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NY Vacation Home Ruling Limits Reach of Residency Tax Test

Law360 Tax Authority

A refusal by New York's highest court to review a decision that an out-of-state commuter's little-used vacation home didn't subject him to New York income tax clarified some elements of the state's statutory residency test but left unanswered questions about its scope.


In Gaied, the court pivoted away from viewing the statutory residency test as entailing a mechanical query of whether a home could be used as a full-time residence, Irwin Slomka of Blank Rome LLP said. Instead, the court introduced the concept of weighing whether an individual has a residential interest in the property to determine if the house is a permanent place of abode.

The Obus decision referenced the residential interest requirement several times and said courts must examine "the nature and duration of the use" of a property. In determining that the couple didn't have a residential interest in the home, the court cited the fact that they used the property for a maximum of three weeks a year, didn't leave personal items in the home and rented an attached apartment to a year-round tenant.

Slomka said the Court of Appeals' passing on the case could be viewed as a tacit acknowledgment that the court didn't have any issue with the appellate panel's holding. Therefore, future applications of the statutory residency test should be viewed through the lens of the law's original intent of sweeping up only New York residents who also reside elsewhere, he said.

In Slomka's view, the decision could also be read to favor nonresidents who commute to New York City and have a sparingly used pied-à-terre in Manhattan.

"I think it is going to permeate any future decisions," Slomka said. "The courts now have to look at the true intent of the statutory residency rule. Although Obus can be interpreted to only apply to a vacation house that's a couple of hundred miles away, I think it could have more significant implications."

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"NY Vacation Home Ruling Limits Reach of Residency Tax Test," by Paul Williams was published in Law360 Tax Authority on February 17, 2023.