Originally published on Forbes.com.
Greg Blatt, Chairman and CEO of Match Group did quite well in the New York Division of Tax Appeals early this month. The Division of Taxation was looking for over $400,000 in state and city income tax for the years 2009 and 2010 along with interest and penalties.
In 2009 and 2010, Mr. Blatt, a once and future New Yorker, considered himself a Texan. And somewhat surprisingly, Administrative Law Judge Donna Gardiner agreed that Mr. Blatt’s change of domicile to Texas, though short lived was quite real. Barry Weisman of Anchin Block & Anchin Accountants and Advisors thinks this decision may enter the folklore of SALT practitioners as the “dog decision” and gives a lot of credit to the SALT attorneys at Hodgson & Russ LLP, but first some background.
The Stickiness Of Domicile
Your residency for state income tax purposes is not merely a matter of simple day counting, although the day count can be important. Of overriding concern is the concept of domicile. Your domicile is your true home. And here is the trickiest part. You can cut all ties to your domicile and swear you will never go back there, but it will remain your domicile until you have established another one. That’s what I call the “stickiness of domicile”. At least in the area of state income taxation, the Beatles to the contrary notwithstanding, there is no such thing as a Nowhere Man.
Given the relative ease of travel nowadays, there is probably a good argument that the concept of domicile is obsolete particularly for people who can afford multiple homes. Nonetheless domicile persists. And when the facts can support narratives of one domicile or another, you can pretty well count on the taxpayer favoring the low tax state and the high tax state seeking to hold onto him. The detailed narratives in domicile decisions make for interesting stories, which is one of the reasons that I like domicile cases so much. And to win a complex domicile case you have to tell a good story, which is what Greg Blatt’s representatives managed to do.
New York’s Narrative
Some of the raw facts, make Greg Blatt’s position that he was domiciled in Texas in 2009 and 2010 on the improbable side. When he committed to running Match, which was headquartered in Dallas, he negotiated a deal that allowed him to continue to be based in New York. He continued to own his apartment at 377 West 11th Street throughout his Texas sojourn while renting in Texas. He continued to own a boat located in New York, which he used while vacationing in the Hamptons (The Hamptons are a string of seaside communities on Long Island, which is part of the state of New York. I know you knew that, but you have to consider the other readers.)
By the spring of 2011, he was back living in New York. When he finally sold his apartment in Manhattan in 2011, he used the proceeds to buy a place in the Hamptons. So much for him being a Texan, you might say.
But there is another narrative.
Texas Greg Blatt
In 2008, Greg Blatt was Executive Vice President, General Counsel & Secretary of InterActiveCorp (IAC). IAC describes itself as a “leading media and internet company”. It has over 150 brands including Vimeo, Tinder, About.com, and The Daily Beast to name a few I recognize. Not to mention the Match Group’s clutch of dating sites including Match, OkCupid, Tinder, and PlentyOfFish. IAC has done some complicated reorganizing, which is beyond the scope of this piece but is there in the background.
The various reorganizations had taken the fun out of Mr. Blatt’s position at IAC, so he was considering moving on. Apparently the powers that be liked having him around so they tempted him with a job that strikes me as irresistible. CEO of Match. Although my time with it was very brief, I really liked Match.com. To avoid TMI, I will leave it at that. The downside was that the headquarters were in Dallas. Initially, Mr. Blatt worked out a deal that let him remain a New Yorker.
Though Match was based in Dallas, petitioner negotiated to continue to be based in New York City. He committed to spend time in Dallas; however, the Term Sheet made clear that the expectation was that his time in Dallas would be limited to between one-third and one half of his working time. In other words, petitioner negotiated for the right to be able to spend the majority of his work time in New York.
Effectively, petitioner took the following three actions in order to construct a comprehensive “safety net” that allowed him to explore the new job at Match without having to commit to a move to Texas: (1) he retained his corporate positions with IAC, (2) he negotiated to work principally from IAC’s New York office, and (3) he maintained his New York apartment. While petitioner was open to a new location and a new career outside the law, he was not yet prepared to surrender his home in New York.
Things changed pretty quickly, though and here I think Judge Gardiner got a little caught up in the nature of Mr. Blatt’s business.
Despite petitioner’s initial hesitation over fully committing to Match and living in Dallas, he quickly fell in love with both his new position and living in Dallas.
