Originally published on Forbes.com May 21st, 2013
Full time RVers have not applied for statehood – yet. I have not been able to come up with a good estimate of what the population of RVania would be. I have seen estimates of anywhere from 200,000 to 1,000,000. The latter would put five states behind RVania in population. I saw one estimate, a bit implausible, that 500,000 full-time RVers claim South Dakota residence. That would mean that most of the people who live in South Dakota (Population 833,000 +/-) don’t live in South Dakota. If you are interested in the RV lifestyle you can find a lot of advice about every aspect of it by googling, including how you should pick your home base. Not surprisingly, state income tax is a consideration.
There are seven states that do not have individual income tax – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. The home base advice then encourage you to consider numerous other factors like vehicle registration and health insurance in selecting your flag of convenience as you launch on to the seas of RVania. There is something else you need to consider before you start on your journey. It is what I call the stickiness of domicile. That is what William Severns ran afoul of. New Mexico’s claim of several hundred thousand dollars in state income tax covering a seven year sojourn in RVania has been upheld by the Court of Appeals in an unpublished decision. (Sorry I can’t find a free link. You’ll have to trust me.)
Residence
People often get confused about what it means to be a resident of a state. It is understandable. Many states have adopted something like the “New York” rule which focuses on the number of days you are physically present in the state. The “New York” rule will make you a “statutory resident” of a state. If you are a statutory resident of a state, you are likely a domicile resident of another state. I could imagine a financial wizard who has a very nice home in Connecticut and small apartments in Manhattan and Boston. He divides his working time between New York and Boston. It is not unusual for him to have a meeting in New York in the morning and one in the evening in Boston. If the day count works out right, he would be a full-year resident of all three states. So if you are moving to RVania, don’t spend too much time in the Catskills or the Berkshires.
Domicile
You can avoid being a statutory resident of any state, just by cruising enough, but a domicile resident is a different matter. Everybody has a domicile. You don’t get to say that you have abandoned your old domicile until you have established a new one. As the decision puts it:
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely.
The effect of this rule is that the citizens of RVania are counted as domicile residents of the states they pushed off from.
The New Mexico Case
William Severns decided that he wanted to push off from Nevada, rather than New Mexico. He took some steps:
(1) the purchase of a RV lot in Boulder City, Nevada, in February 2001; (2) consulting with a New Mexico attorney in January 2001 regarding plans to change domicile; (3) recording a homestead declaration in Nevada for the RV lot in March 2001; (4) ordering banking checks made with the Nevada RV-lot address on them in September 2001; (5) Severns’ wife obtaining a Nevada driver’s license in September 2001; (6) Severns’ wife registering to vote in Nevada and Severns’ unsuccessful attempt to change voter registration in September 2001; (7) divestment of personal property and storing personal effects during 2001; and (8) leaving New Mexico community affiliations and groups.
It was not enough. It is a rather lengthy decision but the bottom line is that Mr. Severns retained a lot of connection to New Mexico and established very little connection with Nevada.
Severns argued below, and again on appeal, that his continued activities in New Mexico during the tax years at issue were merely because New Mexico was a centralized location that fit well within his RV-travel plans. However, travel charts covering Severns’ travels during years 2003 through 2006 showed that all travel during these years began in Albuquerque and ended in Albuquerque. That is, except in instances where Severns stopped in Nevada during a trip, all trips departed from Albuquerque and returned there, whether the trips were taken by RV or by air travel. When Severns and his wife were not traveling, the RV was stored, not in Nevada, but at their Albuquerque home. Thus, as the hearing officer noted in his decision, New Mexico, and not Nevada, remained “the common denominator in most of travels.”
A Virginia Case
Ruling of Commissioner, P.D. 13-56 illustrates the same principles. The anonymous taxpayer, whom I will refer to as Henry, was not moving to RVania. He was going on an extended foreign assignment for the United States government. Henry did not argue that he was abandoning his Virginia domicile to set up permanent housekeeping in Transylvania or wherever it was they were sending him. Before taking off on his assignment, he registered to vote in State A. (I’m guessing Florida.) That was not enough for Virginia to let go of him:
The Taxpayer was domiciled in Virginia in 2007. He has failed to provide sufficient evidence that he abandoned his Virginia domicile and acquired a new domicile in State A. Although the Taxpayer severed most of his connections with Virginia, both he and his spouse continued to maintain their Virginia driver’s licenses and received federal information returns at a Virginia address. The spouse let her driver’s license expire in 2011 while the Taxpayer held his driver’s license into 2012.
The Exposure
The stickiness of domicile is a real threat to the residents of RVania, particularly those who continue to own a sticks and bricks house. After hitting the road you may be able to park in your cousin’s driveway in Florida or South Dakota for a couple of weeks and qualify for voter registration and a drivers license and go on your merry way. Florida and South Dakota might not mind at all. Enough RVers calling them home and they’ll have an extra Congressman. It’s not like you’re contributing to school overcrowding. If you still have that house on Cape Cod, though, Massachusetts might still think you belong to them. New York and California can also be pretty clingy. If you have not had a reason to file a non-resident return, the statute of limitations will not help you.
I don’t have an easy answer to the problem. If you rent the sticks and bricks house out, you’ll be able to file as a non-resident, which will at least get the statute of limitations working for you. Maybe you need to start working toward statehood for RVania.
You can follow me on twitter @peterreillycpa.