NEW YORK – July 1, 2022 – In a June 30 ruling in Obus v. New York State Tax Appeals Tribunal, the New York State Appellate Division, Third Department, held that a vacation home of a New Jersey resident more than 200 miles from the place where he worked was not a permanent place of abode that would make him subject to New York tax as a resident. Global law firm Greenberg Traurig, LLP represented the petitioner, longtime client Nelson Obus.
“This ruling is a major change in New York’s law on statutory residency. It makes clear that it is irrational to only consider the physical characteristics of the dwelling to determine whether it is a permanent place of abode. Rather, the taxpayer’s use of the dwelling must be considered to determine whether someone is, ‘really and for all intents and purposes’ a resident of the state,” said attorney Glenn Newman, who led the Greenberg Traurig team representing Obus.
At the center of the dispute was the issue of whether the taxpayer, domiciled in New Jersey and working more than 183 days in his Manhattan office, was a statutory resident of New York subject to New York tax on all of his income. Obus owns a vacation home in Northville, Fulton County, more than 200 miles from his place of employment and 240 miles from his New Jersey domicile. He paid tax to New York on all his earned income and paid tax to New Jersey on his income from investments, according to court records.
The New York State Department of Taxation & Finance asserted, and the Tax Appeals Tribunal held, that because Obus spent two or three weeks a year at the vacation home for the Saratoga racing season and cross-country skiing and the house was “suitable for year-round use,” it was a permanent place of abode that subjected the taxpayer to the 183-day test to be a statutory resident.
The Tribunal reached this determination because "petitioners had the right to reside in and maintained living arrangements at [the] Northville home and exercised that right, albeit sparingly, during the years at issue." The court, stating that this is a matter of statutory interpretation and not subject to the substantial evidence standard of review, found that “it was unreasonable for the Tribunal to focus solely on the Northville home's objective characteristics.”
“Even though the Northville home could have been used in a manner such that it could constitute a permanent place of abode within the meaning of Tax Law § 605, because petitioners did not use it in this manner, it does not constitute a permanent place of abode,” the court held.
“New York has had a robust residency audit program for many years and these audits do not raise ordinary audit issues of verifying income or documenting deductible expenses,” Newman said. “These are lifestyle audits that look at where a taxpayer spends time, has family and business contacts, and even where ‘items near and dear’ are kept. These audits can be very intrusive and without a tax professional’s advice, they can be very costly.”
Newman handles tax planning and controversy matters. Before reentering private practice, he was the president of the New York City Tax Commission and the NYC Tax Appeals Tribunal, the agencies that hear and determine disputes of New York City property and business income and excise taxes. Previously, he was deputy commissioner for Audit & Enforcement at the New York City Department of Finance and chief of the Tax and Bankruptcy Division in the Office of the Corporation Counsel of the City of New York.
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