United States: Common Sense Prevails – NY High Court Clarifies Tax Residency Test

Isn't it common sense that in order to be a "resident" of a State one must actually reside in the State? Not so for the State of New York's taxing authority.

Until February 18, 2014, when New York's highest court clarified certain contours of New York's statutory residency test, the New York State Department of Taxation and Finance had long-held that a person could be a resident even if he or she did not actually live in the State or sleep within the State's borders for even a single night. On February 18, in Gaied v. New York State Tax Appeals Tribunal, the Court of Appeals of New York unanimously rejected the Department's long standing position, and now many people who live outside of New York but own property within its borders may find relief from onerous New York State and City taxes.

In general, New York taxes its residents (a.k.a. "resident individuals") on all of their income – both New York-sourced income and income sourced elsewhere. See Tax Law sec. 601 (New York State); New York City Administrative Code § 11-1701 (New York City). Constitutional issues aside, an individual may be taxed as a "resident individual" in one of two ways: (1) he or she is "domiciled" in New York, i.e. the taxpayer's permanent and primary home is located in New York (see Tax Law § 605 [b] [1][A]); or (2) he or she is a "statutory resident," which is defined as someone "who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate more than [183] days of the taxable year in the state." (Tax Law § 605 (b) (1) (B)). The rationale for the "statutory resident" test is to ensure residency status for people who are for all intents and purposes residents of the State but maintain sufficient indicia of domicile (e.g., place registered to vote) in an adjacent State to avoid New York taxes.

It is the second way – by being a "statutory resident" – that was at issue in Gaied v. New York State Tax Appeals Tribunal. There, the petitioner, Mr. Gaied, owned an auto repair business in Staten Island, New York, and commuted daily to work from his home in New Jersey. He also maintained a multi-family apartment building in Staten Island, which he in part rented to third parties and in part maintained for his elderly parents to reside. For purposes of discussion, Mr. Gaied really never used the apartment as his home, although in maintaining the apartment for his elderly parents he paid utilities and on occasion, to attend to their medical needs, he slept over on the couch in the apartment.

Ostensibly, whether Mr. Gaied fell within the "statutory resident" definition depended on whether he met the two part test: (1) "maintained a permanent place of abode," and (2) spent more than 183 days in New York. Mr. Gaied conceded that he spent more than 183 days in New York (commuting to his auto repair business), but contended that he did not "maintain a permanent place of abode." In construing that phrase – "maintain a permanent place of abode" – the Department argued that a taxpayer need not actually dwell in the permanent place of abode, but need only maintain it. Ultimately, the lower courts sided with the Department, and Mr. Gaied appealed to New York's high court, the Court of Appeals.

On appeal, the high court observed that New York's tax statutes do not define "permanent place of abode" but that tax regulations do. By regulation, "permanent place of abode" is "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." See 20 NYCRR 105.20 [e] [1]. The regulation further provides as an example that, "a mere camp or cottage, which is suitable and used only for vacations, is not a permanent place of abode" (id.). The Tax Tribunal had interpreted "maintains a permanent place of abode" to mean that a taxpayer need not "reside" in the dwelling, but only maintain it, to qualify as "statutory resident" under Tax Law § 605 [b][1][B].

The Court of Appeals disagreed, holding that in order to "maintain a permanent place of abode," the taxpayer must, himself, have a residential interest in the property. Consequently, to be a resident, there must be evidence that the taxpayer's dwelling was actually utilized as a residence by the taxpayer. Common sense prevailed.

The Court of Appeals' decision may be significant to a variety of taxpayers, not only those similarly situated to Mr. Gaied. For example, the decision may hold implications to certain part-year residents, and determining when the partial-year period commences and ends. If a resident re-locates to another State, the taxpayer's residency status should terminate when he or she ceases to live in their New York place of abode; under the Department's now-repudiated view, the residency period may have continued during the taxpayer's process of selling or renting the property, even after the taxpayer had relocated. Similar issues arise for determining the commencement of the partial-year period.

The Court's decision may also embolden taxpayers to challenge other rules surrounding statutory residency that may run counter to common sense. Less than one week prior to the Court of Appeal's decision in Gaied, the New York Tax Appeals Tribunal, in Matter of Zanetti (DTA No. 824337, Feb. 13, 2014), reiterated its stance that in computing the 183 days under the statutory resident rule, a day counts if the taxpayer spent any part of the calendar day in New York. Presumably, even a 30-minute jaunt over the George Washington Bridge to pick up a thin-crust pizza for the family back in Fort Lee, New Jersey counts. In light of Gaied, a taxpayer, on the right set of facts, may be emboldened to test the Tax Appeals Tribunal's position.

The Gaied decision – and questions of statutory residency—may also increase in importance if the tax burden for New York State and City residents increases. There are several efforts in the works, including a hotly debated bill backed by NYC Mayor Bill de Blasio, to raise taxes on the wealthy; if successful, such efforts would commensurately raise the stakes and interest to avoid statutory resident status by legitimate and legal means.

This article is designed to give general information on the developments covered, not to serve as legal advice related to specific situations or as a legal opinion. Counsel should be consulted for legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.