On December 2, 2020, a three-judge panel of California’s Office of Tax Appeals (“OTA”) issued a non-precedential decision ruling that a husband and wife remained domiciled in and residents of California for the 2013 tax year despite the husband leaving the state for an alleged “permanent” job in Alaska that lasted from April to July of that year. The taxpayers filed a joint 2013 California Resident Income Tax Return but subtracted wages earned by the husband when he was living and working in Alaska. At audit, the California Franchise Tax Board found that the taxpayers were California residents during the entire year. On appeal the taxpayers argued they were no longer domiciled in California as of April 2013, when the husband “moved” to Alaska.
Basing its decision on the written record, the OTA concluded that the taxpayers did not provide any evidence demonstrating their intent to remain in Alaska permanently or indefinitely such that they did not surrender their California domicile. For example, the taxpayers did not provide any documents or other evidence showing that the husband’s job in Alaska was anything other than a temporary position or that the taxpayers searched for a permanent home during the four months the husband worked in the state. Further, despite the wife’s claims that she returned to California after traveling to Alaska “only to sell the family home, quit her job, and sever ties with her community for good,” the taxpayers did not produce any evidence that the taxpayers owned – as opposed to rented – a California home in 2013 or that the wife quit – or gave notice of an intent to quit – her California job in 2013. Instead, the evidence showed the wife continued to live in the taxpayers’ rented California home while the husband was working in Alaska and that both taxpayers lived in the home when the husband returned to California in July.
The OTA also explained that other than their unsupported assertions, the taxpayers did not provide any evidence demonstrating that their absences from California during 2013 were “for other than temporary or transitory purposes.” In addition to the lack of evidence regarding the husband being offered a permanent job and the taxpayers searching for a permanent home in Alaska, the taxpayers did not provide evidence showing that they established any significant connections in Alaska. Accordingly, the OTA concluded that the taxpayers’ closest connections were with California, that their visits to Alaska were for temporary or transitory purposes, and that the taxpayers remained California residents during the entire year.
For an overview of California law regarding domicile and residency, see our prior post on “What Makes a California Resident?”
Appeal of W. Smoot and K. Smoot, 2021-OTA-041 (Dec. 2, 2020) (non-precedential)