The COVID-19 Effect on State/City Personal Income Taxes

1. THE COVID-19 EFFECT
ON STATE/CITY
PERSONAL INCOME
TAXES
CITRIN COOPERMAN’S
STATE AND LOCAL TAX (SALT)
WEBINAR
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THURSDAY, JUNE 4, 2020
10:00 AM – 10:45 AM EST
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PANELISTS: David Seiden, Eugene Ruvere, and Rena Genauer

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evolution THE COVID-19 EFFECT ON STATE/CITY PERSONAL INCOME TAXES
KEY REMINDERS / USING ZOOM
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• The webinar is 30 minutes.
• You have joined in listening mode only.
• You will have the opportunity to submit questions to our panelists by typing your
questions into the Q&A icon on the Zoom panel.
• This session is being recorded and a playback link will be sent.

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AGENDA
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• Introductions
• Webinar Objectives
• Overview
• Residency Status
• Examples
• Concluding Thoughts

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evolution COVID -19 UPDATE
TITLE
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• TBD
PANELISTS
Eugene Ruvere, CPA, MST
Partner, State and Local Tax
Practice
914.949.2990 x3375
eruvere@citrincooperman.com
David Seiden, CPA
Partner & Practice Leader, State and
Local Tax Practice
212.225.9505
dseiden@citrincooperman.com
Rena Genauer
Manager, State and Local Tax
Practice
212.225.9551
rgenauer@citrincooperman.com

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WEBINAR OBJECTIVES
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• Providing a solid understanding of state/city personal income tax
concepts such as:
• Domicile
• Statutory residency
• Nonresident state-sourced income

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KEY CONCEPTS - DOMICILE
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• Domicile - An individual’s permanent residence
 “Domicile” and “residence” are often used synonymously but have
distinctly different meanings.
 An individual may have many residences BUT can have only one
domicile.
 Once established, an individual’s domicile remains as such until
there is “clear and convincing” evidence that the individual
intended to give up his or her old domicile and has in fact
established a new domicile.

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CHANGING DOMICILE
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• Take off (terminate old domicile)
• Land (establish new domicile)

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evolution THE COVID-19 EFFECT ON STATE/CITY PERSONAL INCOME TAXES
CHANGING DOMICILE (Cont’d)
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Changing domicile does NOT require selling home in “old domicile”

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evolution THE COVID-19 EFFECT ON STATE/CITY PERSONAL INCOME TAXES
DETERMINING DOMICILE
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• Home – Comparison of size, fair market value and usage, as well as community ties
in the involved jurisdictions.
• Time - Not simply a 183-day test.
• Active Business Involvement – Analysis of taxpayer’s active business
participation, if any, and where it takes place.
• Near and Dear Items - Location of cherished possessions.
• Family – General focus is spouse and minor children with some weight to location of
extended family (siblings, grandchildren, etc.).
• Other – Window-dressing items such as driver’s license, voter registration, car
registrations, etc.

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STATUTORY RESIDENCY
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Statutory Resident – An individual who:
• Maintains a permanent place of abode “for substantially all of the taxable
year,” and
• Spends more than 183 days in state/city.
While many states use the above test to determine who is a statutory resident,
some states do not.
• California uses the standard of “more than a temporary or transitory period of
time.”
• There is a rebuttable presumption that if a taxpayer is in the state more than
nine months, he or she is a resident.

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STATUTORY RESIDENCY TEST
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Three Key Points to Statutory Resident Test
1. What does “maintain a permanent home” mean?
2. What does “substantially all” mean?
3. What is a “day”?

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NON-RESIDENT
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Non-Resident – An individual who is not a domiciliary or statutory resident but
derives income from “in-state” sources.
Income from in-state sources can include:
• Wages for services performed within state
 Convenience vs. necessity rule for days worked at home (NY and PA are
primary states with rule)
• Deferred compensation and stock options
• Flow-through entity income

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CHANGING DOMICILE IN CURENT COVID-19
ENVIRONMENT
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• Simple Test – In X months, when a COVID-19 vaccine is discovered, if your
“life” substantially reverts back to 2019 (pre-COVID) it will likely be VERY
difficult to convince the historical domicile state that the intent was to change
domicile, regardless of the amount of time spent in the proposed “new
domicile” until then or the number of domicile checklist items completed.

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EXAMPLE #1
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• Mary has been filing as a NYC resident for 15+ years.
• She maintains a 6 BR home in Westchester County, NY and a 2 BR
apartment in New York City close to her job.
• Each year before 2020 she spent greater than 183 days in NYC; because of
COVID she will be under 184 days in NYC for 2020.
• Her children are in high school in Westchester.

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EXAMPLE #2
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• John (and his family’s) primary home was in New Jersey for 10+ years.
• His place of work was in NYC during that same period, with his W-2 being his
primary income source.
• John is fed up with the property taxes and state personal income tax rates;
COVID triggers a desire to move to Florida, but he wants to maintain his
home in NJ.
• His employer is willing to let him work remotely from Florida but there is no
plan to open a Florida office.
• The children will start school in Florida in fall 2020.

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CONCLUDING THOUGHTS
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• Apply the state/city residency and income-sourcing rules to your personal
facts.
• Be sure to have a conversation with a trusted state tax advisor before taking a
leap.
• Ensure the residency change is worth your while (i.e., the tax savings are
meaningful to you).

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THE COVID-19 EFFECT ON STATE/CITY PERSONAL INCOME TAXES
QUESTIONS & ANSWERS
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evolution DISCLAIMER
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These materials provided by Citrin Cooperman & Company, LLP, are intended to provide general
information on a particular subject or subjects and are not an exhaustive treatment of such subject(s)
and are not intended to be a substitute for reading the legislation. Any advice contained in this
communication, including attachments and enclosures, is not intended as a thorough, in-depth
analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. The materials are being
provided with the understanding that the information contained therein should not be construed as
legal, accounting, tax or other professional advice or services. Before making a decision or action that
may affect you or your business, you should consult with Citrin Cooperman & Company, LLP, or
another qualified professional advisor. The materials and the information contained therein are
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LLP, does not warrant that the materials or information contained therein will be error-free or will meet
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19. THANK
YOU
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