Senate Bill S3998C

                                BILL NUMBER:S3998

TITLE OF BILL:
An act
to amend the tax law, in relation to the definition of a resident for the
purposes of the personal income tax

PURPOSE:
To expand the definition of a resident for the purposes of the
personal income tax.

SUMMARY OF PROVISIONS:
Paragraph 1 of subsection (b) of Section 605 of the tax law, as
amended by Chapter 28 of the Laws of 1987, subparagraph (A) as
amended by section 1 of part A-1 of Chapter 57 of the Laws of 2009 is
amended to expand the definition of "resident individual".

JUSTIFICATION:
Earlier this year, the State of New York Division of Tax Appeals
upheld the decision of an Administrative Law Judge that ruled all
income earned by a Connecticut couple who own a second home on Long
Island is subject to New York State taxes. This ruling has sent a
shudder of concern through vacation-home communities across the State
as vacation homeowners relied upon an exemption in the tax regulations.

Current law states that if you are domiciled in another state, own a
              

permanent place of abode in New York and spend more than 183 days in
New York, you are a resident for income tax purposes. The tax
regulation, however, excludes camps or cottages suitable and used
only for vacations. In the above referenced case, the family lived in
Connecticut and had a vacation home on Long Island's East End which
they used only five or six weekends a year. The husband worked in New
York City, returning each night to Connecticut. They had paid New
York State income tax, but at the non-resident rate because they live
in Connecticut. The ruling determined their Long Island vacation home
was a permanent place of abode in New York and the husband was in the
state more than 183 days between work and vacation. As such, they
were deemed residents of New York State pursuant to provisions of the
Tax Law and held accountable for additional taxes.

Vacation-home communities heavily depend on those out-of-state
residents who enjoy spending their precious free time and their
hard-earned dollars in New York. If left unchanged, the
implications of this decision will surely discourage vacation home
ownership in New York causing further damage to an already struggling
housing market and impeding New York's economic recovery. This
legislation amends the Tax Law to expand the definition of "resident"
for the purposes of personal income tax. In addition to being in New
York State for 183 days for business or personal reasons and owning a
personal residence, a person would also have to spend at least 120

days at such residence to be considered a resident of New York State
for income tax purposes.

LEGISLATIVE HISTORY:
New legislation.

FISCAL IMPLICATIONS:
To be determined.

EFFECTIVE DATE:
Immediately.

                                BILL NUMBER:S3998A

TITLE OF BILL:
An act
to amend the tax law, in relation to the definition of a resident for the
purposes of the personal income tax

PURPOSE:
To clarify the definition of permanent place
of abode for the
purposes of the residency rules under the personal income tax.

SUMMARY OF PROVISIONS:
Subparagraph (B) of paragraph 1 of subsection
(b) of section 605 of the tax law, as amended by Chapter 28 of the
Laws of 1987, is amended and a new subparagraph (C) is added to
clarify the definition of a permanent place of abode.

JUSTIFICATION:
Earlier this year, the State of New York Division of
Tax Appeals upheld the decision of an Administrative Law Judge that
ruled all income earned by a Connecticut couple who own a second home
on Long Island is subject to New York State taxes. This ruling has
sent a shudder of concern through vacation-home communities across
the State as vacation homeowners relied upon an exemption in the tax
regulations.
              

Current law states that if you are domiciled in another state, own a
permanent place of abode in New York and spend more than 183 days in
New York, you are a resident for income tax purposes. The tax
regulation, however, excludes camps or cottages suitable and used
only for vacations. In the above referenced case, the family lived in
Connecticut and had a vacation home on Long Island's East End which
they used only five or six weekends a year. The husband worked in New
York City, returning each night to Connecticut. They had paid New
York State income tax, but at the nonresident rate because they live
in Connecticut. The ruling determined their Long Island vacation home
was a permanent place of abode in New York and the husband was in the
state more than 183 days between work and vacation. As such, they
were deemed residents of New York State pursuant to provisions of the
Tax Law and held accountable for additional taxes.

Vacation-home communities heavily depend on those out-of-state
residents who enjoy spending their precious free time and their
hard-earned dollars in New York. If left unchanged, the implications
of this decision will surely discourage vacation home ownership in
New York causing further damage to an already struggling housing
market and impeding New York's economic recovery. This legislation
amends the Tax Law to clarify the definition of "permanent place of
abode" for the purposes of personal income tax.

Under this legislation, the usage or ownership of a vacation home will
not be sufficient to establish residency for personal income tax
proposes so long as the taxpayer spends less than 90 days year at the
vacation home and the home is located more than 50 miles from the
taxpayer's primary place of employment in New York. This proposal has
the benefit of being narrowly tailored to address usage and ownership
of home in vacation communities. It also is similar to a proposal
that was under consideration by the Tax Department several years ago
when efforts were being made to exclude vacation homes from
classification as "permanent places of abode" under New York's
residency rules.

