for all tax years at issue.

PETITTTIONER claims that he sought advice on this domicile issue from competent tax consultants prior to moving to COUNTRY and, therefore, asks for a waiver of interest associated with tax years 1995 and 1996. PETITIONER offered no evidence in support of that claim, so that request is denied without further consideration.







DATED this 23rd day of December , 2002.



Administrative Law Judge


The undersigned Commissioners have reviewed this matter and concur in this decision.



Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner






Palmer DePaulis Marc B. Johnson

Commissioner Commissioner

[1] Petitioners state that they relied upon tax professional for advice before they moved to COUNTRY, but they had no documentary proof of the advice given.

[2] PETITIONER REP stated that one must be a citizen to own property in COUNTRY, so Petitioners could not buy property in COUNTRY.

[3] PETITIONER REP states that it is illegal to drive in COUNTRY without COUNTRY registration, driverís license and insurance.

[4] PETITIONERíS brother is now deceased and PETITIONER stated the multiple listing contracts are no longer available.

[5] Petitioner stated he believed the home was vacant in 1995, unless his brother spent any amount of time in it. Respondent did not pursue this issue further.