SESSION 5
How Much Time Must You Spend In Florida?

Remember, 183 days is the magic number. Accurate records are required to show the specific days that the retiree is out of New York State. The New York tax auditor may check airline tickets, telephone bills and credit card statements to confirm the number. Even if a retiree changes his domicile to Florida, he will be required to pay New York income taxes on 100% of his income, if he is in New York for more than 183 days in any calendar year. A partial day is counted as a full day even if it is only a few hours. The test is the number of days in New York -- not the number of days in Florida.

Even though a New York retiree has unquestionably changed his domicile to Florida, New York State will still consider him a New York resident for income tax purposes if he 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.⁽¹⁾

This seems hardly fair. Why should New York State be allowed to tax a Florida domiciliary on 100% of his world-wide income when he may only be present in New York State 51% of the year? Shouldn't the tax at least be limited to 51% of the income, especially where none of the income is New York-based income? The 183-day rule used to be a seven-month rule. The chairman of the board of the Anaconda Copper Mining Company was hit with the tax and he challenged the seven-month rule in court. In all his relations - social, political, and business - he maintained Montana as his residence. However, in connection with his duties as chairman, he spent a majority of his time in New York. The court held that no Federal constitutional questions were present and that New York's tax law rested on a fair and substantial basis.⁽²⁾

Fortunately, there are two tests. The retiree domiciled in Florida can avoid New York income taxes if he can show that he did not maintain a permanent place of abode in New York even if he was in New York state for more than 183 days.

The New York State Tax Regulations define a "permanent place of abode".⁽³⁾ It means a dwelling place permanently maintained by the taxpayer, whether or not owned by him, and will generally include a dwelling place owned or leased by his spouse. However, a mere camp or cottage, which is suitable and used only for vacations, is not a permanent place of abode. Furthermore, a building which only contains bachelor-type quarters but does not contain facilities ordinarily found in a dwelling, such as facilities for cooking, bathing, etc., will generally not be deemed a permanent place of abode. Also, a place of abode is not deemed permanent if it is maintained only during a temporary stay for the accomplishment of a particular purpose. For example, an individual domiciled in Florida may be assigned to his employer's New York State office for a fixed and limited period, after which he is to return to Florida. If such an individual takes an apartment in New York State during this period, he is not deemed a resident, even though he spends more than 183 days of the taxable year in New York State, because his place of abode is not permanent. He will, of course, be taxable as a nonresident on his income from New York State sources, including his salary or other compensation for services performed in New York State. However, if his assignment to his employer's New York State office is not for a fixed and limited period, his New York apartment will be deemed a permanent place of abode and he will be a resident for New York State personal income tax purposes if he spends more than 183 days of the year in New York State.

The above recites almost verbatim the New York State Tax Regulations. The Regulations raise more questions than they answer. For example, what if the taxpayer resides in New York State at his daughter's home but he helps her maintain it? Does it make any difference if the retiree has access to a kitchen but dines out at restaurants most of the time? What if the taxpayer rents an apartment in New York State only for the months when he is in New York State? Does it make any difference if somebody else leases the apartment for the rest of the year? What if the taxpayer owns an apartment or home in New York State but rents it out on a furnished basis for the months when he is not in New York State? Does the entire place of abode have to be maintained by the taxpayer? Does the abode have to be maintained by the taxpayer for the entire twelve months of a calendar year?

Some issues were clarified in a case involving John Evans.⁽⁴⁾ The New York Supreme Court (Appellate Division) upheld the decision of the Tribunal concerning what constitutes maintenance of a permanent place of abode. John shared a Manhattan apartment with a friend during his work week and had paid for his share of household expenses for approximately seven years. He stayed there from Sunday or Monday to Friday. He also had provided some of the furniture for the apartment. The Court rejected John's claim that since he did not pay for many of the operating expenses he was not "maintaining" the apartment. The Court also rejected John's claim that he could be asked to leave at any time and that to be "permanent" the apartment must be owned, leased or otherwise based upon some legal right. The Court considered the word "permanent" to mean an abiding place, having a fixed or established character as distinguished from intermittent or transitory.

