BEFORE THE UTAH STATE TAX COMMISSION
Petitioners, ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
v. ) AND FINAL DECISION
COLLECTION DIVISION OF THE ) Appeal No. 94-1261
UTAH STATE TAX COMMISSION, :
) Account No. XXXXX
Respondent. : Tax Type: 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 Petitioners was Mr. XXXXX, Attorney at Law. XXXXX and XXXXX were also present in the hearing room. Present and representing Respondent was Mr. XXXXX, Assistant Attorney General, together with Ms. XXXXX from the Collection Division.
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 calendar years of XXXXX, XXXXX, XXXXX, XXXXX, and XXXXX.
3. Respondent has made a determination that the income of Petitioner, XXXXX, is taxable by the State of Utah for the periods in question. Petitioner, XXXXX, claims that such income for the relevant periods is not taxable to the State of Utah because he claims he was not a resident of the State of Utah, was not domiciled in the State of Utah, and the income was not earned within the State of Utah.
4. The parties have all agreed that XXXXX is a resident of the State of Utah and that any income which she earns is subject to income tax within the State of Utah. The only issue in this proceeding involves the income of XXXXX.
5. Petitioners, XXXXX and XXXXX are husband and wife and have been married since approximately XXXXX. In addition, they were together for ten years prior to their marriage. During the course of their marriage, they have lived the majority of the time within the State of Utah, and they raised their children within the State of Utah. Their children are now adults and no longer reside with either Mr. or Mrs. XXXXX.
6. Mr. XXXXX has been employed by XXXXX for more than 25 years and is currently stationed in XXXXX, Wyoming. Mr. XXXXX will normally make approximately two trips per week from XXXXX, Wyoming to Salt Lake City, Utah, and then return to XXXXX, Wyoming. Each trip takes approximately 5-12 hours, depending upon the type of train which he is assigned, and the weight and priority assignment of that train. He does not have a regular schedule, but will receive an assignment by telephone call in XXXXX, Wyoming. Once he arrives in Salt Lake City, he is required to have a layover of at least 8 hours. The layover will usually run 10-12 hours, but it may sometimes be as long as 15 or 16 hours that he is in Salt Lake City. When he is in Salt Lake City, he will stay at the home which is owned by Mr. XXXXX and his wife. Mr. XXXXX will occasionally make 3 trips in a week, and he will work approximately 42 weeks out of the year. He does not travel to Utah during his 5 weeks of vacation, or when he makes other arrangements, is sick, or has other matters to which he must attend.
7. Petitioners have represented that they are substantially separated, but are not divorced and do not presently intend to divorce.
8. Petitioner XXXXX continues to reside in Salt Lake City in a home on XXXXX which is owned in joint tenancy by XXXXX and XXXXX.
9. Petitioner XXXXX lives primarily in XXXXX, Wyoming. Mr. XXXXX has purchased a condominium in XXXXX, Wyoming, and holds the title to that condominium in conjunction with two other men with whom he works and shares the condominium. Each of those three individuals share the expenses of the condominium. Mr. XXXXX has made substantial improvements to the condominium by providing the labor to finish the basement, and provided a large share of the materials to finish the basement.
10. While Mr. and Mrs. XXXXX were residing together in Utah, they lived for approximately 14-15 years at XXXXX in Sandy, Utah. When Mr. XXXXX decided to move to Wyoming, the residence on XXXXX was sold, and a new residence was purchased at XXXXX, Salt Lake City, Utah, where Mrs. XXXXX has resided since XXXXX. It is also that home to which Mr. XXXXX goes to rest and sleep when he is laying over in Salt Lake City. The home on XXXXX is also held in joint tenancy. Mr. XXXXX comes and goes from that home without asking or informing Mrs. XXXXX of his plans or schedule. There is very little communication between Mr. and Mrs. XXXXX because of their marital situation.
11. When the home on XXXXX was sold, Mr. XXXXX was advised by his C.P.A. that if his residence was deemed to be Wyoming, then the home on XXXXX could not be deemed to be his primary residence, and therefore the gain on the sale of the home would be taxable to him and could not be deferred by investing it in another home. At that time, Mr. XXXXX acknowledged that he was a Wyoming resident, that the home in Utah was not his primary residence, and he therefore paid a total of $$$$$ income tax on the gain on the sale of his Utah residence located on XXXXX. That entire amount of $$$$$ in tax would not have been imposed if he had been a Utah resident and had been willing to claim that his home in Utah was his primary residence.
12. Both the house on XXXXX, and the house on XXXXX were at one point in a family trust for estate planning purposes. However, they were taken out for re-financing and financing purposes, and as of the time of the hearing the home on XXXXX was in joint tenancy.
13. Mr. XXXXX makes the payments on the home.
14. All of the utilities for both the home on XXXXX and the home on XXXXX have been in the name of XXXXX. Mrs. XXXXX testified that they remained in the name of Mr. XXXXX because he continues to pay the bills and because there was no benefit or reason to change the utilities when Mr. XXXXX left and went to Wyoming.
15. It is the practice of Mr. XXXXX's employer to pay a per diem allowance when its employees are out of town and away from their regular home. Petitioner, XXXXX, does not receive an out-of-town allowance when he is in Wyoming. If he claimed Utah as his residence with his employer, then he would be able to receive an additional per diem allowance for such days as he is in Wyoming.
16. Mr. XXXXX has shown Wyoming to be his residence with his employer, and it is at his telephone number in Wyoming where he receives his calls informing him as to the dates and times that he is to report to work.
