Georgia Tax Tribunal Ruling: Expatriate Taxpayers are No Longer Georgia Residents

In the case of a married couple and their children who moved to Spain, the Georgia Tax Tribunal ruled that they had abandoned their domicile and were not required to pay Georgia income tax.

By Denisse Beldin, SALT associate

Are you considering a move? Of the many logistical issues that must be addressed, one perplexing tax issue is whether you need to continue to file a resident income tax return in the state you are leaving. The answer to this question often depends on a variety of factors assessing whether or not you intended to truly leave your current state of “tax residence.” On Dec. 1, 2015, the Georgia Tax Tribunal (“Tribunal”) issued a decision that provides some guidance in this area, finding in favor of a married couple and ruling that the couple did not have to file a Georgia resident income tax return during the time that they were abroad. [1]

The taxpayers are a married couple who resided in Atlanta, Georgia, with their four children. The wife is a U.S. citizen, and her husband maintains dual citizenship in France and the United States. In 2008, the family moved to Madrid, Spain, and resided there until mid-2012, at which time they returned to Atlanta. During that period, the family spent approximately six weeks per year at their Atlanta home. They filed a U.S. Federal 1040 for taxable years 2008 through 2012, but did not file individual income tax returns in Georgia for 2009 through 2012. In 2014, the state examined the taxpayer’s status, determined that they should have been filing Georgia resident income tax returns and assessed tax, interest and penalties for tax years 2009-2012. [2]

Under Georgia law, a taxpayer can be considered a “resident” of the state for income tax purposes in one of three ways: (i) being a “legal resident” of the state (this is synonymous with “domicile”); (ii) residing in the state on a more or less regular or permanent basis and actually residing in the state on Dec. 31 of the tax year or (iii) residing in the state for at least 183 days (or part days) of the tax year. [3] Given that the taxpayers did not meet (ii) or (iii), the state’s only argument was that the taxpayers maintained their legal residence, or domicile, in the state. In order to make that determination, the Tribunal had to address the distinction between two terms: “residence” and domicile.”

In everyday discussions, the terms “residence” and “domicile” are used interchangeably. For tax purposes, however, the two terms are distinct. As the Tribunal explained, a residence is simply a place of abode. A taxpayer can have many residences, but a taxpayer may have only one domicile. A domicile implies permanence, a place where the taxpayer, being away for however long, ultimately intends to return. A taxpayer cannot acquire a new domicile simply by moving to a new place. In order for a Georgia taxpayer to establish a new domicile, they must abandon the old domicile and move to another place with the intent to remain there permanently or indefinitely (i.e., establish a new domicile).

It is the condition of “intent” for domicile that requires that the analysis be based on each taxpayer’s specific facts and circumstances. In this ruling, the Tribunal used several factors to make the determination that the taxpayers had abandoned their Georgia domicile and acquired a new domicile in Spain:

  1. The taxpayer’s move to Spain was not tied to employment and was not for a fixed time;
  2. The family all became EU citizens and did not require additional permit(s) to remain in Spain indefinitely;
  3. The taxpayers obtained a driver’s license, bought a car and paid car tax to Spain;
  4. The taxpayers obtained a Spanish tax identification number and paid income tax;
  5. The taxpayers unenrolled their children from school in Georgia and enrolled them in school in Spain;
  6. The taxpayers obtained Spanish health insurance for themselves and their children and transferred certain health records to Spain;
  7. The taxpayers signed a three-year lease on their Spanish apartment, renewed it once and moved personal belongings to Spain that “made a house a home;”
  8. The taxpayers altered their country club status from resident to non-resident;
  9. The taxpayers only spent approximately six weeks per year in Georgia; and
  10. The taxpayers removed their Georgia homestead exemption.

All these factors considered, the Tribunal determined that the taxpayers were no longer Georgia residents for income tax purposes.

If you are considering moving and are concerned about the tax implications, it is important to speak with an advisor so that you do not end up subject to unexpected taxes, interest and penalties. Aprio’s SALT team has experience addressing residency issues and can assist you in determining your filing requirements in order to minimize your risk. We continue to monitor important developments and issues in state and local taxation in order to help our clients address their specific tax situations, and we will include those in future issues of the Aprio SALT Newsletter.

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

This article was featured in the January 2016 SALT Newsletter. To view the newsletter, click here.

[1] Fleury v. Riley, 2015 – 6 Ga. Tax Tribunal, Dec. 1, 2015.

[2] The three-year statute of limitations period did not apply in this case because the taxpayers did not file any Georgia returns.

[3] Ga. Code Ann. § 48-7-1(10)(A)

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 this matter.

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