Though east and west coast states often steal the spotlight when it comes to aggressive residency positions on audit, a recent decision from the Alabama Tax Tribunal ("Tribunal") serves as a reminder that domicile and residency issues can plague taxpayers across many jurisdictions. Watson v. Ala. Dep’t of Revenue, Dkt. No. Inc. 24-0499-LP (Ala. Tax Trib. July 31, 2026).
The Facts: Charlotte Watson was born in Alabama, but she moved to Texas in 1986 where she spent the next 40 years living, working, and raising her son. In 2015, Watson moved back to Alabama to care for her ailing father. In 2018, Watson returned to Texas to care for her son who was seriously injured in a car accident. Continuing the series of unfortunate events, Watson returned to Alabama in September 2019 to care for her parents after her mother suffered a stroke. Despite the move, Watson was unsure how long she would remain in Alabama because her son (who was still ill) and her grandchildren lived in Texas.
Unmoved by Watson’s circumstances or the documentation she submitted to prove that she lived in Texas through September 2019, including the lease she held for a home in Texas and her Texas driver’s license, the Department of Revenue (the "Department") determined that Watson was domiciled in Alabama for all of 2019. As a result, the Department found Watson liable for individual income tax in Alabama for all of 2019. Watson challenged the Department’s determination.
The Law: Alabama income tax is levied on individuals residing in the State and on “individuals residing and earning income outside of Alabama that are domiciled in Alabama.” Ala. Code § 40-18-2. Once a person’s domicile is established in Alabama, that domicile continues until the person establishes a new domicile elsewhere with the intent to remain there permanently or at least indefinitely. The taxpayer bears the burden to prove a change of domicile.
The Ruling: The Tribunal determined that Watson was not domiciled in Alabama in 2019. Key evidence influenced the Tribunal’s decision: (i) Watson’s testimony that she considered Texas to be her home and that she only moved to Alabama to care for her parents; (ii) proof that Watson continued to travel to Texas after September 2019; and (iii) that Watson’s son and grandchildren resided in Texas, the State where she “made a life … over the last forty years.”
While Watson was not a domiciliary of Alabama, she did owe Alabama income tax on the income she earned in the State after moving there in September 2019.
The Takeaway: This ruling serves as a reminder that domicile and residency issues do not just impact taxpayers residing on the eastern or western coasts of the United States. Taxpayers travelling frequently between jurisdictions should be mindful of where they establish domicile and when they intend to change that domicile. Contemporaneous documentation that helps to support a particular domicile should be maintained. Furthermore, the Tribunal’s ruling underscores that domicile determinations should consider not only documentary evidence but also the taxpayer’s intent and credible testimony about where they consider their home to be.
This update is one in a series of updates written for the September 2026 edition of The BR State + Local Tax Spotlight.
© 2026 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.