Moving To A Tax Free State?

[Martha]

Quote:

Originally Posted by audreyh1 Th If you no longer own property (or rent it) and have no vehicles registered in a given state, have changed drivers license, voter's registration, insurance, etc., and aren't physically present, I think the state would have real trouble claiming you are still a resident. It doesn't matter whether you travel all the time in an RV or not - YOU get to pick where you call home as long as you do all the above. Audrey

Unfortunately, this is not the case. The case I referred to from Minnesota involved those factors. They sold their home. They never returned to Minnesota. They registered to vote in South Dakota. They got their drivers licenses in South Dakota They still lost. .

Here is a link to the court case: http://caselaw.findlaw.com/mn-suprem...t/1385455.html
From the court's ruling: Suffice it to say that on this record, there is ample support for the tax court's conclusion that the Sanchezes had no physical presence in the State of South Dakota that was sufficient to demonstrate that they intended to make their home there and integrate their lives into the community.   There is no evidence that their visits to South Dakota during 2004 were anything more than brief, temporary stays for the purpose of establishing a mailing address


If I were to leave Minnesota I would be sure to spend a significant amount of time in the state where I was trying to establish my domicile.

I understand that Minnesota isn't the only state taking a hard line on this. You run the same risk in other states that have an income tax.

[RonBoyd]

Quote:

Originally Posted by teejayevans I think I could fight this. Residency is not required, even those who live outside the US still have to declare a "home" state. If I have a drivers license, registered to vote, register my autos, use address on my 1040, etc of a state, that's my home state, MN can pound sand. TJ

This belongs here:

http://www.early-retirement.org/foru...ime-54406.html

[SunsetSail]

Quote:

Originally Posted by Martha Unfortunately, this is not the case. The case I referred to from Minnesota involved those factors. They sold their home. They never returned to Minnesota. They registered to vote in South Dakota. They got their drivers licenses in South Dakota They still lost. . Here is a link to the court case: No. From the court's ruling: Suffice it to say that on this record, there is ample support for the tax court's conclusion that the Sanchezes had no physical presence in the State of South Dakota that was sufficient to demonstrate that they intended to make their home there and integrate their lives into the community.   There is no evidence that their visits to South Dakota during 2004 were anything more than brief, temporary stays for the purpose of establishing a mailing address If I were to leave Minnesota I would be sure to spend a significant amount of time in the state where I was trying to establish my domicile. I understand that Minnesota isn't the only state taking a hard line on this. You run the same risk in other states that have an income tax.

I want to clarify that this is a one year issue only. The MN attack on non-MN residency is only if you actually had a physical presence or potentially an economic presence in MN at any point during the year (i.e., 2004 for the case Martha noted). If you moved in 2004, then chances are it will be more difficult to change residency for your 2004 tax year given the ruling. However, in 2005 and thereafter MN couldn't touch you under interstate commerce and probably due process so long as you didn't go to MN.

You can just time your move for December (assuming you are a calendar year filer) and defer income to the next year.

[Martha]

Quote:

Originally Posted by SunsetSail I want to clarify that this is a one year issue only. The MN attack on non-MN residency is only if you actually had a physical presence or potentially an economic presence in MN at any point during the year (i.e., 2004 for the case Martha noted). If you moved in 2004, then chances are it will be more difficult to change residency for your 2004 tax year given the ruling. However, in 2005 and thereafter MN couldn't touch you under interstate commerce and probably due process so long as you didn't go to MN. You can just time your move for December (assuming you are a calendar year filer) and defer income to the next year.

I wonder about this because the long arm statute drags in anyone who is domiciled or residing in Minnesota and arguably you remain domiciled there until you establish a new domicile elsewhere. Page's dissent emphases the problem:

But, after today's decision, taxpayers wishing to establish a change in domicile will have to buy or rent property in another state and remain physically present in that state for some undefined period of time.   The logical absurdity of the court's decision is that because the Sanchezes did not buy or rent property or spend sufficient time in South Dakota, they remain to this day subject, at the Commissioner of Revenue's whim, to Minnesota's income tax even though they have completely abandoned their Minnesota domicile.   Therefore, I would reverse the tax court's order granting the Commissioner's motion for summary judgment.

Do you have any cites on this?

[SunsetSail]

Quote:

Originally Posted by Martha I wonder about this because the long arm statute drags in anyone who is domiciled or residing in Minnesota and arguably you remain domiciled there until you establish a new domicile elsewhere. Page's dissent emphases the problem. Do you have any cites on this?

I'll look for cites when I have more time, but even if the long-arm statute pulls you in under due process for domicile purposes the state won't be able to subject your income to tax under the interstate commerce clause.

So MN may have in personam jurisdiction, but MN couldn't subject the income to tax. Complete Auto Transit v. Brady established the tests that would fail, but there is more recent treatment that I can't think of now.

[audreyh1]

Quote:

Originally Posted by Martha I wonder about this because the long arm statute drags in anyone who is domiciled or residing in Minnesota and arguably you remain domiciled there until you establish a new domicile elsewhere. Page's dissent emphases the problem: But, after today's decision, taxpayers wishing to establish a change in domicile will have to buy or rent property in another state and remain physically present in that state for some undefined period of time.   The logical absurdity of the court's decision is that because the Sanchezes did not buy or rent property or spend sufficient time in South Dakota, they remain to this day subject, at the Commissioner of Revenue's whim, to Minnesota's income tax even though they have completely abandoned their Minnesota domicile.   Therefore, I would reverse the tax court's order granting the Commissioner's motion for summary judgment. Do you have any cites on this?

Yeah - something seems really wrong here! Without an agreement between states with what constitutes establishing residency, we have a real problem. Every state has a different residency requirement, and there is not official "time" specified in many cases.

I always felt better that I did not have to change state residency when I went fulltime, although I did change county residency twice. I was just lucky to already live in a low tax state, and selling my house made it even lower.

Audrey

[BigMoneyJim]

Quote:

Originally Posted by cb7010 My questions are mostly relative to a retiree living off only investment income. Wouldn't it be a great benefit to establish residency in a State that has no state income tax?

That seems backward. If you have no income, move to a state with higher income taxes and lower property and sales taxes since you will presumably be paying—directly or indirectly—property taxes and certainly sales taxes.

If you earn a lot of income, move to a no-income-tax state. If you have low income but consume a lot, look for low sales taxes.

Or pick a place you can afford that has a good quality of life for you and pay whatever taxes they have there.

[gettingthere]

Quote:

Originally Posted by Martha For perpetual travelers who pick a no tax state for your domicile, if you are moving from a state with income taxes that state may not recognize your change of domicile unless you physically move there. There is a Minnesota case where some RV'ers tried to establish a South Dakota domicile. The sold their home and did not return to Minnesota. But they also did not live in South Dakota, only spending brief periods of time there to get a drivers license, set up mail forwarding, and the like. Minnesota said not good enough, you are still Minnesota residents. To "establish or change one's domicile requires one's bodily presence in a place coupled with an intent to make such place one's home." Minnesota: Do You Know Where You Live? | AccountingWEB.com

You can check out any time you like, but you can never leave.

[Martha]

Quote:

Originally Posted by SunsetSail I'll look for cites when I have more time, but even if the long-arm statute pulls you in under due process for domicile purposes the state won't be able to subject your income to tax under the interstate commerce clause. So MN may have in personam jurisdiction, but MN couldn't subject the income to tax. Complete Auto Transit v. Brady established the tests that would fail, but there is more recent treatment that I can't think of now.

If you happen to think of any, let me know. It seems like more of a due process issue than a dormant commerce clause issue (the situation is a bit different that businesses that are doing business in more than one state, and the income here is only being taxed in one state), but this is not my area of knowledge. Minnesota would argue that domicile remains in Minnesota as under Minnesota law they have not established a new domicile and under the long arm statute the courts have jurisdiction over its domiciliaries. If a due process issue, would not a court have to find Minnesota's domicile provisions unconstitutional?

I am still concerned about the Minnesota case and sure would like a case on point addressing subsequent tax years, especially given the broad language of the opinion and Page's concerns in his dissent.

EDIT: Sunsetsaid and I took our esoteric discussion off line.

[BigMoneyJim]

Quote:

Originally Posted by BigMoneyJim If you earn a lot of income, move to a no-income-tax state. If you have low income but consume a lot, look for low sales taxes.

It just occurred to me that states relying on sales taxes are places people want to go in the first place, otherwise they are better off taxing income. Popular destination? Sales tax the tourists. Local population leaving in droves to vacation elsewhere? Tax the income.