This change is being made to clarify existing law. Despite the
decisions in the New York Division of Tax Appeals, it is clear that
it was never the Legislature's initial intent to include or to
classify as "residents" those taxpayers who made limited use of
vacation homes located in New York state. Instead, the statutory
provisions were added to the Tax Law in the 19205 to ensure that only
those people with no transitory and abiding connections to New York
State be classified as residents under the Tax Law. Taxpayers with
limited-use vacation homes were never supposed to be taxed as
"residents" in New York.

LEGISLATIVE HISTORY:
New Legislation, 2011.

FISCAL IMPLICATIONS:
To be determined.

EFFECTIVE DATE:
This act shall take effect immediately.

                                BILL NUMBER:S3998B               REVISED 02/28/12

TITLE OF BILL:
An act
to amend the tax law, in relation to the definition of a resident for the
purposes of the personal income tax

PURPOSE:
To clarify the definition of permanent place of abode for the
purpose of the residency rules under the personal income tax.

SUMMARY OF PROVISIONS:
Subparagraph (B) of paragraph 1 of subsection (b) of Section 605 of
the tax law, as amended by Chapter 28 of the Laws of 1987 is amended
to clarify the definition of a permanent place of abode.

JUSTIFICATION:
In 2011, the State of New York Division of Tax appeals upheld the
decision of an Administrative Law Judge (Mtr. of Barker) that ruled
all income earned by a Connecticut couple who own a second home on
Long Island is subject to New York State taxes. This ruling has sent
a shudder of concern through vacation-home communities across the
State as vacation homeowners are now potentially subject to double
taxation in both New York and their domiciliary state. In a
subsequent decision, the Tax Appeals Tribunal (Mtr. of Gaied), in a
split decision, found a permanent place of abode for a son staying
              

"occasionally" with his elderly parents at a dwelling owned by him
and maintained for their use.

In both cases, the individuals worked in the State of New York and
paid taxes on their New York State earned income. Similarly, they
maintained out-of-state permanent places of residence in Connecticut
and New Jersey respectively. These decisions resulted in them being
subject to liability for unearned income as well. Current law states
that if a person is domiciled in another state, but owns a permanent
place of abode in New York and spends more than 183 days in New York,
such person is a "statutory" resident for income tax purposes.

The Department of Taxation and Finance regulations have a limited
exclusion for camps or cottages which aren't suitable for year-round
use, but do not exclude vacation or seasonal homes or other dwellings
which are owned by people whose clear principle place of residence is
in another state, In the Barker case, the family was domiciled in
Connecticut and had a vacation home on Long Island's East End which
they used only five or six weekends a year, The husband
worked in New York City, returning each night to Connecticut They paid
New York State income tax on their earned income, and received a
reciprocal credit from Connecticut on taxes paid to New York. As
such, no double taxation occurred on their earned income. However,
because the Tax Tribunal deemed the vacation property to be a
"permanent place of abode" and with the fact that the husband worked

more than 183 days in New York State, the family were determined to be
statutory residents of the State. The consequence of this finding
is that their "unearned" (interest, dividends and capital gains)
income was subjected to New York tax. Since New York does not have
a reciprocal credit provision for unearned income, the family was
double-taxed on such income in both states.

Vacation-home communities heavily depend on out-of-state residents who
enjoy spending their precious free time and their hard-earned dollars
in New York. If left unchanged, the implications of this decision
will surely discourage vacation home ownership in New York causing
further damage to an already struggling housing market and impeding
New York's economic recovery.
A fundamental principle of taxation should be that taxpayers not be
subject to double tax on the same income.

In Gaied, the Tribunal modified the facts to find
"Petitioner would
occasionally spend the night at the first floor apartment where his
parents lived. He would only stay when his parents would request it
because he preferred to be at his New Jersey home. Petitioner
testified that there was no bed, nor a bedroom for him at his
parents' apartment and that when they did request that he stay, he
would sleep on the couch. Petitioner did not keep clothing or
personal possessions at his parents' apartment.

In spite of these facts, the majority found against Mr. Gaid.

This legislation amends the Tax Law to clarify the definition of
"permanent place of abode" for the purposes of personal income tax.
The mere usage or ownership of a dwelling will not be sufficient to
establish residency for personal income tax purposes so long as the
individual spends no more than 90 days per year at the dwelling and
does not use it as the principal place of residence. Despite the
decisions in the New York Division of Tax Appeals, it is clear that
it was never the Legislature's intent to include or to classify as
'residents' those taxpayers who made
limited use of vacation homes located in New York State or stayed
occasionally particularly to take care of elderly parents. Instead,
the statutory resident provisions were added to the Tax Law in the
1920's to ensure that New York residents were not permitted to evade
taxation by claiming residence in other states, despite having
continuous and actual domicile in New York.

LEGISLATIVE HISTORY:
New legislation.

FISCAL IMPLICATIONS:
To be determined.

EFFECTIVE DATE:
Immediately.