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A New Day Dawns for Determining What Constitutes a New York Day

November 8, 2010

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This article, by State & Local Tax Practice Group partner Timothy P. Noonan, was originally published in the November 8, 2010 State Tax Notes. Reprinted with permission.

If you’ve handled New York residency cases on behalf of a client, you’ve been there. You’ve sat across the table from a New York state auditor and argued that your client didn’t make that phone call from the apartment. Or that your client couldn’t have been in New York City on that Saturday because his pattern was to return home on Friday night. Or that your client went to his non-New York home after a long flight since that too was his pattern.

Certainly, these aren’t the kinds of arguments you dreamed about making when trudging through your first year of law school. Or at least I didn’t have such lofty goals. But alas, for the New York tax practitioner, these arguments are a fact of life. And generally, given the high burden of proof in the law and the general difficulty of these residency audits, arguments like that are tough to make. Every once in a while, though, some common sense emerges, giving hope to folks like me. A little over two years ago, for instance, I wrote an article for this column about day counts, highlighting some helpful but not wellknown cases involving the importance of testimony in statutory residency audits.1 I’ve received great feedback on that article from clients and practitioners. Not so much from auditors though, who basically respond with a ‘‘yeah, right.’’ But just last month, the Tax Appeals Tribunal issued its decision in Matter of Julian H. and Josephine Robertson, one of the most important and significant residency cases in recent memory.2 And what we see in that decision is the reaffirmation of the principle addressed in my previous article on day count issues, requiring a fair application of the burden of proof standard and instituting some common sense in the day count process.

In this article, I will discuss New York’s residency rules for personal income tax, the recent Robertson decision, and that decision’s importance to New York state tax practitioners.

Background on Residency Rules

Before touching on Robertson, some background on statutory residency might be helpful. In New York a person can be taxed as a resident by either being domiciled in New York or by meeting the statutory residency requirements. Classification as a resident carries with it significant consequences, because residents of New York are taxed on their income from all sources, while nonresidents are taxed only on their New York-source income.

In determining residency, auditors will first look to domicile. Domicile refers to the location of one’s true, fixed, and permanent home. In other words, it is the place to which a person intends to return whenever absent. However, non-New York domiciliaries can still be taxed as New York residents if they meet the test for statutory residence. To be a statutory resident, one must maintain a permanent place of abode and spend more than 183 days in the state during the tax year. In many cases, whether a taxpayer meets the definition of a statutory resident can turn on how one or two days in a tax year are counted.

For those who maintain a residence in New York City, day count can become even more important, because a count over 183 days might subject them to both state and city tax on all income.3 Add in the well-established rule that presence in New York for a minute constitutes a day spent for statutory residency purposes,4 and it becomes clear why day counts and the evidence used to establish them are so important.

Taxpayers who maintain a residence and spend a good deal of time in New York face a tough road in fighting the statutory residency label. New York places the burden on the taxpayers to prove, by clear and convincing evidence, that they were not present in the state for more than 183 days.5 Since the burden of proof rests on the taxpayer, tax auditors often start with the premise that, absent other evidence, the taxpayer spent 365 days in New York, and undocumented or unidentified days can quickly become New York days. Therefore, the more tools available to the taxpayer in proving that a day was not a ‘‘New York day’’ the better.

In previous rulings, the New York State Tax Appeals Tribunal has held that credible testimony alone can be enough to prove that days were spent outside New York state, even if they are not otherwise substantiated with documentary evidence.6 But to the everyday practitioner, that concept never has seemed to work its way down to the audit level, where issues like this come up everyday. And nowhere was that more evident than in Robertson, in which despite significant testimonial evidence, the Department of Taxation and Finance still took issue with the taxpayer’s day count.


In Robertson, the taxpayer was the chair of Tiger Management and a successful hedge fund manager based in Manhattan. Since 1986 the Robertson family had lived in their Locust Valley home on Long Island. However, the Robertsons also maintained an apartment on Central Park South in New York City and rented a house in Southampton for approximately six weeks each summer.

In September 2007 the Division of Taxation began an audit of the Robertsons’ personal income tax returns for 1995 through 2001, but ultimately the 2000 tax year became the focus. Following the audit, the division concluded that Robertson had not satisfied his burden and issued a notice of deficiency, asserting additional New York City personal income tax due for the 2000 tax year in an amount over $26 million. That’s right: $26 million . . . in New York City personal income tax only. The notice was premised solely on the division’s conclusion that the taxpayer was a statutory resident of New York during 2000. Robertson acknowledged that he maintained a permanent place of abode in New York during 2000, and the parties stipulated that Robertson was present in New York for 183 days and absent from New York for 179 days during the relevant tax year. So the taxpayer was faced with the burden of proving that he was not physically present in New York on any of the four disputed days.