Matter of Moed⁽⁵⁾ was more instructive in determining whether petitioner maintained a permanent place of abode. In Moed, the Tax Appeals Tribunal relied upon Matter of Evans to devise the following four-part test to determine whether an apartment was maintained by the taxpayer as a permanent place of abode: (1) whether the petitioner had a property right in the apartment; (2) whether there is evidence of a shared rental; (3) whether the petitioner had free and continuous access to the apartment; and (4) the marital relationship between the petitioner and other users of the residence.

Applying that analysis, an Administrative Law Judge in a 1997 determination reached the conclusion that the apartment at issue herein did not constitute a permanent place of abode.⁽⁶⁾

Where the retiree who has changed his domicile maintains a permanent place of abode in New York, he should avoid spending more than 183 days in any calendar year in New York. But what if he becomes ill and cannot return to Florida on schedule and is in New York more than that number? This is what happened to Barbara. She was domiciled in Florida but leased an apartment in New York City which she used occasionally and, at most, a few days at a time. Barbara became ill and came to a New York City clinic which offered the most advanced facilities for treatment of her condition. She was hospitalized from February 20th to March 29th when she was discharged. Although she wanted to return to Florida, her doctors advised her against it. She stayed in the New York apartment until she was readmitted on April 25th and remained hospitalized until June l9th. On July 27th, she was readmitted to the hospital and died there on September 19th. During the year she spent 215 days in New York, 148 days were in the hospital and 67 days were in her apartment.

The New York State Tax Commission held that there was no exception to the 183-day rule even where the stay was involuntary. The reviewing court was less cold-hearted. It overruled the Commission. The court held that when a nondomiciliary, such as Barbara, seeks treatment in New York for a serious illness the time spent in a hospital for treatment of that illness should not be counted.⁽⁷⁾

The 1997 Nonresident Audit Guidelines issued by the Department state that it is audit policy that "A non-domiciliary seeking treatment for an illness is not considered present during the time spent in a New York medical facility." It further states that this includes:

* situations where an incompetent person is placed in a facility in New York.

* situations where the individual suffers a medical emergency while present in the state for other purposes and the patient cannot realistically be removed from the state.

* situations where an individual is confined to an institution as a result of seeking treatment in New York.

Even though the retiree is present in New York State for more than 183 days during the year, he will not be considered a resident if he maintains a permanent place of abode in New York for less than substantially all of the taxable year.⁽⁸⁾ For this purpose, the Audit Guidelines state that substantially all the taxable year means a period exceeding 11 months.⁽⁹⁾ For example, an individual who acquires a permanent place of abode on March 15th of the taxable year and spends 184 days in New York State would not be a statutory resident since the permanent place of abode was not maintained for substantially the entire year. Similarly, if an individual maintains a permanent place of abode at the beginning of the year but disposes of it on October 30th of the tax year, he too, would not be a statutory resident despite spending over 183 days in New York. Since the individuals in each of the above examples did not maintain their permanent place of abode in New York for more than 11 months, the individuals would not be considered residents of New York State for any part of the year. The issue of "substantial part of the year" applies only to statutory resident cases. However, as shown below, the test for statutory residency may apply even in a situation where an individual changes domicile during the tax year.⁽¹⁰⁾

The 1997 Audit Guidelines caution that the eleventh month rule is a general rule rather than an absolute rule. They give an example of a couple who rents an apartment in New York year after year, but each year they sublet the apartment to their son for the month of December. The manual points out that under the absolute rule, the couple would not be maintaining a permanent place of abode in New York since they do not maintain it for more than eleven months of any particular year. However, it points out that the Division's position is that the couple should properly be covered by the 183-day rule since they are maintaining the abode on a regular basis.

BEWARE! The Tribunal might not accept the eleven-month criteria whether applied as a general rule or an absolute rule.⁽¹¹⁾

Also, remember that the burden is on the retiree to prove by clear and convincing evidence not only the issue of domicile but also compliance with the 183-day requirement.⁽¹²⁾

What if in the fall the retiree catches a 6:45 A.M. flight from New York to Florida? What if he returns to New York at 11:00 P.M. in the spring? Yes, each of those days will be considered as a full day in New York State.⁽¹³⁾

During the summer months some retirees take out of state trips. Assume the retiree leaves at 7:00 A.M. on Friday and returns at 11:00 P.M. on Sunday. Most people would consider this a three-day trip. The New York State auditor will consider it a one-day trip out of New York State for purposes of counting the 183 days. This interpretation was challenged in Leach v. Chu.⁽¹⁴⁾ In that case Fred Sigman worked five days a week in New York City. While he was domiciled in Connecticut and usually returned to his home there after the workday, he also maintained a studio apartment in New York City. If only full 24-hour days were counted, Mr. Sigman was eligible to file a nonresident income tax return. The New York Tax Commission counted partial days in New York as full days. The trial court reversed the Commission, holding that while the Legislature could enact a statute defining a day to include a fraction of a 24-hour period, here it did not do so and, therefore, the Commission usurped its power by expanding the term "day" to consist of a period of time less than 24 hours.

