Who’s a New Yorker? It’s Not Always So Clear Cut

By:
Chris Gaetano
Published Date:
Nov 8, 2016

nymap

People use all sorts of criteria to determine who does and does not count as a real New Yorker, and New York's tax authorities are no different. But while others may talk about sports affiliations and how one pronounces Houston Street, the government is more concerned with things like business ties, living space and how long someone stays in the state throughout the course of a year. 

However, Brian Gordon, state and local tax director with Sanders Thaler Viola & Katz and a speaker at the FAE's New York State Taxation Conference on Nov. 8, suggested that practitioners untangling these sorts of issues with their clients think more about an overall picture of what kind of lifestyle is someone living. 

Gordon said that when someone has ties to both New York and another state, auditors will generally look at five factors to determine which location represents their primary home or domicile. They will look at the homes themselves to see whether one is more significant than the other, the time spent at each residence, business activity in each location, where close family ties are located, and where the taxpayer keeps valuable possessions or personal keepsakes. 

However, he said these all add up to a more holistic picture that he said permeates each of the individual factors. If someone is arguing that he or she shouldn't be counted as a New York resident, he said that person should prepare to prove an unwritten sixth factor, something that he calls "habit of life." 

"What do you do with yourself or your time in Florida or New York? What are your hobbies? What is your lifestyle?" he said. "I think it's such an important factor." 

He brought up a 2012 administrative law case, Matter of Cooke, to illustrate. The Cooks were a family who had a home in both Manhattan and Long Island, out in the Hamptons. The question, he said, was whether the family was domiciled in New York City or Long Island. The family spent much more time in New York City, living in an apartment there five days a week, and only went to the Hamptons on the weekend. While the state took the position that this means they're domiciled in Manhattan, the judge ultimately ruled that they were actually domiciled in Long Island. Why? Even though they had a residence in Manhattan and spent most of the week there, the court determined that their habit of life was more centered around Long Island. 

"The way they painted the picture was, sure, the kids go to school in Manhattan, but they don't have much social life there... The apartment was nothing special," he said. 

Gordon contrasted this to their home in Long Island. 

"When the weekend came, the sun would shine and they would get in the car and drive out to the Hamptons and they get out there and come to their beautiful new home, built from the ground up and had designers and decorators and had expensive materials used to decorate the house... The house was just beautiful," he said. 

He added that their social ties were shown to be not in New York City but Long Island, where the kids went horseback riding with the friends they had there and the parents would throw lavish parties. Once the kids were college age, he said, they still came to Long Island, as opposed to New York City. The family won the case. 

"This was the habit of life, the lifestyle that permeates all those written factors, and you really have to pay attention to that," he said.  

Relying on this unwritten factor, though, can sometimes necessitate some lifestyle changes. He brought up the example of one of his clients who lived in New York but got a new job as a college professor in Philadelphia. The client wanted to change his domicile from New York to Pennsylvania. He asked the client, "Who are you?" Was he, in Gordon's words, a prestigious university professor who makes his work the focus of his life and has joined professional organizations and is involved in programs with his university and has friends in Philadelphia? Or is he a devoted family man who spends half the week with his children in New York and simply commutes to Philadelphia so he can support his family? 

"So, who are you? And you have to decide what your lifestyle will be so you can convince New York you've changed your domicile to Philadelphia, Pennsylvania," he said. 

More than that, he said he told his client that he would need to change the timing of when he came to see his family. New York considers anyone who spends more than 183 days in the state cumulatively throughout the year a resident. The client’s typical schedule, he said, was returning from Pennsylvania Friday night and leaving Monday morning. That, he said, would eventually turn him into a resident and make it more difficult to prove his pattern of living centered around Philadelphia. 

"In New York, that's four days statutory residence. So you'd be a resident that way. You have to adjust your schedule so at least most of the time you're getting back Saturday morning and back to Philadelphia Monday morning. Or Friday night and Sunday night. So you have to avoid that," he said. 

Jack Trachtenberg, an attorney with Reed Smith who previously served as the state's first Taxpayer Rights Advocate, pointed out that the burden of proof is on the taxpayer to prove they are not a resident of New York state. However, he noted that recent court cases over the past few years have made this easier to do. One of the more significant ones was Matter of Gaiedwhich concerned what exactly counts as a permanent place of abode. Previous to this case, he said, Albany took a very wide ranging position on this. 

"Historically the department took the position of if you had a place with four walls and a ceiling and had some heat and running water in your bathroom, they didn't care whether they used it, or if it was furnished, or if you even set foot in it. They cared you had a place capable of year-round living," said Trachtenberg, who was also one of the speakers at the conference. 

Since that case, however, a permanent place of abode can only be established if someone is actually using it as a residence. Still, he noted that there can still be dispute over what exactly counts as someone using a type of home as a residence. He said he looks at whether someone has living quarters. 

"Do you have a bed? Do you use it? Do you have clothing there? Toiletries there? All the things establishing a relationship with a place as living quarters," he said. 

However, even this can be the subject of debate. He said he is currently working on a case involving someone who has an apartment that's fully furnished but the owner claims he only stays there five days a year. Cases like these, he said, is why the tax department is looking to have more black and white rules. Without bright lines, he said, it can be a difficult line to draw even assuming the facts of the matter can be proven. 

And even with bright lines, sometimes a question can emerge as to whose bright lines are valid. He noted that while states will generally give credit on taxes paid in other jurisdictions, it's no guarantee, as one state may not necessarily agree with the other in what that tax should be.  

"Oftentimes you get into the trap that the state you want the credit in says, 'We don't agree on how the nonresident state sourced the income... We'll give you a credit to taxes paid to other jurisdictions... if they use our rules," he said. 

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