To meet his burden of proof on those four days, the taxpayer presented an exhaustive amount of evidence over the course of a four-day hearing! That’s right: The taxpayer spent four days at a hearing trying to prove his location on four total days in the 2000 tax year. Following the hearing, an administrative law judge found that the taxpayer had met his burden of proving that he was not present in New York City on any of the four days in issue. The division appealed, but only regarding two of the four days. Accordingly, the issue on appeal became whether the taxpayer had satisfied his burden of proving he was not physically present in New York City on two days: April 15 and July 23. The tribunal affirmed the ALJ’s ruling on all counts and canceled the deficiency, holding that the finding of the ALJ, regarding the two days at issue, was based on credible testimonial evidence backed up by other documentation.

In laying out the facts of the Robertson case, the tribunal stressed a number of critical factors that were important to its finding that the taxpayer had met his burden of proof. First, the taxpayer specifically intended to spend 183 days or less in New York City and took a number of steps to effectuate that plan in 2000.7 Second, the taxpayer had his assistants keep a contemporaneous account of his whereabouts and periodically advise him of his day count.

Third, the taxpayer had a reputation for both honesty and integrity. During her testimony, Robertson’s secretary said that over the years, Robertson had told her that a day was a ‘‘New York City day’’ (even if he was present in the city for only 15 minutes) when she would not otherwise have known about his presence in the city. Regarding the two days at issue, the tribunal was presented the following evidence: 

What Does Robertson Mean?

The tribunal’s decision in Robertson obviously was a significant victory for the taxpayer, but it also solves a big piece of the day-count puzzle for practitioners. Even in the absence of specific documentary evidence linking the taxpayer to a location outside New York City, the ALJ found that Robertson had satisfied his burden of proving that the two days at issue were not New York City days. The tribunal affirmed the ALJ’s decision, finding that despite the lack of specific documentary proof, the taxpayer still met the standard to prove his non-New York City location with clear and convincing evidence. And here are some of the important takeaways, and the things practitioners should be able to use the next time they are sitting across the table from their friendly neighborhood residency auditor:

Dissenting Opinion

It is very rare that we see a dissenting opinion in a Tax Appeals Tribunal case, but Robertson apparently struck a chord with Commissioner Carroll R. Jenkins, who issued a dissenting opinion. And interestingly, his dissent seems to imply that there was much more going on behind the scenes and not addressed even in the 62-page decision. For instance, Jenkins’s dissent argues that the majority improperly relies on Colorado v. New Mexico, but that case was cited nowhere in the majority’s opinion. The dissent also quotes the majority as saying that the division ‘‘produced little evidence in support of its contention of a New York City presence on either of the two days at issue.’’ But again, that isn’t something that the majority ever said in its opinion. Indeed, if it did, I’d have to agree with Jenkins that this would have been an incorrect standard.


Although the tribunal had previously touched on the importance of testimony in domicile cases,15 in Robertson the tribunal unequivocally stated that, for statutory residency purposes, day count can be proved by credible testimonial evidence. I hope this ruling will force auditors to play by the rules and abide by the department’s own guidelines when examining a taxpayer’s day count, while at the same time alleviate the frustrations of state tax practitioners trying to solve that 365-piece puzzle.

1Timothy P. Noonan, ‘‘Day Counts and the Importance of Testimony in Statutory Residency Audits,’’ State Tax Notes, Apr. 28, 2008, p. 317, Doc 2008-8845, or 2008 STT 83-26.
2Matter of Robertson, New York Tax Appeals Tribunal (Sept. 23, 2010). (For the decision, see Doc 2010-23153 or 2010 STT 207-25.)
320 NYCRR section 105.20(c). New York City’s definition of a resident mirrors New York state’s, substituting only the word ‘‘city’’ for the word ‘‘state.’’
5See Matter of Holt, New York Tax Appeals Tribunal (July 17, 2008).
6See Matter of Avildsen, New York Tax Appeals Tribunal (May 19, 1994); Matter of Armel, New York Tax Appeals Tribunal (Aug. 17, 2995); Matter of Reid, New York Tax Appeals Tribunal (Oct. 5, 1995).
7For instance, Robertson refrained from going into New York City when he was not required to be there, and he made a habit of leaving the city before midnight on Friday night.
8Supra note 1.
10See 20 NYCRR section 105.20 (stating that ‘‘Any person domiciled outside New York State who maintains a permanent place of abode within New York State during any taxable year, and claims to be a nonresident, must keep and have available for examination by the Department of Taxation and Finance adequate records to substantiate the fact that such person did not spent more than 183 days of the taxable year within New York State’’).
11N.Y. Nonresident Audit Guidelines, p. 28 (updated Mar. 31, 2009).
13See Matter of Holt, New York Tax Appeals Tribunal (July 17, 2008) (stating that ‘‘Statutory residency cases . . . are very fact intensive and require specific evidence through substantiating contemporaneous records to show a taxpayer’s whereabouts on a day-to-day basis during each year in question’’). (For the decision, see Doc 2008-16343 or 2008 STT 148-8.)
14Citing Matter of Moss and Matter of Reid (supra note 1).
15See Matter of Craig F. Knight, New York Tax Appeals Tribunal (Nov. 9, 2006). (For the decision, see Doc 2006-24114 or 2006 STT 235-13.)

© Hodgson Russ LLP 2010