94-1552

Income

Signed 2/1/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioners, : FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

v. : AND FINAL DECISION

)

AUDITING DIVISION OF THE : Appeal No. 94-1552

UTAH STATE TAX COMMISSION, )

: Account Nos. XXXXX

Respondent. ) XXXXX

: Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a Formal Hearing on XXXXX. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing the Petitioners by telephone conference were XXXXX, Tax Representative, and XXXXX. Present and representing the Respondent were XXXXX, Assistant Attorney General, XXXXX and XXXXX of the Auditing 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 period in question consists of the tax years of XXXXX, XXXXX and XXXXX.

3. Petitioners had filed resident individual income tax returns for XXXXX, XXXXX and XXXXX. Petitioners subsequently filed amended nonresident returns for these years. The XXXXX return was processed and a refund issued to Petitioners. However, prior to issuing the refund for XXXXX and XXXXX Respondent audited the account and disallowed the XXXXX and XXXXX amended returns. On XXXXX Respondent issued a Statutory Notice requesting return of the refund for XXXXX in the amount of $$$$$ and interest of approximately $$$$$.

4. Petitioners are appealing the assessment for XXXXX and asking that the amended returns for XXXXX and XXXXX be allowed.

5. Petitioners owned a home in Roy, Utah and resided in the state until XXXXX when Petitioners moved to Japan so Petitioner XXXXX could work as a civilian for the U.S. Air Force. In Japan housing was provided by the U.S. Air Force.

6. Petitioners did not have minor children during the subject period.

7. Petitioners did not sell their home in Roy, Utah, because when they first went to Japan in XXXXX Petitioners thought that they might return to Utah. Petitioners' son, who was an adult during the years in question, resided in Petitioners' home in Utah. Petitioners did not change the telephone bill or telephone directory which continued to list Petitioners as if they resided at the Roy residence.

8. When they first went to Japan Petitioners did not know how long Petitioner XXXXX would be allowed to work in Japan. He was concerned about getting in his forty years as a civilian employee with the Air Force so he could retire. In XXXXX he was told that he could continue to work in Japan until he retired. At that time Petitioners determined that they would stay in Japan until Petitioner XXXXX could retire then they would move to California.

9. Petitioners had originally filed Utah resident individual income tax returns during the years in question.

10. Petitioners visited Utah at least once during the audit period and Petitioner XXXXX renewed his Utah drivers license in XXXXX. Petitioners kept a bank account in Utah. Petitioners did not register cars in Utah during the audit period.

11. Petitioners did not subject themselves to the income tax laws of Japan, nor attempt to give up U.S. Citizenship to become permanently domiciled in Japan.

12. Petitioners returned to the United States in XXXXX but did not return to Utah. They moved to California where they continue to reside.

13. At the Initial Hearing in this matter the Commission waived the assessment of interest for the XXXXX year because the Commission had erred in refunding the money to Petitioners. This was not challenged by the Respondent at the Formal Hearing.

CONCLUSIONS OF LAW

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:

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).

DISCUSSION AND ANALYSIS

The issue presented in this appeal is whether Petitioners were "domiciled" in the State of Utah for the purposes of Utah Code Ann. '59-10-103(1)(j) during the years XXXXX, XXXXX and XXXXX. Petitioners assert that they were not domiciled in the State of Utah during these years and Respondent maintains that Petitioners were domiciled in the State of Utah.

In order for the Commission to find for Petitioners, Petitioners must show that: 1) they abandoned their Utah domicile; and 2)that they intended to establish and did in fact establish domicile in Japan. Petitioners failed to meet the second prong of this test. Petitioners did not intend to establish a permanent domicile in Japan. Petitioners testified that they intended their stay in Japan to be temporary. Originally they thought they would stay in Japan a couple of years. When they learned that they could be employed longer in Japan, Petitioners determined they would stay only until Petitioner XXXXX could retire. Petitioners did not in fact establish a domicile in Japan. They did not give up U.S. Citizenship, attempt to obtain Japanese citizenship, nor subject themselves to the Japanese equivalent of income tax laws. It has been the long standing policy of the Tax Commission that U.S. citizens working aboard, subject to federal income tax, remain domiciled within the United States for tax purposes, unless they give up U.S. Citizenship, become a permanent citizen of the foreign country and subject to the income taxes laws of the foreign country. Generally, the domicile within the United States for tax purposes is the last state in the United States at which the taxpayer resided.

DECISION AND ORDER

Having reviewed all of the facts, the Commission finds that Petitioners were domiciled in the State of Utah during the years of XXXXX, XXXXX and XXXXX for the purposes of Utah Code Ann. '59-10-103. Therefore Petitioners income is taxable by the State of Utah for these years.

Based on the forgoing the Commission sustains the assessment as it pertains to individual income tax as set out in the Statutory Notice for XXXXX. The Commission affirms its decision to waive the interest assessed relating to XXXXX. Further, the Commission sustains the disallowance of the amended returns for XXXXX and XXXXX. It is so ordered.

DATED this 1st day of February, 1996.

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 R861-1A-5(P) and Utah Code Ann. ''59-1-601(1), 63-46b-13 et. seq.)

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