Conference Highlights State Tax Updates

Conference Highlights State Tax Updates

The Tax Planning for Individuals Conference, held Aug. 18 at the Marriott Marquis in Manhattan, provided CPAs with an update on federal, state and local tax for individuals. The conference, which was sponsored by the Society’s Taxation of Individuals Committee, was chaired by Lisa Theodore; Alan Dlugash serves as chair of the sponsoring committee.

Paul R. Comeau, chair of Hodgson Russ LLP, provided attendees with New York state tax updates.

“Even though the governor tried to keep New York taxes down, they are still among the highest in the country,” Comeau said.

Among the programs Comeau discussed is a voluntary compliance initiative for taxpayers who engaged in reportable transactions (a penalty will be imposed on eligible taxpayers who do not participate in the program). This program is “available to large corporations and basically all taxpayers,” he said, unlike some state tax amnesty programs. The initiative will cover tax avoidance transactions. Its structure is similar to California, Illinois and South Carolina programs. Comeau said the initiative will run from Oct. 1, 2005, to March 1, 2006.

When deciding if a taxpayer will pay New York state taxes, the issue of domicile often comes into play, Comeau said.
“One of the problems with domicile is that there isn’t any federal definition,” he said.

Comeau noted two domicile exceptions. The 30-day rule is when a taxpayer’s permanent place of abode is determined to be out of the state of New York for the entire year and the taxpayer is in New York for 30 days or less. In this case, the taxpayer will not be taxable as a New York resident. In the second rule—called the 548 Day Rule—a taxpayer won’t be taxable as a resident if he is present in a foreign country for at least 450 days, isn’t present in the state for more than 90 days and does not have a permanent place of abode in the state.

Statutory residency is also an issue to focus on when determining if a taxpayer will be subject to New York state taxes, Comeau said. If an individual is not domiciled in New York but maintains a permanent place of abode in the state and spends more than 183 days of the year here, then that person is a statutory resident, he said.

The “convenience rule” comes into play when determining whether a taxpayer who works outside of New York is doing so out of necessity versus personal preference.

“The convenience rule is based on employer necessity, not employee convenience,” Comeau said. If an employer requires that the employee work out of state, then the convenience rule and ensuing taxes don’t apply, he said.

Comeau also covered the issue of termination pay and what rules apply.

“Normally, severance is taxable,” he said.

Comeau has practiced New York tax law since 1973 and serves on several state committees concerned with taxation.