Petitioner loved his job at Match. In his new management role, petitioner enjoyed being the one to make the decisions, rather than advising people on making decisions.
Petitioner also fell in love with the Dallas area. Petitioner determined that his preconceived stereotypes about Dallas were unfounded. Petitioner stated that he found the people were uncommonly friendly and that Dallas was very cosmopolitan. Petitioner immediately began making friends and started dating.
I can’t help but think what it would be like if I were CEO of Match and was in dating mode. Would I be tempted to tell the chief programmer that I wanted dibs on tall women with Ph.Ds or whatever else was tickling my fancy that week? Smacks too much of insider trading, but it is an entertaining thought experiment.
Regardless, Mr. Blatt renegotiated his employment agreement so that the Texas office of Match was his home base as of 2009.
With the elimination of petitioner’s IAC corporate titles, the new Dallas principal place of employment in the Match Employment Agreement, and the listing of his New York apartment, petitioner had eliminated the pillars of the safety net that he had so carefully constructed only months before.
Phil Dardeno, my go to Massachusetts SALT guy, told me once that the true home, the real domicile is where the family pictures are. It was different for Mr. Blatt. He started going to the gym in Dallas, something he had never done in New York and having his prescriptions filled there. And of course there were the basics of a drivers licenses and voters registration. The really big sign though was the dog.
In November 2009, petitioner moved his dog to Dallas. The significance of this is reflected in an email that he sent to a friend in October 2009 in which he stated: “Dog is the final step that I haven’t been able to come to grips with until now. So Big D is my new home.” Petitioner’s dog, which he had rescued from the ASPCA, was a large, senior dog. Petitioner believed that moving her to Texas was a serious undertaking.
So How Does He End Up Back In New York?
To complete the narrative of Mr. Blatt’s Texas sojourn, it is necessary to explain how it is that he came back to New York. And, of course, like the initially reluctant move to Dallas that move was career related. Much to everyone’s surprise the IAC CEO position opened up. Mr. Blatt didn’t even consider applying for it, but then was encouraged to by Jack Welch. He took the job with the condition that he remain based in Dallas and that was agreed to. It turned out to not be practical, though. Once again, career concerns trumped domicile desires.
In time, petitioner determined that jointly running IAC with Mr. Diller created problems when he spent too much time away from the New York headquarters. By mid-2011, petitioner realized that he could not adequately run IAC from Dallas. Petitioner ultimately moved back to New York City in 2011 and, by that summer, he was working primarily from IAC’s offices in New York City, although he continued to travel to Dallas periodically.
Expert Comment
As promised here are Barry Weisman’s thoughts on the decision.
Just as Evans was known as “the rectory” decision and Gaied was known as “the couch” decision, In the Matter of Gregory Blatt will be known as “the dog” decision to practitioners dealing with state residency issues.
The burden of proof of demonstrating a change in domicile (i.e., the place you intend to return to) out of New York is always on the taxpayer “by clear and convincing evidence”. Showing “intent” is very fact intensive and it’s easier when there is a “smoking gun” such as a permanent change of employment, death of a spouse, retirement, or divorce. In Blatt there were various smoking guns over several years which made it harder to discern intent and the case could have gone either way—especially since he maintained residences in New York. In the end, Blatt’s dog became the tie-breaker—a critical fact probably teased out of the taxpayer by his well-known SALT attorneys at Hodgson & Russ LLP.
Although this Administrative Law Judge decision has no precedental value and it is uncertain whether the Department of Taxation and Finance will file an appeal to the three-judge Tax Appeals Tribunal, it again demonstrates that all facts (regardless of their apparent irrelevance and triviality) count as well as the importance of keeping excellent, contemporaneous records of where you are present on any day.
Other Coverage
Bryan Koenig had a piece on Law 360
An attorney for Blatt, Joseph N. Endres of Hodgson Russ LLP, said Friday that domicile questions need to take a deep dive into personal lives.
John Herzfeld had something on Bloomberg BNA.
The gist of his case was, “This was my intent, and this is how I accomplished it,” said Noonan, whose firm represented the taxpayer. In particular, Blatt had brought his dog with him to Texas, which helped satisfy the test of where he kept things near and dear to him. He also had told all his friends of his plans to move, he said.
Even in the Blatt case, where the state could count several New York factors that might add up against the taxpayer on paper, Noonan said that “it was the compelling story that carried the day.”