The New York State Court of Appeals (our highest court) recently provided some helpful clarification of – and a little relief from – New York Tax Law §601 and §605(b)(1)(B). As one of the majority of U.S. states that collect a state-level income tax, New York imposes the income tax on people and corporations if:
- The person is “domiciled” in New York (“domicile” is sometimes referred to as the location you “call home”, and is normally your place of permanent, full-time, residence); or
- The person maintains a "permanent place of abode” in New York, and spends in aggregate, more than 183 days per year in the state (a day longer than one-half the calendar year).
In the recent case of Gaied v. New York State Tax Appeals Tribunal, 22 N.Y.3d 592, 2014 NY Slip Op. 01101 (2014), the Court of Appeals reversed the tax court’s determination that the plaintiff (Mr. Gaied) had a “permanent place of abode” in New York State. The plaintiff lived in New Jersey (near the NY/NJ border), he owned a 3-family residence in New York, and he spent more than 183 days in the state. However, the apartments in the 3-family property were all rented to strangers, except for one apartment where he housed his ailing parents. He evidently paid some of the utilities for his parents' apartment but, according to the plaintiff, he never actually stayed at that apartment he owned for more than a brief period, and only at his parents' request. The tax court held that Mr. Gaied's "maintenance" of this family property in New York State established it as his "permanent place of abode" under the tax law. However, the Court of Appeals reversed the tax court’s ruling in this case, finding that there was "no rational basis for [the tax court's] interpretation" of §605(b)(1)(B) in that way.
Although Mr. Gaied has prevailed on this issue so far, this case reminds us of some other issues that snow birds (and other transient visitors to New York) should keep in mind if they wish to avoid being saddled with an unexpected New York State income tax bill:
- The 183 day period is an aggregate time period calculated across the whole taxable (calendar) year. Thus, if you spend one whole day in New York at the beginning of the year, move away for some time, spend another 180 days in the state, then leave again, only to return to New York for the last 3 days of the year, your 184 total days in the state will qualify you as a taxable “resident” of our state (if you also have a permanent place of abode in the state).
- Secondly, a “permanent place of abode” is not necessarily only a house you might own. If you rent an apartment all year long, for the purpose of living at that apartment while you are in New York for your 183+ days, you will similarly be caught up in the definition of a “statutory resident” under §605. Although our Court has rejected the Tax Tribunal's interpretation of the regulations defining "permanent place of abode" as "a dwelling place of a permanent nature maintained by the taxpayer, whether or not owned by such taxpayer, [which] will generally include a dwelling place owned or leased by such taxpayer's spouse," (20 NYCRR 105.20[e][1]), the Court did go on to state that "[t]he legislative history of the statute, ... as well as the regulations, support the view that in order for a taxpayer to have maintained a permanent place of abode in New York, the taxpayer must, himself, have a residential interest in the property." The idea of a "residential interest" in property is much broader than "ownership". You might not own the apartment building in which you live, but if you have a valid lease for that space, you do have a legally-protectable "residential interest" in that space. And, if that building is in New York State, it may wind up qualifying as your "permanent place of abode" in the State for Tax Law purposes.
Therefore, if you intend to leave the Empire State (and our income taxes) for good, make sure that you either get rid of your New York “place of abode”, or at least be very careful that you do not come back to visit for more than ½ of any future year.
