We have seen all sorts of changes in behavior over the past 12 months as a result of the COVID-19 pandemic. Remote working. No live music. Limited (or no) family gatherings. And, for some, an extra 15 pounds. But in the state and local tax world, we've seen another striking change in people's behavior.

People. Are. Moving.

They are moving to Florida. They are moving to the Hamptons. They are moving home to live with their parents. They are moving in with their kids. They are leaving California, Illinois, New Jersey, and New York, and they are landing in places with lower taxes and, usually, better weather. And many need tax advice!

Here at Noonan's Notes World Headquarters, we've generated more residency-change checklists and playbooks in the past 12 months than we've probably sent out in the last 10 years. And the types of situations we've seen are so much more varied and different from the typical retirees shuffling off to their shuffleboards in Florida. Hedge-fund millennials are moving. Parents with young kids are moving. Taxpayers in their working prime are moving. And with these moves come a whole host of interesting tax issues.

So this month, we thought we'd dive into these residency issues a bit more and give you a glimpse into the world of a tax residency practitioner during 2020 and 2021.

Residency Overview

We've covered this ground many times before in this space,1 but here's a quick overview of the legal landscape.

There are two residency tests that apply in most states. The first test, and the more objective test, is generally called "statutory residency." This is the more black-and-white, day-count based residency test. In New York, a taxpayer is a statutory resident if he maintains living quarters in the state (often referred to as a "permanent place of abode") and spends more than 183 days of the tax year in the state.2 This test applies separately in New York City as well. And this test is easy enough to understand and apply in practice: if you spend less than 184 days in the state (or city), the test doesn't apply.

But the other residency test is significantly more subjective and is based on the location of the taxpayer's domicile. A person's domicile is the "place which an individual intends to be such individual's permanent home — the place to which such individual intends to return whenever such individual may be absent."3 This is a fuzzier, fact-specific test, and it looks to a taxpayer's subjective intent. The general standard is that ''the test of intent with respect to a purported new domicile [depends on] 'whether the place of habitation is the permanent home of a person, with the range of sentiment, feeling and permanent association with it.'''4

A person's existing domicile continues until a new one is acquired.5 So to change domicile, we look to the "leave and land" rule: The taxpayer must "leave" New York with the intention of not moving back and also "land" in the new state with the intention of living there on a permanent, or, at least, indefinite basis. Merely being absent from New York for some period of time without landing in another place will not suffice.6 Remember that point for later!

The party asserting a change of domicile bears the burden of proving, by clear and convincing evidence, a change in domicile.7 So if it's a close case, the taxpayer loses. And while the taxpayer must prove his subjective intent based on objective indications of that intent,8 most states apply a comparison of factors to determine the taxpayer's subjective intent. The typical ones, and those used by New York and many other states, are home, time, active business involvement, near and dear items, and family connections.9

Residency in a Pandemic

Enough of the background, let's get to it. To get a sense of how these rules apply in the new world dominated by COVID-19, what follows is a series of case studies — based on real-life examples we've dealt with over the past year. As is clear, the moves and the issues come in all shapes and sizes, and they demonstrate the various nuances that arise in trying to apply the basic residency tests in the COVID-19 era.

The Comeback

Facts. The taxpayer is a New York City domiciliary, and he lives in the city with his wife and children. Since March 2020 the entire family has been hiding out at their home in the Hamptons, and they do not plan to return to New York City until at least September 2021. The taxpayer's office is in New York City, but he's working remotely, and his children have been remote learning from the Hamptons. In 2020 they will have spent only 75 days in New York City, and their total New York City days will probably be in the same range in 2021. But, fingers crossed, they'll all be back in the city in the fall.

Analysis. Many clients like this believe they are "home free" when it comes to New York City taxes. After all, in both 2020 and 2021, they will have spent less than 184 days in New York City. So they won't be statutory residents in either year. But don't forget, we have to look at the domicile issue as well. And on that issue, did the taxpayers "leave" New York City and "land" in the Hamptons? If they come back in the fall of 2021 and the kids start back up at their New York City school, they may have a tough time proving that they intended to land in the Hamptons. And hindsight here will be, well, 20/20. The audit of these taxpayers' 2020-2021 tax returns isn't likely to take place until 2022 or probably 2023. If these taxpayers are back in the city, with their kids in school, and going to Broadway shows, etc., it may be hard for them to prove that they really intended on giving New York City up for good in 2020.

Vacation Home Becomes Home

Facts. This case is similar to the above example, but these taxpayers intend to stay in the Hamptons. They left the city in March 2020 and quickly thereafter decided that they could live in the Hamptons permanently. Both parents believe they'll be able to telecommute even post-pandemic, and they enrolled their kids in the local school.


1 See, e.g., Timothy P. Noonan and Daniel P. Kelly, "The Nuts and Bolts of a New York Residency Audit, Revisited," State Tax Notes, Oct. 27, 2014, p. 207.

2 N.Y. Tax Law section 605(b)(1)(B)

3 20 NYCRR 105.20 (d)(1).

4 Matter of Bodfish v. Gallman, 50 A.D.2d 457 (N.Y. App. Div. 3d Dep't 1976) (quoting Matter of Bourne, 181 Misc. 238, 246, aff'd, 267 App. Div. 876, aff'd, 293 N.Y. 785 (Sur. Ct. 1943)).

5 Matter of Bodfish, 50 A.D.2d at 458.

6 See Matter of Knight, DTA No. 819485 (Tax Appeals Tribunal 2006).

7 20 NYCRR 105.20 (d)(2).

8 Matter of Simon, DTA No. 801309 (Tax Appeals Tribunal 1989).

9 New York State Department of Taxation and Finance, Nonresident Audit Guidelines, 14-50 (2014). For an in-depth discussion of the factors, see Noonan and Kelly, supra note 1.

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