New York State Tax Appeals Tribunal Reverses ALJ and Holds That Taxpayer Was Not a Statutory Resident

The BR State + Local Tax Spotlight

The New York State Tax Appeals Tribunal reversed a determination of an Administrative Law Judge (“ALJ”) and determined that a teacher who rented an apartment in New York City during the tax year at issue was not a statutory resident of New York during that year. In re Joseph Pilaro and Joseph Gorrie, DTA No. 829204 (N.Y. Tax App. Trib., Aug. 18, 2022).

The Facts: Mr. Pilaro shared a house in California with his husband Joseph Gorrie in 2014, but from January 1, 2014, through November 1, 2014, while he was teaching at a New York college, he rented an apartment in New York City. Mr. Pilaro and his husband subsequently bought an apartment in New York City on December 3, 2014. For the period between the expiration of his lease on November 1, 2014, and before the purchase of his apartment on December 3, 2014, Mr. Pilaro stayed with friends in New York.

In the proceeding before the ALJ, Mr. Pilaro’s attorney conceded that Mr. Pilaro became domiciled in New York once he purchased the apartment in New York City on December 3, 2014. However, at oral argument, Mr. Pilaro stated that his former attorney misrepresented his residency status, and that he was not domiciled in New York State at any time during 2014 as he did not move into his New York City apartment until January 2015.

To be a statutory resident, a taxpayer must (1) maintain a permanent place of abode in the state or city; and (2) be physically present in the state or city on more than 183 days in a taxable year. See Tax Law § 605(b)(1)(B). Further, a statutory resident must maintain his or her permanent place of abode for “substantially all of the taxable year,” which the Division’s Audit Guidelines interpret to mean a period in excess of eleven months. 20 NYCRR 105.20(a)(2).

The Decision: The Tribunal reversed the ALJ and determined that Mr. Pilaro was neither a domiciliary nor a statutory resident in 2014. Regarding domicile, the Tribunal noted that the burden of proof is on the party asserting a change in domicile to show such a change, and that Mr. Pilaro’s hearing testimony, as well as his statement at oral argument, both established that he did not move into the New York City apartment he purchased and become domiciled in New York until January 2015.

The Tribunal also found that since Mr. Pilaro did not occupy the New York City apartment he purchased in December 2014 until January 2015, it did not qualify as a “permanent place of abode” for statutory residency purposes. Further, and unlike the ALJ, the Tribunal concluded that Mr. Pilaro did not maintain a place of permanent abode during the period that he stayed with friends, finding that the facts in the record weighed in Mr. Pilaro’s favor, including the brief and temporary nature of the living arrangements and the fact that the Division itself did not argue that the arrangement constituted the maintenance of a “permanent place of abode.”

Accordingly, the Tribunal determined that Mr. Pilaro maintained a permanent place of abode in New York for the period January 1 through November 1, 2014, only, and that such 10-month period was insufficient to establish statutory residency.

While it would likely not have changed the outcome of this case, it is worth noting that for tax years beginning in 2022, the Division changed its Audit Guidelines to provide that “substantially all of the year” generally means a period exceeding 10 (rather than 11) months for tax years in which a taxpayer either acquires or disposes of a residence.

This article is one in a series of articles written for the September 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.