86-0383 - Income





Petitioner, )





AUDITING DIVISION, : Appeal No 86 0383



Respondent. )



This is an appeal to the Utah State Tax Commission from a decision of the Auditing Division of the Utah State Tax Commission (Respondent) to disallow employee business expense on Petitioner's individual income tax account No. XXXXX for the tax year XXXXX. Petitioner did not request an oral hearing in this matter. Therefore, the Tax Commission renders its decision based on the materials in the file.

Petitioner asserts that he is entitled to an employee business expense of $$$$$ ($$$$$ per day for 365 days), even though twenty percent of his wages, or $$$$$ were deducted from his pay for room and board Petitioner works for XXXXX (XXXXX), an entity separate from the Utah state prison, but which draws its work force only from the prison. Petitioner's theory underlying his claim is that because he must live at the prison in order to be employed by XXXXX, he is entitled to take a deduction for employee business expenses. Petitioner supports his claim by asserting that the prison is not his home.

Pursuant to Utah Code Ann. 20-2-14(4) (1953), the residence of a person incarcerated in prison is deemed to be the voting district where he resided before incarceration. By analogy, Petitioner asserts that his tax home is his residence before incarceration; thus, he is entitled to take a deduction for away-from-home related business expenses.


1. The petitioner is not required to reside at the prison in order to work at XXXXX. Rather, Petitioner is required to reside at the prison for other reasons and works at XXXXX merely as a privilege. Petitioner is not required to work at XXXXX in order to pay for room and board. However, if Petitioner does elect to work at XXXXX then twenty percent of his wages are deducted to contribute toward the costs of his incarceration.

2. A "residence" for voting purposes is not the same as a "residence" for determining business expense deductions. There is no statute or Utah case law which states that an inmate's tax home is deemed to be the home in which he resided before incarceration. Utah Code Ann. 20-2-14(4) (1953) specifically states that, for voting purposes, a person incarcerated at the prison is deemed to reside in the voting district in which he resided before incarceration. Section 26-2-14(4) is strictly construed by the Tax Commission to apply only for voting purposes and not for tax purposes.

3. State taxable income is defined as a resident's federal taxable income with certain modifications. 59-14A-ll (1953). Internal Revenue Code (I.R.C.) 162(a) provides a deduction for all ordinary and necessary expenses paid or incurred during the tax year in carrying out any trade or business. Traveling expenses, including amounts for meals and lodging while away from home in pursuit of a trade or business, are valid business expenses. No deduction is allowed for personal, living, or family expenses pursuant to I.R.C. 262.

4. Petitioner's room and board expenses are not "ordinary or necessary" expenses arising from a trade or business. Petitioner's expenses are not incurred while Petitioner is away from home. The IRS considers a taxpayer to be away from home when he is temporarily away from his residence. Petitioner is not temporarily away from his residence just because his incarceration is "indeterminate." The IRS defines temporary as a short or fixed period of time:

If your work away from your regular work is temporary, that is if its end can be foreseen within a fixed and reasonably short time, your tax home does not change, and you are considered to be away from home for the whole period. Usually, an assignment expected to last more than a year is not temporary. .

. .

Indefinite assignment. If your new job at the new location is for an indefinite time, that is, if its end cannot be foreseen within a reasonably short time, the new location becomes your new tax home.

Excerpts from Internal Revenue Publication [1986] Stand. Fed. Tax Rep. (CCH) 1350.1433.

Petitioner's indeterminate incarceration is an indefinite assignment for tax purposes. Therefore, the prison has become Petitioner's new tax home.

5. The IRS in Publication 436 uses three factors to determine whether the taxpayer has a "tax home":

(1) the taxpayer has part of his business in the area of his principal home and uses that home for lodging while doing business there,

(2) the taxpayer has living expenses at home that are duplicated because his business requires him to be away from that home, and

(3) the taxpayer has not left the area in which both his traditional place of lodging and principal home are located; the taxpayer has a member or members of his family living at his principal home; or the taxpayer often uses the home for lodging. Id.

The IRS requires a taxpayer to meet at least two of the three factors to have a tax home at the principal home where he regularly lives and to qualify for travel expenses. Petitioner does not meet any of the above three factors. Therefore, he is an itinerant pursuant to IRS Publication 436 and his tax home is where he works, i.e., the prison.


It is the decision and order of the Utah State Tax Commission that Petitioner's Petition for Redetermination, Appeal No. 86 0383, be denied.

The Auditing Division's decision to disallow employee business expense on individual income tax account No. XXXXX for the tax year XXXXX is hereby affirmed.

DATED this 11 day of March, 1987.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner