If You Are A Snowbird Considering A Domicile Change From New York To A Florida Domicile That May Trigger A New York Audit, Consider The Following:
What Steps Should You Take To Change Your Domicile?
Take the domicile checklist test. Although theoretically a retiree’s subjective intent is determinative of a domicile change, the taxing authorities and the courts place substantial weight on the checklist items. There is no mathematical formula. A change of domicile may be challenged even if most of the checklist items are satisfied. Nevertheless, a cautious retiree who has changed his domicile should strive to satisfy as many of the checklist items as possible.
Once the retiree decides to change domicile, he should be prepared to take steps to further evidence his intention to make Florida his primary home. For example, the retiree should:
- File a declaration of domicile.
- File for Florida homestead exemption.
- Obtain Florida operator’s license and relinquish Northern state license.
- Acquire Florida license plates and relinquish Northern state license plates.
- Register to vote in Florida and actually vote and notify Northern state to remove your name from the voting roles.
- File a nonresident, rather than a resident, Northern state income tax return if there is Northern state source income.
- File Federal income tax return with IRS Center in Atlanta, Georgia.
- Transfer safe deposit box contents to Florida and close out Northern state box.
- Open a Florida bank account.
- Change credit cards to Florida address.
- Execute a new Florida Will, Florida Durable Power of Attorney and Florida Health Care Proxy.
- Refer to Florida residence in all trusts and other legal documents.
- Affiliate with Florida organizations and consider disaffiliation with Northern state ones or become nonresident members, if available.
- Have family gatherings and social activities centered in Florida rather than Northern state.
- Affiliate with a church or temple in Florida.
- If you intend to invest in real estate or businesses, focus on those in the Florida area rather than the Northern state area.
- Move works of art, expensive furniture, heirlooms and other items “near and dear” to Florida and retain any moving receipt and insure shipment.
- Consider acquiring cemetery plots in Florida.
- List Florida residence as the primary residence on all homeowners insurance and update any special personal property rider.
- Turn in any Northern state resident fishing or hunting license.
- License pets in Florida.
- Obtain a Florida library card.
- If a Northern state notary public, resign and become a Florida notary public.
- Cancel any Northern state real estate For example: NY Star Exemption
- Stay as long as is practical in Florida each year and maintain a diary evidencing your whereabouts. Should be close to seven months or more. Remember a partial day in some northern states, such as NY, is considered a full day even though less than an hour.
- Consider acquiring a smaller and/or less expensive home in Northern state and document any steps taken in doing so, such as attempts to sell the larger home and any negotiations to acquire a smaller one . Consider purchasing a larger home in Florida and document any offers made to do so.
- If a physician has advised that either extremely cold weather or hot, humid weather may be harmful to your health, the physician should be requested to document the medical records accordingly.
- Request Northern state physician and Northern state dentist to send a copy of all medical and dental records to your primary doctor and dentist in Florida.
- Subscribe to a local Florida newspaper.
- Change area code on cell phone to Florida area code.
- Dispose of northern state source income, if feasible to do so. Such income is likely subject to northern state income taxes even if a snowbird retiree becomes a Floridian. For example, rental income from northern state properties.
- Be careful what you say on social media. For example: “I will be coming HOME up north soon.” Consider face timing your grandchildren up north when you are in Florida. By doing so frequently you may miss them less and have more frequent contact then when you are visiting up north during the summer. Keep a record of doing so in your diary.
- If you receive any communications from a domicile auditor, do not respond with any information. Refer the auditor to your professional advisor.
- To the extent you do not satisfy a domicile check list item, keep a domicile folder where you explain the reasons why it was not practical to do so. This will refresh your recollection if you are later audited. It may prove indispensible if you have dementia or have died. You should also keep in the folder any domicile change documents such as a copy of your Declaration of Domicile.
- Hear and view answers to ten domicile questions most frequently asked by snowbirds at snowbirdguide.com. as well as contact information and qualifications. No charge or sign in. Also consult with your own qualified professional adviser who may be able to expand on this domicile check list.
In 1997 and in 2008, audit guidelines were issued that indicate under what circumstances some of the checklist items are to be considered during the audit review. These guidelines are reviewed in Session 7.
Legal decisions which address the domicile question frequently cite several of the items on the checklist. Resolving the domicile issue is treated as a factual question and the court attempts to weigh the various factors. There is no mathematical formula which adds any degree of certainty to the process. This is unfortunate since it places the retiree in a position where he acts at his own peril. For example, he may think he has changed his domicile when he has really not done so; he may cut short trips to New York State because of a concern that he will spend over 183 days in the state. If he has guessed wrong, the retiree may not only have to pay delinquent New York taxes based on his entire income, but also interest and heavy tax penalties.
The retiree is apt to ask various questions with regard to the checklist.
Why should he take a new driving test in Florida which he may not pass? Isn’t it sufficient if he indicates his Florida address on his New York license? Is it necessary to have Florida plates on an automobile which he uses both in New York and Florida? The answer to these questions is simple. If he is domiciled in Florida and wants to drive he must have a Florida operator’s license. If he is domiciled in Florida and uses his car in Florida, it must be registered in Florida. When a retiree changes his domicile to Florida he is required under Florida law to register with the Florida Motor Vehicle Department any automobile he intends to operate in Florida and obtain a Florida operator’s license. He must surrender his New York operator’s license unless he can show that his New York license is necessary because of his New York employment or his New York part-time residence.(1)
What if the retiree lives part of the year in Florida but continues to be domiciled in New York? Subject to certain limitations, a New York domiciliary is not required to have a Florida operator’s license or to register his automobile in Florida and obtain Florida license plates, even though he operates his own automobile in Florida while he is living there most of the year. The Florida Motor Vehicle Law provides that a nonresident who has in his immediate possession a valid operator’s license issued to him in his home state may operate a motor vehicle in Florida.(2) This exception does not apply to a nonresident who accepts employment or engages in any trade, profession or occupation in Florida or who enters his children to be educated in the Florida public schools. Furthermore, the exception does not apply to the spouse of such a nonresident.(3)
The Florida Motor Vehicle Law requires registration of motor vehicles owned by residents and display of license number plates. However, such requirements do not apply to a motor vehicle owned by a nonresident of Florida if the owner has complied with the provisions of the motor vehicle regulations or licensing law of his residency and conspicuously displays his registration number. This exception does not apply to recreational vehicles or mobile homes located in Florida for at least six months. It also does not apply to a nonresident who accepts employment or engages in any trade, profession or occupation in Florida or a nonresident who enters his children to be educated in the Florida public schools.(4)
The answers are not quite so clear when the retiree poses the following types of questions:
Should he vote in Florida even if he did not vote on a regular basis in New York? It probably will not make much difference if it became known that he seldom voted in New York and he is voting in Florida simply to make a “record”.
Why should he give up his safe deposit box in New York when it is the only safe place where he can leave valuables when he is in New York State? He probably should not.
Why is it necessary to close out his New York bank account when he has been dealing with the New York bank for many years and it may be more willing to accommodate him with regard to financial transactions? Under such circumstances, it is probably not necessary. But it might be helpful to have some documentation of the relationship.
Should he affiliate with Florida organizations even though he doesn’t intend to actively participate at meetings? Probably it is not significant if it becomes apparent that he seldom attended meetings.
Is it necessary for him to disaffiliate with New York organizations when he may wish to attend meetings that take place when he is in New York during the summer? No, but look into special types of membership for nonresidents of New York.
Can he still maintain membership in his New York country club? Certainly, especially since most activities of country clubs are during the summer months when the retiree is visiting New York. The retiree might consider changing his membership to a special “summer” classification, if available. If there is a Club Roster, the Florida residence should be listed first. If the retiree fails to keep accurate records of the dates when he visits New York and “guesstimates”, he should be aware that the taxing authorities may subpoena and review the bar and food charges at the country club.
What if the reason for continuing an affiliation with a church or a temple is to be assured burial in the same cemetery as a parent or deceased spouse? This reason should be good enough. But again, obtain documentation.
What if it is not prudent to sell New York business interests because of capital gains tax or other business reasons? The continuation of business ties to New York present a substantial risk. But adverse tax consequences is a point that can be raised if the change of domicile is attacked.
Why transfer furniture and other household belongings to Florida when they do not fit in with the more casual Florida life-style? There is no sense in moving the items to Florida if they are not going to be used there. However, there may be sentimental type items that generally would be kept at a primary residence such as work of art, family portraits and the like. These should be moved to Florida.
Common sense should prevail in following the checklist and answering the above questions. If there is a good reason for not complying with one or more items, the reasons for not doing so should be documented so that it can later be pointed out to the Domicile Investigator why the retiree’s action was not inconsistent with his intent to change his domicile from New York to Florida. Documentation may be helpful in establishing proof during an audit when the retiree is alive. It may be indispensable if the retiree has died.
In many instances the tax benefits of a domicile change may be outweighed by the traumatic effect on the retiree of forcing himself to follow a pattern with which he is not comfortable. If the retiree is reluctant to follow the checklist, perhaps he should rethink whether he is really a candidate for a domicile change.
The confusion may be compounded where the retiree satisfies some of the items on the checklist but his wife does not, or vice versa. When the concept of domicile first developed a wife was considered domiciled in the same state as her husband. But that concept is now archaic. What if both are determined to be domiciled in Florida, but the wife was in New York for over 183 days in a calendar year to visit her sick mother while the husband remained in Florida to play golf? The solution may be for the husband to file a separate nonresident income tax return. The New York Tax Law provides that if either husband or wife is a resident and the other is a nonresident, they are required to file separate New York income tax returns on separate forms unless they determine their Federal taxable income jointly and both elect to determine their joint New York taxable income as if both were residents.(5) See Session 10 for a more complete discussion.
It is unfortunate that the courts are reluctant to accept at face value a change of domicile when an actual residence is established and maintained in Florida and the retiree declares that it is his intention that Florida be considered his domicile. It is submitted that the New York taxing authorities are often overly aggressive in contending that no domicile change has taken place under such circumstances. The result of this aggressive approach may be less tax revenues for New York State rather than more. Faced with such uncertainties, the retiree may decide to remove all contact from New York State. He may sell his New York residence and purchase one in some other northern state or simply stay in Florida all year. The tax revenue dollars generated by New Yorkers who move to Florida but spend considerable time each year in the state probably outweighs the additional revenues which New York State attains by contesting domicile in income and estate tax cases. However, until some policy change is made by the taxing authorities or the Legislature decides to correct the situation, the retiree must proceed with the awareness that there is a lack of certainty in this area.
In order to increase his chances of success, the retiree should not only follow the checklist (to the extent practicable), but should try to have them all take place at about the same time. The New York State taxing authorities are likely to discount those that take place a substantial period of time prior to or after the purported date of the change of domicile. A case in point involved a woman named Dee. It was undisputed that Dee was a New York domiciliary prior to 1968. She claimed a change of domicile that year. The New York Tax Commission rejected the claim, pointing out that there was inadequate evidence that her Florida automobile license and registration, Florida bank account, Florida safe deposit box and other related Florida matters represented something recently acquired as opposed to something continuously maintained. It held that her general habit of life did not sufficiently alter in 1968.(6)
Some estate planners add to their checklist a suggestion that the retiree not make contributions to charities located in New York State lest he be deemed a domiciliary of New York State. In order to encourage retirees to continue to contribute to New York State charities, Section 605(c) of the New York Tax Law provides that the making of a charitable gift or donation of uncompensated time shall not be used in any manner to determine where an individual is domiciled. If a New York tax auditor appears to be taking such charitable contributions into account, reference should be made to the statute.
It is most important that the retiree not continue to do anything that is inconsistent with a change of domicile. For example, he should not continue to file resident New York tax returns. He should not execute any legal documents where he indicates his residence as New York State. If he does so, the taxing authorities are apt to claim his change of domicile was not clear and convincing.
This Seminar focuses on the retiree who maintains a residence in both New York and Florida. In most instances, where a retiree gives up his New York residence and does not reside at all in New York he will be considered to be domiciled in Florida. But that is not always the case. In 1967, George sold his New York home and the following year moved to Florida intending to live there with his wife for the rest of their lives – – – nine months of each year in a friend’s house and three months of the year in a furnished apartment. After moving to Florida, George maintained many contacts in New York. He owned commercial property, maintained an active New York checking account, filed yearly New York income tax returns, and was employed as a special salesman in New York. He never voted or owned any property in Florida. The court held that a change of residence without the necessary intention to establish a permanent domicile leaves the last established domicile unaffected, and that the fact that one sells his residence and moves elsewhere does not prove that a change of domicile has occurred.(7) Where the retiree sells his New York home and moves to Florida he should make his intention clear. If he desires to change his domicile to Florida, he should file a declaration of Florida domicile. If he wants to remain a New York domiciliary, he should avoid the steps outlined in this session and file a declaration of non-domicile in Florida.(8)
It may be helpful to the retiree in establishing Florida domicile to follow the checklist and other suggestions set forth in this Seminar. However, this Seminar and examples set forth in New York State publications at best provide examples of the objective facts and circumstances upon which other taxpayers have relied to establish their subjective intent. As stated in a recent case where the Tax Appeals Tribunal refused to recognize an attempt to establish Florida domicile:
“Lastly, we address petitioner’s assertion that he detrimentally relied upon official New York State publications to assist him in an attempt to change his domicile. A change in domicile is not a form of chess where a given set of maneuvers, of themselves, will carry the day for a taxpayer claiming to have changed his domicile. Instead, the taxpayer must prove his subjective intent based upon the objective manifestation of that intent displayed through his conduct. Publications of the Division of Taxation could at best provide examples of the objective facts and circumstances upon which other taxpayers have relied to establish their genuine subjective intent. These publications cannot themselves develop a taxpayer’s intent to change his domicile. The intent must, of course, come from the taxpayer himself. “
Proving a change of domicile should not be “a form of chess where a given set of maneuvers, of themselves, will carry the day”. Nevertheless, the retiree should know the rules of the “game” and make as many “right” moves as possible.
CAUTION: Before acting on any matters discussed in this session, the retiree should request his attorney to review the most recent laws, regulations and cases and seek his advice on the appropriate weight to be given to the various domicile factors discussed in this session.
6 Thibault v. State Tax Commission, 50 A.D.2nd 1045, 377 N.Y.S.2d 741 (3rd Dept. 1975). Where the retiree has staggered his compliance with the checklist over a period of time and his change of domicile is challenged, he might argue that it is more convincing when an individual exhibits a consistent, albeit gradual, intent to change his domicile over a period of years.