Over the summer, the New Hampshire Supreme Court took up our favorite issue—state tax residency—in Morris v. Commissioner, New Hampshire Department of Revenue Administration. The case addressed whether the Taxpayers were residents of New Hampshire for a period of time in 2017.
You might be wondering, why would New Hampshire care where a taxpayer lived? Isn’t that a no-income-tax, live-free-or-die state? The answer, actually, is (or was) no: up until this year, New Hampshire residents were subject to a tax on interest and dividends. The tax was repealed in 2025, but a little late for Mr. and Mrs. Morris, who were fighting a tax bill of over $1 million for the 2017 tax year.
The Background
The Taxpayers were married with three adult children. They owned their home in Connecticut for many years, near Mr. Morris’s office in Stamford, and in 2003, they purchased a home in New London, New Hampshire. By the summer of 2017, the Taxpayers were considering relocating to New Hampshire ahead of Mr. Morris’s retirement.
In connection with that plan, in June 2017, they obtained New Hampshire driver’s licenses and listed their New Hampshire home as their residence. They also registered to vote in New Hampshire, made estimated tax payments to New Hampshire, and filed tax paperwork with the IRS and Connecticut using their New Hampshire address. Two of the Taxpayers’ adult children were living in New Hampshire, and two of the Taxpayers’ cars were registered in New Hampshire.
But they also kept a lot of ties in Connecticut. The Taxpayers testified at trial that they kept their important personal belongings in their Connecticut home and attended doctor appointments, attended church, were members of country clubs, had attorneys and accountants, had Mr. Morris’s car registered, and had close friends and relatives in Connecticut. They said that the Connecticut home was their most important home. Using parking garage data, calendar, and credit card records, the Taxpayers determined they spent most of their time in Connecticut, spending only 51 days in New Hampshire between June 16 and December 31, 2017.
So, despite getting driver’s licenses, registering to vote, etc., Mr. Morris ultimately decided not to retire to New Hampshire, and the Taxpayers filed as Connecticut residents in 2017. They also filed an interest and dividends return to New Hampshire seeking the return of the estimated payments they had made in 2017.
But the New Hampshire Department of Revenue Administration (DRA) disagreed, concluding that the Taxpayers were New Hampshire residents between June 16 and December 31, 2017, and billing them for $1,134,664.83 of tax, penalty, and interest. The Taxpayers filed a petition for redetermination, but the notice was upheld. The Taxpayers appealed the decision to the Superior Court, Merrimack County, which, following a bench trial, upheld DRA’s decision. The Taxpayers then appealed to the Supreme Court of New Hampshire.
The Court’s Reasoning
The Supreme Court of New Hampshire ultimately concluded that the Taxpayers were residents of New Hampshire between June 16 and December 31, 2017. In arriving at its conclusion, the court relied on two DRA administrative rules of note. The first, Rule 902.01, states that:
An individual's intent to establish residency by an ongoing physical presence within New Hampshire which is not transitory in nature, shall be evidenced by: (a) Maintaining a home or other living quarters in New Hampshire; (b) Spending a greater percentage of time in New Hampshire than in any other state; (c) Having family living with them in New Hampshire; (d) Advising any federal, state, or local agency that the individual considers herself or himself a resident of New Hampshire; (e) Being employed or conducting business activity within New Hampshire or at a place to which the individual can readily commute from New Hampshire; or (f) Registering to vote in New Hampshire. N.H. Admin. R. Rev. 902.01.
The court found that the Taxpayers satisfied subsections (a), (c), (d), and (f) because they owned a home in New Hampshire, two of their adult children used their New Hampshire home, they advised state and local agencies that they considered themselves residents of New Hampshire when they registered to vote and obtained New Hampshire driver’s licenses, and Mr. Morris registered his business as a foreign LLC with the New Hampshire Secretary of State. Subsections (b) and (e) of Rule 902.01, however, weighed against a finding of New Hampshire residency.
But doesn’t this seem a little forced? The Taxpayers only spent 51 days in New Hampshire, and, under the normal laws of domicile in the state tax world, if a taxpayer does not abandon their domicile in a former state, then they don’t acquire a domicile in a new state. But New Hampshire’s residency test seems less connected to the traditional domicile test.
But there was another problem, and that relates to the second DRA administrative rule, Rule 902.04, which states that any person who claims to be a “resident of New Hampshire to any state agency or political subdivision of New Hampshire, shall be deemed […] [a] resident of New Hampshire for purposes of taxation of income unless the individual can prove, by a preponderance of evidence, that he or she is an actual resident of another jurisdiction.” N.H. Admin. R., Rev 902.04 (emphasis added).
This seems like an “are you lying now, or were you lying then?” rule. The Taxpayers claimed to be New Hampshire residents when they registered to vote and obtained a driver’s license, so that created a presumption that they were residents, and it was on the Taxpayers to prove otherwise. Frankly, it still seems like the Taxpayers could have made the case that they were actual residents of Connecticut, where presumably they paid 2017 resident taxes, and a lot more income tax than they ended up having to also pay to New Hampshire. But the Court wasn’t having it; it found that there were enough facts justifying resident taxation, sticking the Taxpayers with a big tax bill.
This ends up being a very unsatisfactory result, given that the Taxpayers maintained heavy connections to Connecticut and, as noted above, probably paid heavy taxes to Connecticut, too. On the other hand, it does look like this was a problem somewhat of the Taxpayers’ own doing. Indeed, typically, things like voter registrations and driver’s licenses are ministerial filings that don’t really turn the tide much in a residency case. But obviously, that kind of thing matters to New Hampshire, and the Taxpayers in Morris paid the price for it.
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