Unfortunately, on appeal the decision was reversed. The appellate court recognized that the definition of a day is commonly considered to be that period of time running from midnight to midnight, but held that the Commission's interpretation was not irrational. The court either ignored or was not aware of Section 19 of the New York Construction Law, which states that a "calendar day includes the time from midnight to midnight." However, until the issue is again raised and reversed, the retiree should count each partial day as a full day for the purposes of the 183-day rule.

Some retirees from the Western New York area not only have a home there, but also have a summer cottage in Ontario. Some New York City area retirees may also have summer retreats in New England. To avoid taxation as a New York resident, the time outside of New York does not necessarily have to be spent in Florida. A retiree can avoid such taxation by splitting up his absence from New York State between Florida and some other state or country. The retiree should carefully document his stay in this "third" location.

Every retiree who spends more than a few months in New York should keep a daily diary showing all his trips to New York. He should not be surprised if, on audit, the New York tax examiner requests New York telephone bills, New York country club and social club vouchers, credit card billings and other records that may indicate when the retiree was in New York. If any of those records show his presence in New York when he claimed to be in Florida, the retiree will probably have to prove when he arrived in New York and when he departed on that particular visit.

The Department's audit manual that is discussed in greater depth in a later chapter refers to "false" indicators that can mistakenly turn a non-New York day into a New York day, including credit card purchases in New York by children, phone calls by housekeepers, and children or relatives staying at the New York address as a guest when the individual being audited may not be in New York. But the manual goes on to state that auditors should also be alert for the same "false indicators" which might be used to verify a day spent in Florida when, in fact, the individual was in New York. Don't try to be "cute". The last thing you want is for an auditor to suspect that you may be "playing games" by having a friend use your credit card in Florida or otherwise attempt to show your presence there when you are in New York.

A hostile tax auditor may even seek to impose fraud penalties if he thinks there was deliberate deception.

What if the retiree thinks he was in New York State for less than 183 days but cannot prove it? He may be stuck, unless there are extenuating circumstances.

The regulations require the retiree to "keep and have available for examination. . . adequate records to substantiate the fact that he did not spend more than 183 days".⁽¹⁵⁾

In Chapter 1 we discussed Dr. Feldman's domicile case and the Tribunal's determination that his continued practice of medicine served as a continual tie to New York. In that case the issue was also raised as to whether or not Dr. Feldman was present in New York State for more than 183 days during the calendar year. The Tribunal's opinion in that case was construed as requiring documentary evidence to corroborate credible testimony as to the number of days. The Feldman case was overruled on that point in the Alvidsen case.⁽¹⁶⁾ In that case Mr. Alvidsen's personal secretary testified as to his days in and out of New York City and the Division had the opportunity to cross examine her. In a very detailed and extensive opinion, the Tribunal held that her credible testimony was sufficient to prove that Mr. Alvidsen was not a resident of New York City even without corroborating documentation. The Administrative Law Judge had determined that Mr. Alvidsen was not a domiciliary of New York City during the years 1986 and 1987 but was a resident because his New York City apartment was a permanent place of abode maintained in New York City and because he failed to substantiate that he did not spend more than 183 days in New York City during each of the years at issue. Although the Tribunal reached a determination favorable to Mr. Alvidsen it indicated that it is likely to be a rare case where a taxpayer is successful when relying solely on uncorroborated oral testimony. ⁽¹⁷⁾

In Matter of Armel,⁽¹⁸⁾ the administrative law judge held against the Armels claiming they had not kept adequate records to substantiate the fact that they did not spend more than 183 days of the year within New York State. The Tax Tribunal reversed, holding that the ALJ should have accepted the testimony of the Armels that once in Florida they did not return to New York between October and the following May. It was not necessary to account for their whereabouts on any specific day with "records" despite the tax regulation that appears to indicate that it was.⁽¹⁹⁾ But in a subsequent decision, the Tax Tribunal limited its prior holdings. It held that it is only where a taxpayer can establish a "pattern of conduct" from which the location may be determined for any particular day, that the taxpayer need not specifically account for his or her whereabouts on each day.⁽²⁰⁾

