Originally published on Forbes.com.
The Dock And The Vote
Manuel Roig-Franzia reports in the Washington Post that President Trump has withdrawn a controversial proposal to build a dock at Mar-a-Lago. He quotes attorney Reginald Staumbaugh on the issue that the controversy unearthed.
“One prevalent issue remains lingering, whether President Trump still considers Mar-a-Lago Club his residence,” Stambaugh said Tuesday. “He still can’t have it both ways. It’s either a club or a residence — not both. Florida’s voting laws apply to citizen Trump. If he resides there, he will have to close the club.”
State Income Tax Exposure
I picked up on this story, because of the underlying tax issue. The President took the position in the fall that he is now a Florida Man rather than a New Yorker. I had predicted that move in 2017 Well predicted might be too strong a word, but since reading Art of the Deal, I sometimes engage in truthful hyperbole.
New York ranks ninth in this list of states with high income taxes, but when you throw in the New York City tax you are getting into California territory. Florida, on the other hand, has no income tax. After the switch President Trump will have to still file a New York return, but he will only be taxed by New York on his New York source income.
Domicile
But the matters uncovered in the dock dispute, raise a big red flag on the effectiveness of President Trump’s switch. There was a contract uncovered that indicated that he could not use Mar-a-Lago as a residence-that he could not stay there more than three non-consecutive seven day periods just like any other member of the club.
And that brings us to the question of domicile. It is possible that more than one state can tax you as a resident based on how much time you spend there and some other factors (It’s called the New York rule), but you will almost inevitably be taxed as a resident in your state of domicile even in years when you spend no time at all there.
If you leave your state of domicile and have no intention of ever returning and sever all connections, it remains your domicile until you establish a new one. For that reason domicile cases are usually, but not always, about the state you have left trying to hang on to you.
Since domicile is about where your true home is, it can border on the mystical. One of my favorite domicile cases is that of Tatania Varzar. Praise she received from the Borough President of Brooklyn was held against her.
Permanent Place Of Abode
The issue uncovered in the dock controversy is not at all subtle, though. The New York Department of Taxation and Finance defines a “permanent place of abode”. New York has ruled in favor of a taxpayer that a “private residence club” does not constitute a permanent place of abode, so it is not hard to imagine they will hold the same view when it works against the taxpayer.
There was a good bit of commentary on #TaxTwitter about what will happen when New York looks at the first Trump nonresident return. A few practitioners indicate that resistance from New York is almost inevitable and the state does not find it futile although taxpayers do sometimes prevail.
Sadly, if a Trump v New York domicile dispute erupts, we probably won’t be able to read a decision on it until after the end of the possible second term. These things take time. I hope I will be around to write the story if it does come to that.