This post was originally published on Forbes Jun 5, 2015
According to the Urban Dictionary a “New York minute” is an instant – the time between when the light changes and the car behind you honks its horn. If a New York minute is less than a minute, can a New York day be less than 24 hours? In the case of John and Janine Zanetti, the New York Supreme Court Appellate Division agreed with the Commissioner of Taxation and Finance that a New York day can be less than 24 hours. The point of the decision was to determine whether the Zanettis had spent enough time in New York to be considered statutory residents for the year 2006. When you put it all together you learn, that at least for tax purposes, Seasons of Love notwithstanding, a New York year is a lot less than 525,600 minutes
The concept of “statutory resident” is sometimes called the New York rule, although it is not exclusive to New York. Massachusetts uses the concept also. Most states that have income taxes tax their residents on their world-wide income and non-residents on income earned in that state. Residents will usually get a credit for some or all of the taxes that they pay to other states. Whether you are a resident of New York can have pretty high stakes. New York was looking for over $130,000 from John and Janine Zanetti for the year 2006. Since they have a place in Manhattan there was also city tax included in that.
New York was claiming that the Zanettis were “statutory residents”. The concept of “statutory resident” creates the possibility that you can be a resident of more one than one state for the whole year. Generally your state of residence is also your domicile. The problem with domicile is that it is a difficult concept that can border on the mystical, since it hinges on intent.
Your domicile is your permanent home and everybody has one (or at least is deemed to). You cannot say that you have abandoned a domicile until you have established a new one. It is a concept that I call the “stickiness of domicile”. The Zanettis had a home in Delray Beach, Fl and another in Manhattan. Which was their “real home”? Apparently they were able to make the case that they were Floridians. There is the drivers license and voter registration. But those are just table stakes. Where are their memberships? What about their grave plots?
The New York rule is much more straightforward than domicile. If you have an abode in New York and you are present in New York more than 183 days, then you are a statutory resident. You are still a resident of the state in which you have your domicile. What was at issue was exactly how to do the day count. There was no controversy about the facts. The Zanettis had spent 172 full days entirely outside of New York and 167 full days in New York. What was at issue were the 26 days that had the Zanettis either leaving or arriving in New York by private jet. They argued that a day is from midnight to midnight and that only whole days should count. The court went with the Commissioner’s rule that any part of a day is enough.
The interpretation urged by petitioners – 24 hours and midnight to midnight – could ostensibly be manipulated by a person arriving shortly after midnight one day and then leaving shortly before midnight the next day to have a stay of slightly under 48 hours not count as a single day. This would be at odds with the statutory purpose
Applying the New York rule and this day counting technique, I can conceive of someone being a full year resident of New York, New Jersey and Massachusetts. My hypothetical guy whom I call Harry Hedgefund has a monstrous house in Alpine NJ and apartments in Manhattan and Boston. It is not unusual for him to have meetings in New York in the morning and Boston in the evening. So he is domiciled in New Jersey and a statutory resident of both New York and Massachusetts. I’d hate to be the tax preparer who had to explain it to him.
