93-0761

Income

Signed 11/25/94

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioners, : FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

v. : AND FINAL DECISION

)

COLLECTION DIVISION OF THE : Appeal No. 93-0761

UTAH STATE TAX COMMISSION, )

Respondent. : Account No. XXXXX

) Tax Type: Ind. Income

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing the Petitioners were Mr XXXXX and Mr. XXXXX, Attorneys At Law. XXXXX and XXXXX were also present. Present and representing the Respondent was Mr. XXXXX, Assistant Attorney General, who also had with him XXXXX and XXXXX, Paralegals in the Attorney General's Office, and Mr. XXXXX of the Compliance Division of the Utah State Tax Commission.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is income tax.

2. The periods in question are the taxable years for XXXXX, XXXXX, XXXXX, XXXXX, part of XXXXX, part of XXXXX, XXXXX, and XXXXX. The taxable years of XXXXX and XXXXX are not in dispute in this proceeding because the Petitioners filed Utah Resident Income Tax Returns for those two years. For XXXXX and XXXXX, Petitioner filed non resident or part year Utah individual tax returns.

3. The Petitioners are husband and wife who are currently married, and were so married throughout the audit period. There is one child, XXXXX, who was born on XXXXX.

4. The husband, XXXXX, (hereinafter singularly referred to as "Petitioner") is an airline pilot forXXXXX. Petitioner was initially hired by XXXXX in approximately XXXXX, and was employed by it until the merger with XXXXX in XXXXX, when he then became an employee of XXXXX.

5. As an airline pilot, Petitioner was originally employed in XXXXX for approximately one year, then went to the state of XXXXX for approximately six years, then returned to XXXXX for one year, then XXXXX for two years, XXXXX again for four years, and then he was based in Utah from XXXXX through XXXXX, when he was reassigned to XXXXX.

6. For the years which are the subject of this proceeding, the Petitioner had different relationships with differing states as follows:

A. In XXXXX, the airline base of Petitioner was originally XXXXX but he was transferred to XXXXX, Utah on XXXXX. The wife and daughter of Petitioner lived in XXXXX during the early part of the year but then moved to XXXXX, Utah and rented an apartment there in the fall of XXXXX. For that year, Petitioner claims that his domicile was in Florida. Petitioner did own a condominium in Florida, but it was rented to his father for $$$$$ per month, and Petitioner showed the home as a rental home on his XXXXX income tax return. In XXXXX, Petitioner filed his federal income tax return showing his address as XXXXX, Utah, and he did not file a Utah income tax return for that year. Petitioner obtained a Utah driver's license on XXXXX, and he signed a statement with his employer indicating that his address, in case of an emergency, was XXXXX, XXXXX, Utah, XXXXX, and he listed, with his employer, his telephone number in XXXXX, Utah as XXXXX. His daughter attended public schools in XXXXX, Utah starting in XXXXX.

B. For XXXXX, the airline base of Petitioner was XXXXX, Utah and his wife and daughter lived in XXXXX, Utah. His daughter attended public schools in XXXXX, Utah. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. The Petitioner claims that Florida was his domicile for XXXXX, but his only apparent connection to Florida was the condominium which he owned in Florida and rented to his father for $$$$$ per month. Again, the condominium was shown as a rental property and depreciated on his XXXXX income tax return, which showed an address of XXXXX, Utah, and no Utah return was filed for that year. During XXXXX, Petitioner acquired a building lot in XXXXX, Utah, and later commenced construction of a home on said building lot. The home was completed in either late XXXXX or early XXXXX.

C. In XXXXX, the airline base of Petitioner was XXXXX, Utah. The wife and daughter of Petitioner continued to reside in XXXXX, Utah, and the daughter of Petitioner attended schools in XXXXX, Utah. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. The Petitioner continued to claim Florida as his place of domicile, but again, his only connection to Florida was the condominium which he owned and rented to his father for $$$$$ per month, and which was shown as an income property and was depreciated on the XXXXX income tax return of Petitioner. The XXXXX income tax return of Petitioner was filed showing the address in XXXXX, Utah, but the W-2 forms indicated that he was claiming Washington as his residence.

