BEFORE THE UTAH STATE TAX COMMISSION
) Appeal No. 02-1190
v. ) Account No. #####
AUDITING DIVISION OF ) Tax Type: Income
THE UTAH STATE TAX )
COMMISSION, ) Judge: Phan
Jane Phan, Administrative Law Judge
For Petitioner: PETITIONER
For Respondent: Dan Engh, Manager, Income Tax Auditing
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 November 25, 2002.
Petitioner is appealing an audit deficiency of Utah individual income tax and interest for the tax year 2000. Respondent issued the assessment based on the assertion that Petitioner was a resident or domiciled in Utah through tax year 2000. It was Petitioner=s position that he was not domiciled in Utah throughout the entire tax year at issue, that he had changed his domicile to STATE for part of the year.
Petitioner had filed a STATE Nonresident or Part-Year Resident Income Tax Return for tax year 2000. On the STATE return he indicated that he was a resident of STATE from August to November and indicated the number of days spent in STATE to be 120. On his STATE return he claimed $0 tax liability and requested a refund of the entire amount of his STATE withholding.
Petitioner also filed a Utah Individual Income Tax Return, as a part year resident. On the Utah return he indicated that he was a resident of Utah from January through August 2000. On the Utah return he concluded that his total Utah Tax was $$$$$. The return indicated that $$$$$ had been withheld as Utah withholding and that a refund was due to Petitioner in the amount of $$$$$.
The Commission notes that both the STATE and Utah returns indicate that Petitioners= total income was $$$$$. The Utah return indicates that of this amount $$$$$ is Utah income. The STATE return indicates that of the total amount only $$$$$ is the STATE income which results in $0 STATE income tax liability. This leaves approximately $$$$$ in income not attributed to either state.
The issue in this appeal is whether Petitioner remained a "resident individual" in the State of Utah for the purposes of Utah Code Ann. '59-10-103(1)(k) throughout 2000 or whether he changed his domicile to STATE for a portion of the year. If he remained domiciled in Utah throughout the entire year, all the income he earned including the STATE source income, is taxable to the state of Utah, although Petitioner would be entitled to a credit for income taxes, if any, paid to STATE or any other state.
Utah Code Ann. Sec. 59-10-103(1)(k) has two separate provisions by which one may be a resident of the state of Utah for tax purposes. For purposes of the statute a resident individual is one who spends in the aggregate more than 183 days per year in the State of Utah during the tax year and maintains a permanent place of abode. The second provision states, a resident individual, in the alternative, is one who is "domiciled" in the State of Utah.
The Commission looks at each provision in turn. Petitioners did clearly spend more than 183 days in the aggregate in the state of Utah. The issue is did they maintain a permanent place of abode. Petitioners listed their Utah residence for sale sometime in during the spring or early summer of 2000 as they anticipated moving to STATE. PETITIONER had accepted a position in STATE and went to work in STATE, at which time he rented an apartment there. Their Utah residence went under contract for sale in July 2000 and the sale closed in September 2000. Mrs.PETITIONER and their minor children remained in Utah at the Utah residence until the sale closed. By that time MR. PETITIONER felt his position in STATE was not stable, and MRS. PETITIONER and the children never moved to STATE. They resided with relatives in Utah until they rented another residence. Mr. PETITIONER obtained a new position in Utah and returned to Utah in November 2000 where he resided with the family at the rented residence through the end of the tax year at issue. For much of the time that Petitioner was working in STATE, Petitioners were maintaining a residence in Utah. However, there may have been a few weeks when MRS. PETITIONER and her children were living with relatives. Because the Commission finds Petitioners were domiciled in Utah under the second provision of the statute, the Commission need not decide whether Petitioners maintained a permanent domicile in Utah throughout the tax year at issue.
In looking at the second provision, whether MR. PETTIONER continued to remain domiciled in Utah through the 2000 tax year, he was clearly a resident and domiciled in the State of Utah prior to leaving for STATE. In order to show that he was no longer domiciled in Utah during the period in question 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. The facts indicate that he may have originally intended to abandon Utah and establish a new domicile in STATE, but he never fully accomplished either in the three months that he was residing in STATE.
Certainly he took some steps toward both abandoning Utah and establishing domicile in STATE but, due in part to the short duration of his STATE employment, he did not finish the process. Petitioners did list their house for sale in Utah and in fact, sold the residence. This supports their contention that they were intending to leave Utah and move to STATE. Petitioner obtained a job and rented a place in STATE. He indicates that his job was in the AAREA@ which was too expense for them to purchase a residence. Petitioner did not take all the steps that would be typical in abandoning Utah and establishing a permanent residence in STATE. He did not relinquish his Utah drivers license and obtain a STATE drivers license, he did not register to vote in STATE, he did not register vehicles in STATE. His family never joined him in STATE as they had originally intended.
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:
(k) "Resident individual" means:
(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.
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:
ADomicile@ means 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 . . .
DECISION AND ORDER
Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds that Petitioner maintained his domicile in Utah throughout the tax year 2000. The audit deficiency is hereby sustained. 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 23rd day of January , 2003.
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 23rd day of January , 2003.
Pam Hendrickson R. Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc B. Johnson