The tax concept of “domicile” can be particularly complex, especially if you’re a high net worth individual who spends time in, and receives income from, multiple states. The IRS and most state tax authorities define domicile as “the place where the taxpayer has his true, fixed, permanent home.”

Since this issue’s theme is America’s Most Dynamic Cities, and many readers split their time between New York, Miami and some of the other places on the list, it’s a good idea to revisit this concept of “domicile.” Here, it’s important to note that “domicile” doesn’t necessarily apply to any one specific dwelling. In other words, you can have many “homes” or “residences,” but from a legal and income-tax point of view, you can have only one domicile, or “permanent residence.”


What you should also know here is that many states will pursue a case against a person to tax him or her, even though that state is not necessarily the taxpayer’s “domicile,” or permanent residence. The state’s intent? To establish what the state considers “statutory residence.” At that point, the state’s authorities declare you a “resident” of that state after you have resided there a certain number of days. This matters because tax laws and rates differ from state to state: Where you establish “domicile” can have a significant impact on your state income tax.

The Day Test

Most states will apply what’s known as a day test, where residency is determined by the number of days you spend in a given state during a taxable year. For example, New York, which is notorious for holding anyone it believes to be a “resident” liable for state income taxes, applies a “183-day test” to anyone who has a permanent dwelling in the state. According to the statute, a resident is defined as “any individual who is not domiciled in New York, but who maintains a permanent place of abode in New York and spends in the aggregate more than 183 days of the taxable year in New York.”

What these cases signal is that states, like New York, with high tax rates, do not want to give up on that revenue so easily.

Cases in Point

Even when the number of days a taxpayer is or isn’t in a given state is clearly accounted for, establishing “domicile,” and/or “statutory residency,” is not cut and dried. A recent case involving New York State used a 2015 Supreme Court decision: In their lawsuit, a couple alleged that they had been unconstitutionally “double taxed.” The plaintiffs were Richard Chamberlain and Martha Crum; they alleged that the New York State Tax Department’s establishment of “statutory residency” for them improperly subjected them to double taxation, in violation of the federal Commerce Clause.


Their lawsuit was based primarily on the Supreme Court’s Wynne decision, which found Maryland’s income tax law to be unconstitutional because it subjected some of that state’s residents to “double taxation.” Attorneys for Chamberlain/Crum “alleged, in lightof the analysis used by the Supreme Court in the Wynne decision, that New York’s statutory residence scheme was unconstitutional.” That wasn’t the end of it: A New York trial judge recently ruled in the case, affirming that the state’s taxation of “statutory residents” was indeed constitutional, despite the Court’s Wynne decision. In his ruling, the judge granted the state tax department’s motion for summary judgment on the issue.

As you might imagine, the judgment’s being appealed. In another case involving New York, in 2014, the New York State Court of Appeals handed down a ruling in the Gaied case, which was seen as a “win” for taxpayers. Prior to the ruling, the state Department of Taxation and Finance had broadly applied its “183-day rule.” The Gaied case sought to limit that application: The plaintiff, who lives in New Jersey, had purchased an apartment in New York for his elderly parents and paid most of the expenses for them to live there, but did not live there himself.

The state’s highest court agreed with Gaied’s position: It clarified that a person must indeed have a “residential interest” in, and not merely “unfettered access to,” the property in question, in order to be considered a “statutory resident” and therefore subject to New York state tax. Interestingly enough, the same law firm that scored a victory for Gaied is representing Chamberlain and Crum.

The Takeaway

What these cases signal is that states like New York, with high tax rates, don’t give up on that revenue so easily. Therefore, if you’re planning to relocate to, do business in or frequently visit, one of these cities—and still maintain ties with one of the other cities—it would be wise to seek advice from a CPA familiar with the domicile regulations of both cities and their states. You know which state you’re a resident of; but you have to make sure the tax authorities concur.