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BILL NUMBER:S3998A

TITLE OF BILL: An act to amend the tax law, in relation to the definition of a resident for the purposes of the personal income tax

PURPOSE: To clarify the definition of permanent place of abode for the purposes of the residency rules under the personal income tax.

SUMMARY OF PROVISIONS: Subparagraph (B) of paragraph 1 of subsection (b) of section 605 of the tax law, as amended by Chapter 28 of the Laws of 1987, is amended and a new subparagraph (C) is added to clarify the definition of a permanent place of abode.

JUSTIFICATION: Earlier this year, the State of New York Division of Tax Appeals upheld the decision of an Administrative Law Judge that ruled all income earned by a Connecticut couple who own a second home on Long Island is subject to New York State taxes. This ruling has sent a shudder of concern through vacation-home communities across the State as vacation homeowners relied upon an exemption in the tax regulations.

Current law states that if you are domiciled in another state, own a permanent place of abode in New York and spend more than 183 days in New York, you are a resident for income tax purposes. The tax regulation, however, excludes camps or cottages suitable and used only for vacations. In the above referenced case, the family lived in Connecticut and had a vacation home on Long Island's East End which they used only five or six weekends a year. The husband worked in New York City, returning each night to Connecticut. They had paid New York State income tax, but at the nonresident rate because they live in Connecticut. The ruling determined their Long Island vacation home was a permanent place of abode in New York and the husband was in the state more than 183 days between work and vacation. As such, they were deemed residents of New York State pursuant to provisions of the Tax Law and held accountable for additional taxes.

Vacation-home communities heavily depend on those out-of-state residents who enjoy spending their precious free time and their hard-earned dollars in New York. If left unchanged, the implications of this decision will surely discourage vacation home ownership in New York causing further damage to an already struggling housing market and impeding New York's economic recovery. This legislation amends the Tax Law to clarify the definition of "permanent place of abode" for the purposes of personal income tax.

Under this legislation, the usage or ownership of a vacation home will not be sufficient to establish residency for personal income tax proposes so long as the taxpayer spends less than 90 days year at the vacation home and the home is located more than 50 miles from the taxpayer's primary place of employment in New York. This proposal has the benefit of being narrowly tailored to address usage and ownership of home in vacation communities. It also is similar to a proposal that was under consideration by the Tax Department several years ago when efforts were being made to exclude vacation homes from classification as "permanent places of abode" under New York's residency rules.

This change is being made to clarify existing law. Despite the decisions in the New York Division of Tax Appeals, it is clear that it was never the Legislature's initial intent to include or to classify as "residents" those taxpayers who made limited use of vacation homes located in New York state. Instead, the statutory provisions were added to the Tax Law in the 19205 to ensure that only those people with no transitory and abiding connections to New York State be classified as residents under the Tax Law. Taxpayers with limited-use vacation homes were never supposed to be taxed as "residents" in New York.

LEGISLATIVE HISTORY: New Legislation, 2011.

FISCAL IMPLICATIONS: To be determined.

EFFECTIVE DATE: This act shall take effect immediately.

Text

STATE OF NEW YORK
________________________________________________________________________

S. 3998--A                                            A. 6266--A

2011-2012 Regular Sessions

S E N A T E - A S S E M B L Y

March 11, 2011
___________

IN SENATE -- Introduced by Sens. LAVALLE, MARCELLINO, GRISANTI, JOHNSON,
  RANZENHOFER  -- read twice and ordered printed, and when printed to be
  committed to the Committee on Investigations and Government Operations
  -- committee discharged, bill amended, ordered  reprinted  as  amended
  and recommitted to said committee

IN  ASSEMBLY  -- Introduced by M. of A. THIELE, McLAUGHLIN, RAIA, DUPREY
  -- Multi-Sponsored by -- M.  of  A.    ABINANTI,  LATIMER,  McDONOUGH,
  PAULIN, SIMOTAS -- read once and referred to the Committee on Ways and
  Means  --  committee  discharged,  bill  amended, ordered reprinted as
  amended and recommitted to said committee

AN ACT to amend the tax law, in relation to the definition of a resident
  for the purposes of the personal income tax

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Subparagraph  (B)  of  paragraph  1  of subsection (b) of
section 605 of the tax law, as amended by chapter  28  of  the  laws  of
1987, is amended and a new subparagraph (C) is added to read as follows:
  (B) who is not domiciled in this state but maintains a permanent place
of abode in this state and spends in the aggregate more than one hundred
eighty-three  days  of the taxable year in this state, unless such indi-
vidual is in active service in the armed forces of the United States[.],
OR
  (C) FOR PURPOSES OF THIS SUBSECTION, A PLACE  OF  ABODE  WILL  NOT  BE
DEEMED PERMANENT IF THE ABODE IS LOCATED MORE THAN FIFTY MILES AWAY FROM
THE TAXPAYER'S PLACE OF EMPLOYMENT IN THIS STATE AND THE TAXPAYER SPENDS
NO MORE THAN NINETY DAYS AT THE ABODE DURING THE TAXABLE YEAR.
  S 2. This act shall take effect immediately and shall be applicable to
all open tax years.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09792-02-1