96-2030

INCOME

SIGNED 5/28/97

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, )

Petitioner, ) ORDER

v. ) Appeal No. 96-2030

AUDITING DIVISION OF THE ) Account No. #####

UTAH STATE TAX COMMISSION, :

STATE OF UTAH, )

Respondent. : Tax Type: Income

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. '59-1-502.5, on April 17, 1997. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was PETITIONERS REP., from the law firm of XXXXX, together with PETITIONER and Mrs. PETITIONER. Present and representing Respondent were Mr. Brian Tarbet, Assistant Attorney General, together with Ms. Robbie Levine, a legal assistant in the Attorney General=s Office, and Mr. Frank Hales and Mr. Dan Engh from the Auditing Division.

The Auditing Division issued a statutory notice of deficiency for the 1992 income tax year on August 9, 1995. On July 2, 1996, the Auditing Division later issued a statutory notice of deficiency for the 1993 and 1994 years. The notices alleged that Petitioners were Utah residents or domiciled in Utah and were therefore taxable on all income within the State of Utah regardless of the source of income.

Petitioners filed a timely Petition for Redetermination on June 12, 1996 for the 1992 year. On July 30, 1996, the Petitioners filed a request to include the 1993 and 1994 years with the 1992 Petition for Redetermination.

Petitioners lived in the State of Utah through 1991 and part of 1992. Petitioners filed a resident income tax return within the State of Utah for at least the years 1986, 1987, 1988, 1989, and 1991. On those returns, they showed an address of ADDRESS, CITY, Utah ZIP. Petitioners did not file a Utah return for 1990, 1992, 1993, or 1994.

Petitioners have both lived most of their lives within the State of Utah. Mr. PETITIONER is a heavy equipment operator, and is a member of a union. A number of years ago, Petitioners operated a business in COUNTY, but later moved from COUNTY to CITY. Petitioners owned homes in COUNTY and in CITY, Utah.

As a heavy equipment operator, Mr. PETITIONER was required to frequently travel and he received assignments from the union to go to various locations and different job sites.

In 1991, the youngest child of Petitioners graduated from high school, and got married a few months later. Mr. PETITIONER had been assigned to a job in STATE, so Petitioners took their pickup truck and fifth-wheel trailer and went to STATE for Mr. PETITIONER=s work. They retained their home in CITY, Utah, and two of their daughters and the husband of one of their daughters lived in the home until the fall of 1994. Petitioners then rented the home to non-family members, although one daughter lived there almost all of the time, and there were other renters in the basement even while the daughters were there.

While Petitioners were in CITY, they lived in at least four different locations in CITY and CITY, but stated that they kept the home in CITY for rental and investment purposes.

While Petitioners were in CITY, they signed Affidavits and registered to vote in CITY in the 1992 elections. However, their mail continued to be delivered to their home in CITY, their drivers licenses were Utah drivers licenses, and their cars continued to be registered in Utah. Petitioners never obtained a STATE driver=s license, and they never registered any vehicles in STATE. The telephone of Petitioner=s continued to be listed in their name at their Utah residence, and they never had a telephone in the State of STATE.

Petitioners had a checking account in CITY, Utah, and they never opened a checking account in STATE.

At the time Petitioners went to STATE, they knew that Mr. PETITIONER was only a few years away from retirement, and he intended to retire when he turned 62 in 1995. Mr. PETITIONER did, in fact, retire in 1995, approximately three years after going to the State of STATE. Upon his retirement, they returned to the State of Utah, and now live in CITY, Utah, and they still own the home in CITY. Petitioners testified that they had a Smith=s check cashing card, so they used their CITY bank account and were able to cash checks in CITY for whatever cash was needed, and they were able to pay their bills using the CITY bank account.

In addition to the home in CITY, Petitioners also owned other real property in the State of Utah. They had traded their property in COUNTY for several parcels in COUNTY. Petitioners never owned any real property in STATE.

In 1992, Petitioners voted in STATE. In 1996, Petitioners voted in Utah.

From 1985 through 1995, Petitioners were registered as officers of more than one business within the State of Utah, although those businesses were inactive during part of the time they were in STATE.

During the time in question, Petitioners had credit cards, and all of the statements were mailed to the State of Utah to their home in CITY.

During their time in STATE, Petitioners never had a regular telephone, but instead used a cellular telephone because it could be used at any of the different locations at which they lived.

During the time in question, Petitioners made religious contributions to their LDS ward in CITY, Utah, and obtained temple recommends from their Bishop in CITY, Utah. They did not establish those church affiliations in STATE.

During the period in question, all of their tax returns were prepared by an accountant in CITY, Utah.

During the time in question, the Petitioners returned to CITY approximately every two or three weeks to visit with their children at their house, and to pick up their mail and pay their bills.

On three or four occasions, Mrs. PETITIONER stayed in Utah at the house which Peitioners owned so that she could help with her grandchildren.

During the periods in question, Petitioners stored most of their furniture in their garage at their home in CITY, or some of it was given to their children or grandchildren.

During the period in question, Petitioners income was all earned outside the State of Utah, except for a small amount of rental income paid on their home in CITY.

The address shown on the union card of Mr. PETITIONER is his address in CITY, Utah, and the same address is shown on their checks and their bank statement for the bank in CITY, Utah.

As a part of the audit assessment, Respondent made a penalty assessment against Petitioners. However, at the hearing, there was no evidence presented which would substantiate the imposition of a penalty in this case.

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).

A determination of residency or domicile is based upon the facts determined for each case. Those facts and a person=s actions are more demonstrative of a person=s residence and domicile than are any outward declarations, oral or written.

DECISION AND ORDER

It is clear that Petitioners honestly believed that they were residents of STATE and would not be required to file a Utah income tax return. Nevertheless, the facts also clearly demonstrate that they met the statutory definition of being a domicile of the State of Utah, and that Utah was their permanent home and principal establishment to which they had the intention of returning. It is also clear that they did not abandon their domicile in the State of Utah, nor did they ever clearly establish a new domicile in the State of STATE.

Based upon the foregoing, it is the order of the Utah State Tax Commission that the audit assessment made by Respondent is affirmed, except for the penalty which is abated, and it is ordered that the penalty should not apply. With the exception of the penalty, the Petition for Redetermination is hereby denied.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 28 day of MAY, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner