How does one become an Ohio resident?
It’s not hard, I suppose. One could just buy a house in Ohio and live there.
How does one stop being an Ohio resident?
That one is a bit trickier. I would probably start by selling that same house and moving. It is a simple solution, but not one tailored to the needs of the snowbirds. I would not mind being a snowbird. Call me crazy, but I could separate myself from Cincinnati winters and spend that time in better weather.
Let’s say that you live in Cincinnati. You have a second home in Ft. Myers, Florida and a great deal of discretion as to how much time you spend in each state. You would like to move your “residency” to Florida, as Florida does not have an income tax. You still have friends and family in Cincinnati, however, so you intend to keep your house here. Can you do so and still be considered a Florida resident?
Of course you can.
Ohio is not one of those states that will chase you down to the ends of the earth to tax you years after you have left.
But that doesn’t mean there aren’t rules to follow.
And someone recently thought that those rules did not apply to them. The case is Cunningham v Testa. Let’s talk about it.
We have talked before about the idea of “domicile” in state taxation. Domicile is easy for the vast majority of us. We have one house, and we live there with our family. We have one house, one abode, one domicile. A house gives one an “abode,” and if one is fortunate one can afford more than one abode. Domicile rises above that. Domicile wants to know which abode is one’s true home: the one with the pencil markings measuring the kids’ height over the years, the squeaky floorboard at the top of the steps, the cold corner in the living room that never really warms up no matter how one sets the thermostat.
Domicile wants to know which abode is that house. You know - your home. The concept borders on the mystical.
Ohio is one the states that looks at domicile when determining whether one is a resident or nonresident. Ohio doesn’t care about that house in Florida. That is just an abode until one raises it to the level of domicile.
Remember that Ohio has a tremendous number of snowbirds. In years past the state expended a not-insignificant amount of resources reading tea lives and consulting Tarot cards to figure-out whether or not someone was an Ohio resident. Ohio needed something less employee-intensive.
Ohio decided to use a “bright-line” test and would henceforth look at “contact periods.” If one had enough contact periods it would consider one a resident. If not, it would consider one a nonresident … unless there were other factors indicating that one was a resident.
For the most part it was now an arithmetic exercise. The “… unless” part was there to prevent one from gaming the count.
COMMENT: A contact period occurs if (1) one is away from his/her domicile (2) overnight and (3) is in Ohio for all or part of two consecutive days. It is not the same as sleeping overnight in Ohio, as the test is not where one sleeps. One could book a hotel in Covington, Kentucky for example, and cross the bridge into Ohio in the morning. If one crossed the bridge for two consecutive days, there would be a contact period.
NOTE: Starting in 2015 that count has been raised to 213.
Back to the Cunninghams.
He filed an “Affidavit of Non-Ohio Domicile” for tax year 2008, using his name, social security number and Cincinnati address. She did not file anything.
COMMENT: Mrs. Cunningham is immediately out-of-the-game.
He declared he was a resident of Tennessee, although he did not give an address.
COMMENT: That did not help.
Nonetheless, filing the Affidavit shifted the burden to Ohio.
And Ohio responded by issuing a notice and then an assessment.
The Cunninghams appealed.
Time to show your cards, Ohio.
(1) Cunningham and his wife were raised in Ohio and raised their children there.
COMMENT: Fail. What else do you have, Ohio?
(2) He listed his Ohio address on his tax return.
COMMENT: Dumb but not fatal.
(3) He had his Tennessee utility bills forwarded to Cincinnati for payment.
COMMENT: Same as (2), although I am wondering who was in Cincinnati to pay the bills if they were in Tennessee.
(4) He maintained an Ohio driver’s license.
COMMENT: That guy, he is such a procrastinator …
(5) He voted in Ohio during the year.
COMMENT: Did no one advise this guy?
(6) He did not present a calendar of contact periods.
COMMENT: He’s got this ADD thing with paperwork …
(7) He filled-out paperwork to obtain homestead exemption on his Cincinnati residence.
COMMENT: Really?! I mean it, REALLY???
Let’s just say that the Tax Commissioner persuaded the Ohio Supreme Court that any affidavit Cunningham filed was bunkum. Cunningham was an Ohio resident under common-law tests. The bright lines rules – while invaluable – are not an absolute defense against the common-law tests for residency.
There has been some hyperventilation in the wake of this decision. Here is an example from the Ohio Society of CPAs:
This ruling will encourage even more litigation whenever the commissioner decides to challenge an affidavit as ‘false,’ and will render almost meaningless the recent increase in allowable contact periods from 182 to 212.”
No, no it doesn’t, and I greatly doubt that Ohio wants to get into repetitive shootouts with taxpayers on this issue. That is why Ohio moved to a bright-line standard in the first place.
Just have some common sense out there, folks.
About the author
Steven D. Hamilton is a career CPA, with extensive experience involving all aspects of tax practice, including sophisticated income tax planning and handling of tax controversy matters for closely-held businesses and high-income individuals.