17. Mr. XXXXX has a Wyoming drivers license which was issued in XXXXX of XXXXX. He acknowledges that he continued to drive on his Utah drivers license until he received his Wyoming license. He testified that he voluntarily surrendered his Utah drivers license to the Wyoming drivers license authorities at the time he received his Wyoming drivers license. His Utah drivers license was valid through XXXXX of XXXXX, and has not been reissued since its issuance date in XXXXX.
18. Mr. XXXXX testified that he had obtained a Wyoming fishing license, but did not submit any evidence of such a license. He testified that he has not had a Utah fishing or hunting license during the years that are at issue in the proceeding.
19. Mr. XXXXX has registered in the State of Wyoming the two vehicles which he operates. The vehicle which is operated by Mrs. XXXXX is licensed within the State of Utah. There are two other vehicles which have been registered partially or fully in the name of Mr. XXXXX within the State of Utah. Both Mr. and Mrs. XXXXX testified that those vehicles are owned and operated by the children of Mr. and Mrs. XXXXX, and that it was necessary to place his name on the vehicles for financing purposes because he co-signed the loans to provide the financing for the children's vehicles.
20. Mr. XXXXX testified that he is registered to vote in Wyoming, has a bank account in Wyoming, and has his car insurance issued in Wyoming on the vehicles which he has registered in Wyoming. There was no contradictory evidence to those facts.
21. All parties acknowledge that Mr. XXXXX was a resident of the State of Utah for numerous years up through XXXXX. Respondent has taken the position that Mr. XXXXX was also a resident of the State of Utah for the years XXXXX, XXXXX, XXXXX, XXXXX and XXXXX, and has imposed Utah State income taxes on the income of Mr. XXXXX for those years. In addition, Respondent has imposed a penalty of 50% for intent to evade the tax. That penalty was reduced to a 10% negligence penalty at the Initial Hearing.
22. Mr. XXXXX has removed almost all of his personal property from the home in Utah, and his possessions there are limited to a few changes of clothes and a very few personal items.
23. Respondent introduced several loan applications for financing items within the State of Utah. However, those loan applications were prepared primarily by Mrs. XXXXX for re-financing or for assisting their children in financing their motor vehicles. There is no evidence that Mr. XXXXX personally prepared any of the loan applications, although he acknowledges that he did sign such loan applications.
24. In addition to having a bank account in Wyoming, Mr. XXXXX also has a bank account in Utah.
25. The tax returns of Mr. and Mrs. XXXXX are prepared by an accountant in Utah.
26. Mr. XXXXX testified he has not been to a doctor in several years, but the dentist which he uses is located in Utah. However, the dentist is a relative who does his dental work for free.
27. The bills for debts and obligations relating to the home and for Mrs. XXXXX are received at the parties home in Utah, and Mr. XXXXX provides the funds with which those bills are paid. In addition, he provides sufficient funds for Mrs. XXXXX to live, although she has had some minimal employment through the period.
28. Mr. XXXXX's name is listed in the Utah phone book through XXXXX, and was listed in the Utah Polk Directory through at least XXXXX. Mrs. XXXXX testified that she preferred to leave the telephone number in his name, and has had no reason to change it since he went to Wyoming.
29. Mr. XXXXX testified that he is not in the State of Utah 183 days or more during any given year. Although he enters Utah frequently and then leaves, there is not sufficient evidence to find he is within the State for such a period of time.
A tax is imposed on the state taxable income of every resident individual for each taxable year. (Utah Code Ann. '59-10-104).
A "resident individual" is either:
a. an individual who is domiciled in this state for any period of time during the taxable year; or
b. 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. (Utah Code Ann. '59-10-103(l)(j).)
For purposes of determining whether an individual is domiciled in this state, "domicile" shall mean:
a. the place where an individual has a true, fixed, permanent home and principal establishment, and to which place he or she has (whenever he or she 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. (Rule R865-9I-2, Utah Administrative Code).
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. (Rule R865-9I-2, Utah Administrative Code).
A part year resident is an individual who changes his or her status during the tax year from a resident to a nonresident or from a nonresident to a resident. (Rule R865-9I-2, Utah Administrative Code).
DECISION AND ORDER
Having reviewed all of the facts, the Commission finds that Petitioner, XXXXX, has sustained his burden of proof to establish that he was not a resident of Utah and that he has abandoned his domicile in Utah and has created a new domicile in Wyoming. That finding is based primarily upon the fact that Petitioner, XXXXX has been consistent in his position that Wyoming is his residence, even when that position has been adverse to his interest, such as the requirement to pay income tax on the sale of his home, which could have been avoided by claiming Utah as a domicile, and also by not drawing per diem expenses from his employer for being out of town for the times when he is in Wyoming, which could have meant substantial payments if he had claimed Utah as his residence. Therefore, even though Wyoming is a non-income tax state which allows Mr. XXXXX to avoid state income taxes on his income, he has not attempted to have the best of both worlds by having the advantages of each state. He has, in essence, shouldered the responsibility which residence in Wyoming bears.
Based upon the foregoing, it is the order of the Utah State Tax Commission that Mr. XXXXX has sufficiently terminated his domicile in the State of Utah, and he is not in the state for a period of 183 days or more per year, and was therefore not required to file a Utah income tax return or to pay Utah income tax on the income which he earned. Therefore, to the extent that the audit assessment was based upon the income of Mr. XXXXX, such audit assessment is hereby set aside. To the extent that such assessment may have been based upon any income from XXXXX, the audit assessment is sustained. It is so ordered.
DATED this 7th day of February, 1996.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Roger O. Tew
Joe B. Pacheco Alice Shearer
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 R861-1A-5(P) and Utah Code Ann. ''59-1-601(1), 63-46b-13 et. seq.)