BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX, )
:
Petitioner, )
:
v. ) INFORMAL DECISION
:
)
AUDITING
DIVISION, : Appeal No 86 0383
STATE TAX
COMMISSION OF UTAH, ) Account No XXXXX
:
Respondent. )
_____________________________________
STATEMENT OF CASE
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.
FINDINGS OF FACT
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.
DECISION AND ORDER
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.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner