By Roger C. Hurd

HURD, HORVATH & ROSS, P.A.
Palm Beach Gardens, Florida

If you have already moved to Florida and filed your Declaration of Domicile with the Clerk of the Court or if you are planning such a move, there are several things you must do in order to clearly establish your Florida domicile. This is necessary to avoid New York State from challenging the new domicile of a Florida resident who left New York. New York may challenge the domicile of a Florida resident if it suspects that the resident has only declared domicile in Florida to avoid the tax consequences in New York for such things as income tax and income from other sources such as real estate. New York is becoming increasingly vigilant in auditing non-resident income tax returns and estate tax returns of former residents.

In 1993, New York promulgated written audit Guidelines wherein the Guidelines tell auditors to look first at six "primary" factors in determining the intent to abandon New York as a domicile and establish a new one. These factors are: retention of a residence in New York; business connections in New York; location of personal items; allocation of time between states; location of family members; and membership in New York social organizations.

The Guidelines state that "retention of a residence in New York is not, by itself, sufficient evidence that the taxpayer did not change domicile, but however, retention of the New York home is a strong contact to be considered." Thus, when maintaining two homes New York will look at how much time is spent at each residence in addition to the other factors discussed below.

The Guidelines state that "active involvement in New York business entities, by managing a New York corporation or actively participating in a New York partnership or sole proprietorship will not substantiate or confirm a declaration or a change of domicile." The test will be the extent of the taxpayer's involvement in the business. Suspicions may not be aroused if you only have a minority partnership interest or can demonstrate that you do not participate in the running of an out-of-state corporation.

Taxpayers with two residences must be sure to remove "personal items which enhance the quality of lifestyle" from the New York residence to the Florida residence. Examples of such items are antiques, family heirlooms, works of art, jewelry, book collections, stamp, and coin collections. If these items are left in the New York residence it indicates that you intend to return to that residence which is contrary to the requisite state of mind necessary for a domicile in Florida.

Auditors will frequently ask for diaries, appointment logs, or calendars to analyze "where the individual spends time and for what purpose" and also to make a "comparison of daily expenditures and the type of expenditures made at each location." Other items looked at by auditors include expense account records, credit card receipts, utility bills to determine usages, ATM access records or other bank information, and telephone bills.

Auditors will also look to the location of minor children and determine whether "quality time" with children and grandchildren in New York "is an essential part of the taxpayer's lifestyle." Florida residents should also withdraw and resign from membership in New York social organizations such as churches and synagogues.
In addition to the six primary factors discussed above, the Guidelines also discuss secondary and tertiary factors. Examples of the secondary factors include: address to which bank statements, financial data, and correspondence concerning family business is received; physical location of safe deposit boxes; location of automobiles, boats, and airplane registrations as well as the individual's personal drivers license; where the taxpayer is registered to vote and the exercise of that privilege; frequency and nature of the business conducted in New York for legal, medical and other professional services in relation to the services performed in other locations; analysis of telephone services at each residence.

Some of the tertiary factors are: the place of interment; the state where the Will is executed and probated; passive interest in partnerships and small corporations; location of bank accounts; casual membership in clubs and organizations; contributions made to political candidates or causes; the location where tax returns are prepared and filed.

It is extremely wise and advisable to adhere to as many of these Guidelines as possible within a short period of time after declaring domicile in Florida. It is also advisable that in the year after you change your domicile that you file a non-resident income tax return with the New York tax authorities. Upon the filing of the non-resident tax return, the statute of limitations usually starts to run which will prevent the state from taxing you as a resident for more than three prior years.

If you have any questions regarding your domicile it is better to consult an attorney before a taxing authority summons you for an audit regarding your domicile.