New York Court of Appeals Sides With Nonresident Taxpayers In Interpreting Residency Rules

New York Court of Appeals Sides With Nonresident Taxpayers In Interpreting Residency Rules
New York State Tax Alert - March 2014

An individual generally may be taxed as a New York State resident for personal income tax purposes if the individual either (i) is domiciled in New York or (ii) maintains a permanent place of abode in New York and spends more than 183 days in New York during the taxable year.  An individual that is determined to be a resident taxpayer may incur significant additional tax since all of the taxpayer’s income would be subject to New York tax.  A nonresident taxpayer, on the other hand, would only be subject to tax on the taxpayer’s New York source income.

The New York Court of Appeals recently interpreted the meaning of “maintain[ing] a permanent place of abode” in Gaied v. New York State Tax Appeals Tribunal.

The term “permanent place of abode” is defined by regulation to be a dwelling place of a permanent nature maintained by a taxpayer.  New York’s lower courts and Department of Taxation and Finance have determined that if a taxpayer maintains a dwelling place in the state, the taxpayer does not need to reside there for it to be considered a permanent place of abode.  The New York Court of Appeals, however, concluded that this interpretation is incorrect and that for a taxpayer to maintain a permanent place of abode in New York, there must be some basis to conclude that the dwelling place was used as a residence by the taxpayer.

The Gaied decision should result in a significant number of individuals being classified as nonresident taxpayers.  Taxpayers not domiciled in New York that own or otherwise maintain residential property in New York, but do not use such property as a residence, should consider filing as New York nonresidents for future tax periods and making refund claims if they previously filed as New York residents.