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Recent Ohio Supreme Court Ruling Affecting Non-Residency Status for Snow Birds

Below is a summary of the recent Ohio Supreme Court case affecting Ohio non-residents.  There used to be a bright line rule that determined Ohio residency – 183 overnight stays in another state, and you owned an abode (house, boat, camper, RV, shack) in another state.  The overnight stay limit was recently increased to 212 overnights.  The Ohio supreme court more recently shot down this bright line test and said ‘facts and circumstances’ dictate the determination of residency.  Listed are some of the "facts," non-resident clients could take into account for determining residency:

  • Abode else
  • Residency of spouse and kids under age 18
  • Where taxpayer is registered to vote
  • State drivers license
  • If they claim Ohio homestead exemption for real estate taxes
  • License plate are registered where?
  • Plus other licenses, certifications, and registrations that indicate that you are, or not, a resident of Ohio. 
  • Note: this list is not all-inclusive 

If you are a snow bird or own another property in addition to Ohio, and you have any questions or clarification regarding your residency status, please contact our office at 440-926-9300.

Domicile’ ruling undercuts ‘bright-line’ residency statute

By Greg Saul, Esq., OSCPA director of tax policy

Last week in Cunningham v. Testa, the Ohio Supreme Court ruled 5-2 that the common law understanding of “domicile” is incorporated into R.C. 5747.24, Ohio’s “bright-line” residency statute.

What this means to current and former Ohio taxpayers is the bright-line residency test is dead when determining Ohio residency for income taxes. The process has once again been relegated to a fact-specific searching expedition.

To again establish a bright-line residency test, the legislature must amend the statute to limit the concept of domicile to the definition contained in R.C. 5747.24; thus clearly showing their intent to repeal a settled rule of the common law.

To obtain an irrebuttable presumption of non-residency in Ohio under former R.C. 5747.24(B)(1), a taxpayer must file an “Affidavit of Non-Ohio Domicile” verifying that two factors occurred during the entire taxable year in question: (1) having “no more than 182 (currently 212) contact periods in this state,” and (2) having “at least one abode outside this state (whose location must be identified).” However, the presumption becomes rebuttable if it contains a “false statement,” and the individual is then presumed under 5747.24(C) to have been domiciled in Ohio.

The majority found that “although the bright-line statute creates an irrebuttable presumption, it does not affect the substantive common law of domicile” and that “by clear implication, R.C. 5747.24 incorporates the common law of domicile and preserves it.”

The court stated that under common law, “the issue of domicile is one of intent determined by the facts of the individual case,” including “the acts and declarations of the person” and the totality of “accompanying circumstances.” The majority then cited that “evidentiary factors” include “filing federal income tax returns, voting, automobile registration or location of spouse and children.”

In this case, the Cunningham’s mail was generally delivered to their Cincinnati home and not forwarded to their Tennessee address; they had lived in the Cincinnati area and raised a family there in three houses, including the home that they currently owned in Indian Hill; and they held Ohio driver’s licenses and voted in Ohio in 2008, the tax year at issue.

The majority then held both that (1) a statement verifying non-Ohio domicile can be false if it is not supported by the common law of domicile and (2) the tax commissioner must set forth “a substantial factual basis” for determining that the domicile statement is false and that when he does so, the purposes of the statute have not been frustrated. In this case, they found that the tax commissioner stated a substantial basis for the false-statement finding: the Cunningham’s contradictory application for the Ohio homestead exemption.

Therefore, even though there was no factual dispute concerning the two crucial elements under R.C. 5747.24(B)(1) – namely, out-of-state abode and number of contact periods – the majority held that the Cunninghams did not prove non-Ohio domicile by a preponderance of the evidence.

In the dissenting opinion, Justice French stated that R.C. 5747.24(B)(1) permits a finding of false statement only with respect to out-of-state abode and number of contact periods as predicate facts. She stated that “the majority’s interpretation defeats this legislative purpose” and “essentially renders the ‘bright-line’ non-residency status established by R.C. 5747.24(B) moot, as the commissioner could always challenge the veracity of the statement that the taxpayer was not domiciled in Ohio.”

She also found the majority’s false statement basis unpersuasive: “two different taxes—the state income tax and the local real estate tax—have statutory provisions that create two different tax breaks. It lies well within the authority of the legislature to adopt different domicile standards for two completely different tax provisions” and “there is no reason why the taxpayer cannot claim the benefit of both tax breaks.”

This ruling will encourage even more litigation whenever the tax commissioner decides to challenge an affidavit statement as “false,” and will render almost meaningless the recent increase in the allowable contact periods from 182 to 212.

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