Georgia Tax Tribunal Addresses Legal Domicile of Overseas Worker

By Jeff Glickman, SALT Partner

At a glance

• The main takeaway: Activities like registering to vote or obtaining a driver’s license in Georgia may not be enough to help you establish domicile in the state.
• Impact on your tax obligations: Some states may take the position that you established domicile in a state before the date you reported it, which can create complicated and potentially unfavorable state tax obligations.
• Next steps: Aprio’s State and Local Tax (SALT) team has experience with addressing issues of domicile and can introduce strategies that prevent you from facing negative tax consequences.

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The full story:

Residency disputes often arise with a taxpayer’s former state of domicile, where that state takes the position that the individual has not abandoned the state as their domicile. For example, let’s say an individual Georgia resident takes action to establish a new domicile in Florida (where there is no state personal income tax), but Georgia argues that the person is still a Georgia resident; these types of scenarios are common in domicile disputes.

However, in some cases, a state might want to take the position that an individual established domicile in the state before the date they reported it. This was the issue addressed in a recent Georgia Tax Tribunal decision.[1]

Take a closer look at the case

The taxpayers in the case — Lisa and Larry Perkinson — were residents of Texas in 2009, at which point Larry became employed by an oil company in Saudi Arabia, and he and Lisa moved that same year. Larry remained employed by the oil company until his retirement on June 30, 2019. During that time, Larry and Lisa rented an apartment in Saudi Arabia, furnished it, acquired driver’s licenses and joined religious organizations. However, since there is no path to permanent residence for foreigners, Larry and Lisa were required to renew their visas each year, which were tied to Larry’s employment.

In 2014, Lisa’s mother’s health began to decline, and in order to provide her with a home closer to family, the Perkinsons purchased a home in Georgia. The home was purchased in both of their names and Lisa’s mother moved into it. At that time, the Perkinsons obtained Georgia driver’s licenses; registered to vote in Georgia using their Georgia address; relocated and registered their vehicles in Georgia; began using the Georgia address for bank and credit card statements; and claimed a homestead exemption on their Georgia property. Larry testified that upon moving his mother-in-law into the home, it was his and Lisa’s intention to move into that same home once he retired from his job.

However, in 2015, Lisa’s mother’s health began to decline even further, and Lisa returned to the Georgia home to reside full-time. Larry continued to reside in Saudi Arabia, spending anywhere from 60─100 days in the United States when on leave. Finally, upon retirement, Larry moved into the Georgia home on July 1, 2019.

The Perkinsons filed their first Georgia tax return for tax year 2019, claiming themselves as part-year residents as of July 1, 2019. Since the Perkinsons viewed themselves as nonresidents of Georgia prior to that and did not have any Georgia-source income, they didn’t file Georgia income tax returns for any prior years. The state issued assessments for 2015─2019 on the basis that the Perkinsons were legal residents of Georgia for each of those years and were required to report all income. This appeal ensued, and the analysis focused on Larry since he was the one earning income.

After determining that the Perkinsons did not establish domicile in Saudi Arabia (based on the fact that their time in the country was tied to Larry’s employment), the Tribunal examined whether Larry became a legal resident of Georgia prior to July 1, 2019.

Prior Tax Tribunal and case law precedent had established that “[a] person may change his or her domicile by (a) abandoning the old domicile and (b) physically moving to another place with (c) the present intent to remain there permanently or indefinitely.”[2]

The state argued that Larry’s domicile changed to Georgia through the actions he took in 2014, such as changing his driver’s license, registering to vote and claiming a homestead exemption. The Tribunal rejected that argument, explaining that “present intent to remain there permanently or indefinitely” is “a basic requirement that must be met for one to establish a domicile, but it is also a basic requirement that one physically moves to that intended domicile first.”

Therefore, the Tribunal concluded that since Larry did not move to Georgia until July 1, 2019, he cannot be a legal resident until that date, and an “absurd result would be produced if intent alone is all that is required to establish a new domicile.”

The bottom line

An individual’s tax domicile is a subjective determination, and therefore, clear guidance does not readily exist. Aprio’s SALT team has experience addressing issues of domicile. If you are looking to move to another state, our team can work with you to increase the likelihood that your move is respected for tax purposes by both the state you are leaving and the state you are entering. Otherwise, you may be facing unfavorable tax consequences.

We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This article was featured in the August 2022 SALT newsletter.

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[1] Larry L. & Lisa S. Perkinson v. Robyn A. Crittenden, in her official capacity as Commissioner, Georgia Department of Revenue, Docket No. 2116694 & 2118468, Ga. Tax Tribunal, May 5, 2022.

[2] Petitioner F-1 v. Comm’r, TAX-ITT-1345974 (Ga. Tax Tribunal 2014).

Disclosure

Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.