Originally published on Forbes.com Sept 10th, 2013
You will often see me writing that winning a state domicile change requires a lot more than just getting a new drivers license and registering to vote. So now comes the case of Michael Duley before the Wisconsin Tax Appeals Commission. It is quite possible that a drivers license and voter registration might have made all the difference in the world in his domicile case. Wisconsin was looking for just over $30,000 in tax for the years 2001, 2002 and 2006. His case is instructive, because it turns on a different element than most domicile cases.
The Stickiness of Domicile
Domicile is a concept that sometimes threatens to border on the mystical, since it is ultimately about intent, but, of course that intent needs to manifest itself in action. One of the foundational works of Western literature is all about domicile. People will use the word odyssey to refer to an exciting journey that someone is about to embark on.
The title of the work from which we get that word is actually just based on the name of the main character, Odysseus. An accurate subtitle would not be “The Exciting Journey”, but rather something like “Schlepping Back From Troy”. Odysseus is the greatest example of someone not changing his domicile despite a decades long absence. Of course, being a king and all, it did not produce any tax litigation for him.
There are three very important concepts in domicile. The first is that Lee Marvin’s “Wandering Star” to the contrary notwithstanding, everybody has a domicile.
The other two concepts concern changing your domicile:
A domicile once established is not lost until a new one is acquired. Everyone must at all times have a domicile somewhere. Where an actual domicile has once been established, two things are necessary to create a new domicile, first, an abandonment of the old domicile, and second, the intention and establishment of a new domicile. The mere intention to abandon a domicile once established is not of itself sufficient to create a new domicile, for before a person can be said to have changed his domicile, even though he manifests an intention to abandon the old domicile, a new domicile must be shown
Many people are tripped up on the first element. They fail to thoroughly abandon their old domiciles. They continue to own property and visit frequently. Aggressive state auditors will consider where burial plots are owned and even hold it against you that you continue to contribute to local charities. I understand that Massachusetts charities managed to convince the Department of Revenue that the latter was a self-defeating tactic.
Apparently Wisconsin did not question whether Mr. Duley had abandoned the state. Mr Duley lived in Wisconsin from birth till 1999 when his Wisconsin employer sent him to work as a project manager on a casino project in Louisiana. He filed a Wisconsin resident return for 1999 even though he had begun working for another employer. Laid off in 2000, he collected unemployment insurance from Wisconsin based on his previous job. From that point he became rather peripatetic.
Mr. Duley came back to Wisconsin in 2003 to care for his ill mother. In 2005, he moved back to Louisiana, but then came Katrina
He continued to live in another part of Louisiana until 2006, but then moved to Florida staying there until 2008, when he moved to Texas.
The Problem
Mr. Duley left Wisconsin twice, but never convincingly set up shop anywhere else:
There is no credible evidence that the Petitioner had a driver’s license in any state other than Wisconsin. The Petitioner has claimed that he did have a Florida driver’s license but no longer has it/them; he does admit renewing his Wisconsin driver’s license in 2003.
There is no credible evidence that the Petitioner voted in any of the states in which he lived during the audit period. The Petitioner has claimed that he did vote in Louisiana, Washington, and Florida. He has also claimed not to have voted in any state during the years in question.
There is no credible evidence that the Petitioner filed income tax returns in any state other than Wisconsin during the audit period. The states of Washington and Florida do not have state income tax, but Louisiana does. Petitioner submitted a 2005 Louisiana state income tax return. That return is twice dated April 15, 2005, when in fact it would have been due on that date in 2006. The return further fails in light of the Department evidence showing the State of Louisiana has no record of ever receiving the return. (Exhibit 22.)
We further note there is no evidence that the Petitioner registered any vehicle in any states other than Wisconsin. There was, however, evidence that Petitioner re-registered a truck in Wisconsin in 2003.
Finally, there is no evidence that Petitioner bought real estate outside Wisconsin, contracted for any type of property or casualty insurance in any other state, or engaged in any significant activity which could be construed to culminate in the establishment of a new residence during the audit period.
Horseshoes And Hand Grenades
The state admits that Mr. Duley may have come close to changing his domcile:
The taxpayer has an obligation to make clear his change of domicile in order to avoid the reach of taxation by this state. In Petitioner’s own words in his letter of October 31, 2010, he said as much: “… regarding my using a Wisconsin driver’s license and having vehicles registered in Wisconsin for the years 2003-2007, it was my oversight in not getting everything changed over when I moved.” In this state, the bar is high. Petitioner has not quite reached it.
When it comes to domicile change, “almost” does not count. In this particular case, the most basic steps of drivers license, vehicle registration and voting might have made all the difference.
Advice To Potential Wandering Stars
Domicile is “sticky”. To change it, you need to not only uproot, but also to settle down, at least for a while, someplace else. If you are thinking about becoming a wandering star, you should consider carefully where you will push off from. If it is a high tax state, be prepared for them to want to hang on to you.
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