98-1304

Income Tax

Signed 5/31/01

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, ) FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

Petitioner, ) AND FINAL DECISION

)

v. ) Appeal No. 98-1304

) Parcel No. #####

AUDITING DIVISION OF )

THE UTAH STATE TAX ) Tax Type: Income Tax

COMMISSION, )

) Judge: Davis

Respondent. )

_____________________________________

Presiding:

G. Blaine Davis, Administrative Law Judge

Appearances:

For Petitioner: PETITIONER

For Respondent: Ms. Susan Barnum, Assistant Attorney General

Mr. Dan Engh, from the Auditing Division

Ms. Angie Hillas, from the Auditing Division

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for a Formal Hearing on January 23, 2001. 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 year in question is 1991.

3. The issue in this proceeding is whether Petitioner was domiciled in the State of Utah during 1991, and therefore whether he was required to file a Utah State Individual Income Tax Return for that year.

4. Petitioner is a pilot for COMPANY A, and was based to fly out of CITY, Utah, from 1987 through the spring of 1992. Prior to that time, Petitioner was based in other states, including STATE, and has since been based in other states.

5. Pursuant to the Federal Transportation Act, Petitioner filed a statement with his employer in which he declared his residency to be STATE 2. However, from 1987 through 1990, Petitioner was living some of the time in STATE and some of the time in Utah. Petitioner was divorced in May, 1990 in STATE. However, Petitioner was listed in the Utah telephone directory for the years 1989, 1990, 1991, and 1992. For the years 1989 through 1991, his address was shown on ADDRESS in CITY, Utah. For 1992, his address was ADDRESS, in CITY, which is where Petitioner represented he moved after he was married in 1992.

6. Petitioner had a STATE driver's license until 1989, when he obtained a Utah driver's license. For the years 1989 through 1991 and a portion of 1992, Petitioner rented an apartment at ADDRESS in CITY, Utah. For those same years, he had two separate vehicles registered in the State of Utah, and a pick-up truck registered in the State of STATE. In 1989, Petitioner purchased a lot in CITY, Utah on which he intended to build a home, but his plans later changed and he listed the lot for sale in 1991. The lot was sold in 1992.

7. Petitioner was remarried in the State of Utah in 1992, and then moved to STATE 3 in the fall of 1992.

8. During the time Petitioner was in Utah, he purchased one vehicle in Utah in 1987, and purchased another vehicle in Utah in 1990. Both vehicles were registered within the State of Utah.

9. Petitioner had doctors and dentists in STATE, but obtained his flight physical in Utah. He represented that is because there is a doctor in Utah that is very popular with the people in the aviation industry who must obtain flight physicals.

10. During the year at issue, Petitioner obtained a temporary fishing license in Utah, but never obtained a fishing license in STATE 2. Petitioner represented he only obtained a fishing license because he would accompany his girl friend on trips, and while she was participating in horse shows, he would go fishing.

11. Petitioner was not registered to vote in either the State of Utah, the State of STATE 2, or any other state.

12. Petitioner had a checking account at BANK in STATE, and also a bank account with BANK which is based in CITY, but has offices in numerous locations, including Utah. His credit card statements, W-2 forms, mail, federal income tax returns, and state income tax returns all used the address at his apartment in CITY, Utah. None of those items were sent to any address in STATE 2.

13. Petitioner had a pick-up truck which was registered in STATE 2, and a dog which was kept in STATE 2. He also had a son stationed in the Air Force in STATE 2.

14. Petitioner filed his 1989 Utah part-year resident return showing a CITY address, and his federal return for that year also showed his CITY address.

15. For 1990, Petitioner filed a Utah part-year resident return from his CITY address, and his federal return from his CITY address.

16. For the year 1991, Respondent imposed income tax, a 10% non-filing penalty, and a 10% failure to pay penalty.

APPLICABLE LAW

1. A resident individual means an individual who is either domiciled in this state for any period of time during the taxable year, or 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(1)(j).)

2. "Domicile" means 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 the place in which a person has voluntarily fixed the habitation of himself and family, not for a mere special purpose, but with the present intention of making a permanent home. 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 domicile, a new domicile must be shown. Utah Administrative Code R865-9I-2.D.

3. A person's intentions are determined by his or her actions, and not by verbal declarations.

DISCUSSION

There is no doubt that Petitioner was domiciled in Utah during 1989 and 1990. Even though he filed part-year resident returns for those years and represented STATE 2 as his domicile, he did not rent an apartment in STATE 2 until 1991. He represented he was intending for his domicile to be STATE 2, but the only steps he took were to rent an apartment. He represented that he would get to work by driving or flying from CITY to CITY and then commuting to CITY, but he also acknowledged that he spent some of the evenings in between flights at his apartment in CITY, Utah. He did represent that he sublet the apartment in CITY to three other pilots, but did not produce any documentary evidence to substantiate that it was really a sublease instead of just letting other pilots stay there.

Regardless of whether he really leased his PETITIONER apartment to other pilots or not, Petitioner did not take any active steps to transfer his domicile to STATE 2. His driver's license remained in Utah. His vehicles were registered in Utah. His bills went to his Utah address along with his W-2 forms, and his tax returns were filed from his CITY address. It also appears that he must have kept sufficient furniture in the apartment in CITY for him to personally stay there when he was in town, and during that time he was dating a woman in Utah, going to horse competitions with her, and was here a sufficient amount of time to obtain a fishing license.

In addition to not taking any steps to abandon his domicile in Utah, the only steps Petitioner took to establish a residency in STATE 2 were to rent an apartment and move some of his possessions to that apartment. Those steps, in and of themselves, do not establish domicile in a new state.

While Petitioner declares vehemently that his intention was to be domiciled in STATE 2, his actions are not consistent with his declarations.

One issue that merits some consideration is whether the imposition of a 10% non-filing penalty and a 10% failure to pay penalty should be sustained. If Petitioners declarations about his intentions were fully believed, then the non-filing penalty and failure to pay penalty should perhaps be waived. However, in this case, Petitioner filed his 1989 and 1990 Utah income tax returns as a part-year resident when the evidence is clear he did not rent an apartment in STATE 2 until 1991, and therefore such filings for the prior years were likely inappropriate. The Commission therefore concludes that Petitioner knew that he should not have filed a part-year resident return claiming STATE 2 as his address for at least 1990, and that a substantial part of his motivation for renting the apartment in STATE 2 was not to establish domicile within that state, but to try to avoid the payment of income taxes in the State of Utah. Therefore, the 10% non-filing penalty and the 10% failure to pay penalty should be sustained.

DECISION AND ORDER

Based upon the foregoing, the Tax Commission determines that for the year 1991, Petitioner was domiciled in Utah. Accordingly, the audit determination of Respondent is affirmed, and the Petition for Redetermination filed by Petitioner is hereby denied. The penalties imposed by Respondent are sustained. It is so ordered.

DATED this 31^st day of May, 2001.

______________________________________

G. Blaine Davis

Administrative Law Judge

BY ORDER OF THE UTAH STATE TAX COMMISSION:

The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 31^st day of May, 2001.

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner