CHANGING RESIDENCY FROM NEW YORK TO FLORIDA (OR ANY OTHER STATE): PART FOUR - STATUTORY RESIDENCY
Note: This is the fourth in a series of articles that will cover strategies for changing residency, surviving an audit, and challenging a negative result.
New York State is arguably the most onerous income tax jurisdiction in the country. This has led many New York residents to change their residency to reduce their tax burden on income not effectively connected to New York. This includes business income from around the United States and the world, as well as investment income in retirement. However, as New York’s income tax base erodes with residents fleeing to Florida, New York intends to keep high-income earners paying state taxes on as much income as possible. There are two tests under the New York State Tax Law to determine an individual’s residency: domicile and statutory residency. The previous two posts discussed residency by domicile (See the June 5, 2024 and July 23, 2024 posts.) Statutory residency will be addressed in this article.
Even if an individual is no longer domiciled in New York, that person can be a New York resident for tax purposes if they are a statutory resident. Statutory residency generally depends on the number of days spent in New York.
The statutory residency test provides that if: (1) a nonresident who maintains a “permanent place of abode” within the state for greater than ten months of the year and (2) that individual is physically present in New York for more than 183 days in the taxable year is considered a statutory resident.
Permanent Place of Abode
A permanent place of abode is living quarters sufficient to support everyday living. Such quarters include sleeping, cooking, and bathroom facilities, with certain limited exceptions.
For example, a residence under construction and not fit for habitation would not be considered a permanent place of abode. In such circumstances, the residence during the construction would not be habitable. However, if a residence is merely undergoing modest renovations, then would likely not qualify for the exception because the residence would remain habitable, despite the inconvenience of the renovations. In this regard, many seasonal camps in the mountains or at lakes in upstate New York would be examples of real property that does not rise to the level of a permanent place of abode because these camps are not habitable residences for the required ten months of the tax year.
Further, the courts have added an additional requirement to clarify maintaining a permanent place of abode. This additional requirement provides that an individual must have a residential interest in this permanent place of abode. In one well-known case, the audited individual had no residence in New York, but occasionally slept on the couch of his elderly parents in Staten Island to provide care for them. Although the auditor determined that, by having access to his parents’ couch, this individual maintained a permanent place of abode, the court ruled in favor of the son because he did not have a residential interest. The court found that having occasional access to sleep on a couch is not a residential interest that rises to the level of maintaining a permanent place of abode. See, Gaied v. NYS Tax Appeals Trib., 22 N.Y.3d 592 (2014). Note, however, that auditors in New York remain aggressive in determining what constitutes a permanent place of abode.
Note that an individual does not need to be the owner of the real estate to have access to a permanent place of abode. Transferring the property to a trust or to a family member does not terminate an individual’s access to the permanent place of abode, unless they can demonstrate that there is no longer access to these living quarters.
Day Count
New York considers any day in which a person is physically present in the state for any part of the day, with limited exceptions, to be a New York day in the application of this day count to the statutory residency day count. With respect to a married couple filing jointly, the determination of the day count for statutory residency is made by adding the total number of days spent by either or both spouses in the state.
As noted above, the day count rule is subject to certain limited exceptions. Travel beginning outside New York through the state of New York is not a day in New York. However, stopping for any purposes in New York during that day, other than traveling through or to the airport, is a day in New York. Likewise, a layover at a New York airport without leaving the airport is not a day in New York.
Summary
To change residency from New York to another state, an individual would need demonstrate that they are no longer domiciled in New York and that they are not a statutory resident. If an individual maintains a residential interest in a permanent place of abode and if the individual spends at least 183 days in the state, then that individual is a statutory resident. New York is among the most aggressive states in pursuing statutory residency cases. Taxpayers bear the burden of proving by clear and convincing evidence that they do not have a permanent place of abode or that they have not been in the state of New York for 183 days or more during the tax year. Therefore, care must be taken to carefully document days spent in, and out of, the state of New York.
Scott Shimick is a Partner at Whiteman Osterman & Hanna, LLP and the leader of the firm’s Federal and State Taxation Practice Group. You can contact him at (518) 487-7678 or by email at sshimick@woh.com.
