Appellate Division Holds That Existence of Vacation Home Not Enough to Establish Statutory Residency in New York

The BR State + Local Tax Spotlight

The Appellate Division recently granted taxpayers an important victory when it overturned the decision of the Tax Appeals Tribunal and held that a New Jersey resident’s vacation home in upstate New York was not enough to establish his statutory residency in New York. In re Obus v. Tax Appeals Trib., No. 04206 (N.Y. App. Div. June 30, 2022). 

Mr. Obus, a resident and domiciliary of New Jersey, worked in New York City and owned a vacation home in upstate New York. Under New York law, a person may be considered a statutory resident if he or she maintains a “permanent place of abode” in New York and spends more than 183 days in New York State during the year. N.Y. Tax Law § 605(b)(1)(B). There was no dispute that Mr. Obus met the 183-day threshold for time spent in New York due to his employment in New York City. However, the parties disputed whether Mr. Obus’s home in upstate New York, which was more than 200 miles from his place of employment constituted a “permanent place of abode” for statutory residency purposes. 

The Tax Appeals Tribunal determined that Mr. Obus’s vacation home constituted a “permanent place of abode” for statutory residency purposes because Mr. Obus maintained the home for year-round use and had exercised that right of use, “albeit sparingly, during the years at issue.” Obus,  No. 04206, at *1. The Appellate Division disagreed, noting that in order to establish statutory residency, the person must be shown to “have utilized the dwelling as his or her residence; maintaining a dwelling that could be a permanent place of abode is not enough to establish status as a statutory resident.”  Id. at *4. The Appellate Division explained that in order to determine whether a dwelling is used as a residence, a number of factors must be considered, “including the nature and duration of the use.” Id. at *5. In this case, the Appellate Division held that the Mr. Obus’s use of the residence for at most three weeks a year, its 200-mile distance from Mr. Obus’s place of employment, and the fact that Mr. Obus did not keep personal effects at the upstate home, established that he did not use the dwelling in a manner that demonstrates he had a residential interest in the property.

The case is a significant victory for taxpayers because the Appellate Division held that in determining whether a vacation or other second home is a “permanent place of abode,” the Department must undertake a subjective analysis of the use of the property and may not just rely on an objective evaluation of the potential use of a property. The Appellate Division expressly recognized that not all vacation homes that are inhabitable year-round will rise to the level of permanent place of abode. As such, this case and its holding has the potential to be very helpful to those challenging findings of statutory residency based on their maintenance of a second home in New York State.

This article is one in a series of articles written for the July 2022 edition of The BR State + Local Tax Spotlight.

© 2022 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.