So in general you can live where no one wants to go with no income and pay less, but what will you do there?

Or move to AK where oil pays for everything.

[REWahoo]

Quote:

Originally Posted by BigMoneyJim So in general you can live where no one wants to go with no income [tax] and pay less, but what will you do there?

Fight the scorpions, rattlesnakes, fire ants, and chiggers...

[Brat]

Those considering moving to a no income tax state should consider the other taxes/fees that a state may impose. For example, in the state of WA you pay a form of sales tax on a vehicle not previously sales taxed. An OR resident moving to WA with a 10 yo car purchased in OR would be assessed an additional registration fee. WA charges a tax on the sale of a home.

As an earlier poster mentioned a lot of people who live in Vancouver WA go to OR to shop. The economics of that may change when a toll is assessed to pay for a new bridge.

[audreyh1]

Quote:

Originally Posted by Martha EDIT: Sunsetsaid and I took our esoteric discussion off line.

I think some of us are very interested in any conclusions you reach.

Since buying property in my already domicile state, I have not been quite so concerned about domicile issues for fulltime RVers but I am still very interested in this topic.

Audrey

[olauswormius]

This comment may be forever lost because of the age of the thread, but I found it interesting. I have been out of work for several years following a disastrous back injury, and I've had no income. I have already taken steps to prepare for a permanent move from my native Minnesota, now that I have recovered from surgery. My destination is southeast Alaska. I used most of my remaining funds from the sale of my home to invest in a cousin's business, and we will shortly be getting a huge amount of commissions. It may be possible to defer my share of this income until January. As soon as my investment money is returned, I intend to go to Alaska and register my vehicle there, as well as register to vote and apply for an Alaska driver's license. I will change the address on my bank accounts to Alaska. I've already had an Alaska cell phone for a year. If I establish my new domicile in Alaska before I receive any commissions, but take them this tax year, would I be liable for Minnesota state income tax? Would the fact that I will retain my Minnesota apartment for a few more months, until the end of my lease, cause problems? The nice thing about where I am settling is that I will have no property taxes, and the climate is very mild compared to Minnesota, so even with higher energy costs per gallon, I will have far less heating costs. Advice? I'm not trying to scam the tax authorities. I am legitimately moving to Alaska for the rest of my life.

[clifp]

If you can hold off receiving the commission until Jan than you should be ok simply saying you are resident of Alaska. I don't believe that Minn. will go after you even if you still have an apartment. The situation is much more complicated if you receives fund this year while living in Minn. In this case I'd advise seeing an accountant. It is certainly possible to structure the payment such that money received is considered a return of capital on your investment, rather than some form of taxable income. However, this is well beyond something you want to rely on some random dude on the internet.

Best bet is to wait until Jan.


Moving to Alaska because the climate is milder. I'm still wrapping my head around this concept.

[braumeister]

You will probably need to file a part-year resident Minnesota return, with the tax prorated, but clifp is right -- this is definitely something you need a good accountant for.

[teejayevans]

Quote:

Originally Posted by clifp If you can hold off receiving the commission until Jan than you should be ok simply saying you are resident of Alaska. Best bet is to wait until Jan.

Assuming its going to be counted on your W2s, its best to change your address to Alaska and your domicile so no Mn state taxes are taken out and the check is sent to your home in Alaska. The burden of proof is on you.

There have been court cases on this and IIRC, those with residences in old state generally lose, despite changing drivers license, etc, I believe you have to show you spent a majority of the past year in your new home state, may be tough to do when you still have a residence back in your old state.
TJ

[Aiming_4_55]

Quote:

Originally Posted by clifp Moving to Alaska because the climate is milder. I'm still wrapping my head around this concept.

I'm in Eagan also and last winter was extremely rough! I'm not sure I've ever compared MN to Alaska, but I bet Alaska is better prepared for the blizzards that we experienced last winter. We had 6 - 8 major snow falls that closed the city or made it impossible to get out of your driveway. The -50 wind chill was terrible on our dog. Needless to say, I'm not interested in MN for long term.

As for the apt in Eagan, can't you break the lease just to get it out of your name if you already have a place in Alaska?

[HFWR]

There's a "tax free" state?

[Brat]

Many parts of Alaska are milder than MN because the Pacific Ocean acts as a heat sink. Juneau has a moderate climate.