D. For XXXXX, Petitioner continued to be based for employment purposes in XXXXX, Utah. The wife and daughter of Petitioner continued to reside in XXXXX, Utah and the daughter attended public schools in XXXXX, Utah. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. Petitioner continued to assert that Florida was his domicile, although his only connection with Florida continued to be the ownership of his condominium which was still occupied by his father at the rate of $$$$$ per month. The condominium was shown as a rental property on the XXXXX income tax return of Petitioner and was depreciated on that tax return. The XXXXX income tax return of Petitioner was filed showing a XXXXX, Utah address, and the W-2 form indicated that he was a resident of the state of Washington.

E. For XXXXX, Petitioner continued to be based in XXXXX, Utah for employment purposes. The wife and daughter of Petitioner lived in XXXXX, Utah, and the daughter of Petitioner attended public schools in XXXXX, Utah. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. Petitioner claimed Florida as his state of domicile for most of the year, but he did sell his Florida condominium during XXXXX, and he thereafter filed a part year income tax return with the state of Utah. On XXXXX, Petitioner renewed the Utah driver's license which he had received in XXXXX. Except for the sale of his Florida condominium, nothing had changed from all of the prior years back through XXXXX.

F. For XXXXX, Petitioner was based for his employment in XXXXX, Utah, and his wife and daughter lived together with him in XXXXX, Utah, and his daughter attended either public schools in XXXXX, Utah, or theXXXXX as a resident student. Petitioner claimed Utah as his domicile. The XXXXX income tax return of Petitioner was filed showing the same Utah address which had been utilized since XXXXX, but Petitioner did file a Utah income tax return. Petitioner also filed a new pilot information form with his employer showing XXXXX, as the place of his address.

G. For XXXXX, Petitioner continued to be based in XXXXX, Utah and he and his wife and daughter lived in XXXXX, Utah. His daughter attended the XXXXX as a resident student. Petitioner claimed Utah as his place of domicile. His federal income tax return was filed showing the same XXXXX address, and he did file a Utah income tax return. On XXXXX, Petitioner did receive a change in assignments from his employer, but he only changed the type of plane which he was flying, and he continued to fly out of XXXXX, Utah.

H. For XXXXX, Petitioner continued to be based in XXXXX, Utah for employment purposes. His wife and daughter continued to reside in XXXXX, Utah, and his daughter attended the XXXXX as a resident student. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. Petitioner acknowledged that he was a domicile of Utah for the first half of XXXXX, but claims that he then became a domicile of the state of Washington. The Petitioner purchased a one half interest in a home in XXXXX, Washington in XXXXX, but he did not occupy that residence on a regular basis. During XXXXX, Petitioner also had some estate planning performed, including a will and trust which identified him as a Washington resident, but the work was performed by his attorney in Utah.

I. In XXXXX, Petitioner continued to be based in XXXXX, Utah, and his wife and daughter continued to reside in XXXXX, Utah. His daughter attended the XXXXX in XXXXX, Utah as a resident student. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. Petitioner claimed that he was a domicile of Washington, but his only connection with Washington was the one half interest in a home which was occupied by the other owners, and a corporation which had been incorporated under the laws of the state of Washington.

J. For XXXXX, Petitioner continued to be based for his employment purposes in XXXXX, Utah. His wife and daughter continued to reside in XXXXX, Utah. Petitioner still listed his address and telephone number with his employer as XXXXX, Utah. Petitioner claimed that the state of Washington was his place of domicile, and he filed his federal tax returns showing an address in the state of Washington, but did not file a Utah income tax return.

K. For periods when Petitioner and his family resided primarily in XXXXX, Petitioner would sometimes commute by way of his airline to other locations, but from XXXXX through XXXXX he was based in XXXXX, Utah, so that very little, if any, commuting was necessary.

7. The Petitioner was frequently out of the state of Utah, but there is no evidence that he was not within the state of Utah for at least 183 days or more for each of the years in question. The wife and daughter of Petitioner were clearly within the state of Utah for periods in excess of 183 days per year, and it is presumed that Petitioner was within the state of Utah for a period in excess of 183 days during the years in question. After his flying trips, Petitioner would return to XXXXX, Utah to be with his wife and daughter. He would almost never go to either Florida or Washington.

