By Mark Shipman and Lawrence J. Marks
Consider this scenario. You run several businesses in Connecticut and maintain your home in Connecticut. But you’ve decided to buy some property in Florida, spend some time there for relaxation, and, because of the tax advantages, claim Florida as your primary residence.
You believe you’ve covered all the bases: registered to vote in Florida, obtained a Florida driver’s license, and made arrangements to spend six months a year there. Sounds great, but don’t be surprised if you become the target of a residency audit by the Connecticut Department of Revenue Services and, consequently, subject to a large tax bill.
Under DRS Income Tax Regulations, you are considered a resident of Connecticut if you (1) are domiciled in Connecticut, or (2) are not domiciled here but maintain a permanent place of abode in Connecticut and spend a minimum of 183 days a taxable year in Connecticut. Domicile is defined as the place where you intend to make your permanent home and to which you return after an absence. Once established, your domicile remains fixed until you move to a new location with the intention of making your permanent home at that new location. The burden of proof when asserting a change in domicile is yours.
Generally, the DRS considers five factors in determining your domicile: (1) an analysis of your homes, (2) your business ties in the states involved, (3) an analysis of the items considered near and dear to you, (4) your family connections, and (5) the time you spend in each location.
There are things you can do to support your claim of being domiciled in Florida. Your home should be worth more than your Connecticut home. Your most important personal items should be located in Florida, and you should be certain to save all evidence of moving them there. Purchases of significant personal property such as, cars, furniture and art work, should be made in Florida.
You can maintain business ties in Connecticut and not be considered domiciled here, but it is important to develop significant business interests in Florida as well. Likewise, though your family connections may still be in Connecticut, you will want to develop strong personal relationships in Florida to support your claims. Where your health problems are treated is also a factor. Certainly, the more time you spend in Florida, as opposed to Connecticut, the easier it will be to convince the DRS that you are legally domiciled there.
Because Connecticut tax law permits few, if any, deductions from gross income, it may be more advantageous to be domiciled in another state. There are specific things you can do to reinforce your claim of being domiciled elsewhere in addition to those outlined above. For instance, you can maintain receipts for everyday expenses, use vendors in your domiciled state for such things as insurance, maintain your banking ties in your domiciled state, use doctors and lawyers located in your domiciled state and keep bills for automotive repairs and service, airline receipts, credit card bills and phone records.
We have reviewed many of the factors that the DRS considers in determining domicile. No one factor appears to be dominant, but rather all the factors will probably be looked at cumulatively. Changing your domicile can become more difficult than you think, and, therefore, it may be prudent to plan a strategy in doing so. If it is your goal to effectuate a change in domicile, or if you have any questions regarding this issue, please contact Mark S. Shipman at 860-606-1700.