DON'T DISCARD BACK-UP DOCUMENTATION PROVING YOU WERE NOT IN NEW YORK STATE MORE THAN 183 DAYS

Often, several years go by before New York claims a retiree should have, but did not, file a New York resident income tax return. The Kanes had effectively changed their domicile to Florida. Although their principal residence was in Delray Beach, they also had a place of abode in Ardsley, New York. A New York auditor claimed that in 1989 they were in New York State more than 183 days. A statutory notice was mailed to the Kanes in 1993. The case was finally determined against the Kanes by the New York Tax Appeals Tribunal in February 1999. The Kanes submitted a computer printout, prepared by an accountant, based on conversations with Mr. Kane. It was entitled "Bernard Kane 1989 NYS Diary of Days In & Out of NYS". No handwritten diary or day-to-day records were introduced. There was no back-up documentation of any kind. e.g., travel records or receipts, tickets, credit card invoices, etc. Not good enough. In Matter of Kane, the New York Tax Tribunal held against the Kanes (21). Although the Kanes passed the domicile test, they failed the 183-day test. All income from stocks and bonds were subject to New York tax. The Kanes had excluded all income from tax-exempt bonds on their federal income tax return. $76,000 had to be reported as New York income because the bonds were issued in Florida and Texas. Only New York tax-exempt bonds can be excluded from the New York return. The lessen to be learned --- retain all your back-up information to show you were not in New York State more than 183 days. Your testimony will not be enough. Also, the issue may arise after you are dead, so keep the back-up information organized so your executor can find it if necessary.

CAUTION: A Florida snowbird may be in double-trouble if his New York house is in New York City or other municipality that imposes an income tax on its residence. Good record keeping is a "pain" but is a "must."

1. New York Tax Law § 605(b)(1)(B).

2. Ryan v. Lynch, 233 A.D. 884, 250 N.Y.S. 987, appeal dismissed 262 N.Y. 1, 186 N.E. 28 (1933) Judge Pound in dismissing the case noted that unlike the power of a state to impose estate taxes, in personal income taxes domicile plays no necessary part. Instead, the Court appears to have imposed a residency test.

3. 20 NYCRR § 105.20(e).

4. Matter of John M. Evans, TSB-D-92-(16)-I, aff'd 606 N.Y.S.2d 404.

5. Tax Appeals Tribunal, January 26, 1995.

6. Matter of Lepley, DTA 814368; 1997 N.Y. Tax Lexis 286 (June 19, 1997).

7. Stranahan v. State Tax Commission, 68 A.D.2d 250, 416 N.Y.S.2d 836 (1979).

8. Advisory Opinion, Pet. No. 1880428A (October 4, 1988) TSB-A88-(16)-I.

9. See p. 36 of the 1997 Audit Guidelines.

10. See 1994 Nonresident Audit Guidelines at page 35.

11. Matter of Tweed, DTA No. 812469; 1996 N.Y. Tax Lexis 273 (May 23, 1996).

12. See, Matter of Kern, DTA No. 812127; 1995 N.Y. Tax Lexis 592. See, Matter of Tweed, DTA No. 812469; 1996 N.Y. Tax Lexis 273, where the Tribunal refers to the eleven-month test.

13. 20 NYCRR § 105.20(c).

14. Leach v. Chu, 540 N.Y.S.2d 596 (1989).

15. 20 NYCRR § 105.20(c).

16. Matter of John Avildsen, Tax Appeals Tribunal, DTA No. 809722 (May 19, 1994).

17. See New York City Administrative Code §11-1705(b)(1)(B)

18. Matter of Armel, DTA No. 811255; 1995 N.Y. Tax Lexis 438.

19. Also, see Matter of Reid, DTA No. 811009; 1995 N.Y. Tax Lexis 528.

20. Matter of Kern, DTA No. 812127; 1995 N.Y. Tax Lexis 591.

21. Matter of Kane,  1999 WL 99191 (N. Y. Tax App. Trib..) DTA No. 815424 (1999)