8. Petitioner has registered a boat, recreational vehicle, a XXXXX, and numerous automobiles within the state of Utah. Petitioner has not had any vehicles registered within the state of Florida during the audit period. When Petitioner was asked why his vehicles had all been registered in Utah and not Florida, he indicated that almost all of his vehicle usage was in Utah and for the few times he went to Florida, he could rent a car for a very economical rate.

9. During the years for which Petitioner claims to have been domiciled in Florida, he spent very little time in Florida except to visit his father, and he had no other contacts with Florida. He does not even represent that he would return to Florida from his flights, nor that he spent a significant amount of time in Florida. When he was in Florida, he would stay with his father.

10. Beginning in XXXXX, Petitioner obtained a medical examination from a physician located within the state of Utah, and on that medical examination he showed XXXXX, Utah as his address. The examinations were required by his employer on a semi annual basis, so such certifications were made every six months from XXXXX through XXXXX. For all of the examinations every six months for the full ten years, he reported to the doctor that his address was XXXXX, Utah. On his physical examination for XXXXX, Petitioner showed Washington as his residence.

11. During all of the years in question, the Petitioner was consistently listed in the XXXXX telephone directory.

12. The home of the Petitioner in XXXXX, Utah, was approximately XXXXX square feet, which made it nearly double the size of his rental condominium in Florida, and significantly larger than the home which he jointly owns in the state of Washington.

13. When the Petitioner sold his home in California and moved to Utah, he rolled the gain on the sale of the California home (for income tax purposes) into his home in XXXXX, near XXXXX, Utah, and then he later rolled the gain on the sale of that home into his later home in XXXXX, Utah. To qualify to roll the gain into another home, it is legally required to constitute the principle residence of the taxpayer.

14. During the period in question, the Petitioner filed at least five separate loan applications. Those loan applications were with XXXXX, XXXXX, XXXXX, and two with XXXXX. On each one of those loan applications, the Petitioner showed his address as XXXXX, Utah. The only loan applications filed with banks were filed with Utah banks. No loan applications were filed with Florida or Washington banks.

15. For XXXXX through XXXXX, Petitioner wrote 257 checks totalling $$$$$ to Utah persons or businesses, compared to 6 checks for $$$$$ for persons or businesses in Washington.

16. For XXXXX through XXXXX, Petitioner made 14 credit card charges totalling $$$$$ to Utah persons or businesses, compared to 8 credit card charges totalling $$$$$ for persons or businesses in Washington.

17. At the time Petitioner sold his home in Florida and then acknowledged that he was a Utah resident, he did not take any further actions to change his domicile from Florida to Utah. The only action was the sale of the condominium. Again, in XXXXX, when Petitioner claims to have moved his domicile from Utah to Washington, even though he remained based in XXXXX and he and his family continued to reside in their home in XXXXX, Utah, he cannot name any actions which demonstrate a change of domicile.

18. Florida and Washington, the two states in which Petitioner tries to assert he was domiciled, are both states which do not have a state income tax.

19. The Petitioner maintained a permanent place of abode within the state of Utah from XXXXX through XXXXX. The Petitioner did not maintain any other permanent place of abode for the audit period.

20. From XXXXX through XXXXX, the Petitioner had a true, fixed, permanent home and principal establishment in the state of Utah at which his family resided and to which he returned and made it his home.

CONCLUSIONS OF LAW

A "resident individual" for Utah income tax purposes, and for purposes of determining parties who are subject to the imposition of the Utah income tax, means 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 an individual who is not domiciled in the state but maintains a permanent place of abode in this state and spends an aggregate of 183 or more days of the taxable year in the state. (Utah Code Ann. '59-10-103(1)(j).

"Domicile" means the place where an individual has a true, fixed, permanent home and a 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 and family, not for a mere special or temporary purpose, but with the present intention of making a permanent home. (Utah State Tax Commission Administrative Rule R865-9i-2(d).)

The intentions of a person with respect to the establishment of domicile are determined by the actions taken by such person and not by self proclaimed statements which are not supported or sustained by facts or the actions of the persons.

