Ohio Domicile: Taxpayer could have prevailed with simple affidavit

In a recent Board of Tax Appeals Case, taxpayers contested the Department’s assessment of personal income taxes for 2014-16, asserting that they were not Ohio residents. See Anthony R. Joy & Robin E. Miller, (et. Al.), v. Jeffrey A. Mcclain, Ohio BTA Case No. 2020-239. However, the taxpayers made two critical mistakes that ultimately resulted in the Board affirming the assessment.

First, the taxpayers failed to timely file an affidavit of non-Ohio residency for any tax year. Under Ohio law at the time, taxpayers were treated as nonresidents under the Ohio’s bright-line residency rule if they met three requirements: 1) maintain an “abode” or place of residence outside Ohio during the entire taxable year, 2) had no more than 212 contact periods in Ohio during the taxable year, and 3) filed a non-Ohio residency affidavit. R.C. 5747.24. Here, the taxpayers had a home outside Ohio and met the contact period test, but because they failed to file the non-residency affidavit, they were presumed to be Ohio residents. Therefore, the taxpayers were required to meet the much tougher common law test and present clear and convincing evidence that they established new residency in another state and intended to abandon their Ohio domicile.

Second, the taxpayers failed to present the necessary evidence at a hearing before the Ohio Board of Tax Appeals. Although they attached factual information to the notice of appeal, the evidence must be presented at a hearing in order to be included in the record before the Board. The evidence before the Board showed the taxpayers kept an Ohio abode, were both registered voters in Ohio, maintained Ohio drivers’ licenses and renewed their vehicle license place in Ohio. Therefore, the taxpayers failed to rebut the presumption of their Ohio residency. Had they filed the affidavit entitling them to take advantage of Ohio’s bright-line residency presumption or presented more evidence at a hearing, they may have prevailed.

Beginning with the 2018 tax year, Ohio’s bright-line residency statute was amended such that individuals claiming nonresidency must not:

  1. Hold an Ohio’s driver’s license;
  2. Claim Ohio’s homestead exemption for real property taxes; or
  3.  Pay in-state tuition at an Ohio state university.

Taxpayers fulfilling these requirements must file the Affidavit of Non-Ohio Residency by October 15th of each year to be treated as nonresidents under Ohio’s bright-line residency rules.

It is absolutely critical that taxpayers consult competent representation when changing residency for state tax purposes and pursuing appeals at the Board. If you have any questions concerning Ohio residency or any other Ohio tax matters, please contact us.

Attorney Steven A. Dimengo is Managing Partner of Buckingham, Doolittle & Burroughs, LLC. He helps clients with complicated tax challenges including Ohio sales/use, income, commercial activity and federal taxes and has represented clients before the Ohio Supreme Court. Steve can be reach at [email protected] or 330.258.6460.

Richard B. Fry III is a partner and Buckingham’s Taxation Practice Group Chair. He focuses on state and local tax compliance and controversies, including Ohio and multistate sales/use tax, commercial activity tax, and personal income tax issues. Rich can be reached at [email protected] or 330.258.6423

Nathan M. Fulmer is an associate in Buckingham’s Taxation Practice Group. He represents clients on a broad range of tax planning and controversy matters. His joint degree in taxation allows him to provide unique solutions when assisting clients on business matters. Nate can be reached at [email protected] or 330.258.6464.

 About Buckingham, Doolittle & Burroughs:

Buckingham, Doolittle & Burroughs, LLC is a corporate law firm that counsels middle-market executives and business leaders all over Ohio and beyond. With offices in Canton, Akron, and Cleveland, Buckingham offers clients Business Law Reimagined through sophisticated and practical legal services. Serving the region for more than 100 years, Buckingham’s mission is to deliver meaningful experiences through the practice of law, exceed expectations in terms of service, counsel and business sense, and to offer continuous value to the industries, communities and clients they serve. For more information, news and updates, visit bdblaw.com.