DECISION AND ORDER

In the present case, the issue to be decided by the Commission is whether or not, for the years in question, the Petitioner is required to file a resident Utah income tax return as defined under the Utah State Statutes and Tax Commission Administrative Rules.

Utah Code Ann. '59-10-103 defines the term "resident individual" as meaning "(i) an individual who is domiciled in the 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 the state but maintains a current place of abode in the state and spends in the aggregate 183 or more days of the taxable year in the state."

Pursuant to its rule making power, the Tax Commission has promulgated Rule R865-9i-2(d) which defines the term "domicile" as meaning "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 a place in which a person has voluntarily fixed the habitation of himself and family, not for a mere special or temporary purpose, but with the present intention of making a permanent home...."

In the present case, the evidence clearly shows that the wife and daughter of Petitioner were within the state of Utah continuously on a regular basis and that the state of Utah was their normal place of habitation. The evidence also shows that the Petitioner did not have any other place to which he regularly returned except to his family within the state of Utah. Further, although the Petitioner traveled with his employment and was out of the state of Utah for a substantial number of days, there is no evidence to indicate that he was not in the state for a period of at least 183 days or more of each of the taxable year. The Petitioner had the burden of proof to show that he was not within the state for such period of time, and there was no substantial evidence presented on that issue. Therefore, the Commission determines that Petitioner was a resident of the state of Utah for a period of at least 183 days each year, and was required to file a Utah individual income tax return for each of the years in question in the audit report.

Further, the Commission also finds that the Petitioner was a domicile of the state of Utah. His main home was here, his family was here, all of his business affairs were conducted from the state of Utah, and he gave the state of Utah as his residence on every single document every time he was asked to list his address. Further, although he may have owned property in Florida and Washington, there is no evidence to support his claim that he was domiciled in Florida or Washington until after he sold his home in Utah in XXXXX and moved to the state of Washington. Therefore, while a determination of domicile is to a substantial degree a determination of a person's intent, that intent is demonstrated by the actions taken by the person and not the self proclaimed attempts at declaring such domicile. The conduct of Petitioner and all other relevant facts and circumstances in this proceeding clearly indicate that the Petitioner and his family were domiciled within the state of Utah. There is no showing that Petitioner had any contacts with Florida or Washington during the audit period except the nominal ownership of property in those states and an occasional trip to visit relatives and friends. In fact, it is clear that the claimed domicile in those non income tax states is nothing more than an attempted "tax dodge" claim.

As a part of the audit assessment, the Respondent proposed a penalty for late filing of the return in the amount of the greater of XXXXX or 10% of the return filed amount for each return, and an additional penalty for negligence of 10% of the amount of the tax due. The evidence clearly sustains that the returns were filed late, and in fact were never filed for the years that are the subject of the audit. However, the evidence is overwhelming that the Petitioner was both a resident and domicile of the state of Utah, and the only times he made any claims to be domiciled in Florida or Washington were when it was time to file a state income tax return. Even then, he showed XXXXX, Utah as his address on his federal return. It is clear that Petitioner held himself out to be a resident or domicile of Florida and Washington only for the purpose of evading the income tax due to the state of Utah. Petitioner is therefore subject to a penalty in the amount of XXXXX per period or fifty percent (50%) of the tax due, whichever is greater, pursuant to ' 59-1-401(3)(c), Utah Code Annotated, instead of the ten percent (10%) negligence penalty.

Accordingly, the Commission hereby affirms the determination of the Collection Division regarding the amount of tax which is due, and further sustains and affirms the determination of a ten percent (10%) penalty for late filing. The Commission further determines that a XXXXX or fifty percent (50%) penalty for intent to evade the tax is to be imposed instead of the ten percent (10%) negligence penalty. It is so ordered.

DATED this 25th day of November, 1994.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

NOTICE: You have twenty (20) days after the date of a final order to file a Request for Reconsideration with the Commission. If you do not file a Request for Reconsideration with the Commission, you have thirty (30) days after the date of a final order to file a.) a Petition for Judicial Review in the Supreme Court, or b.) a Petition for Judicial Review by trial de novo in district court. (Utah Administrative Rule R861-1-5A(P) and Utah Code Ann. ''59-1-601(1), 63-46b-13(1), 63-46-14(3)(a).)

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