22 N.Y.3d 592 (2014)

For an individual to be deemed a statutory resident of New York based on maintaining a permanent place of abode, there must be evidence that the dwelling was utilized as the taxpayer’s residence.

Summary

John Gaied, domiciled in New Jersey, owned an apartment building in Staten Island where his parents resided. New York sought to tax him as a statutory resident, arguing he maintained a “permanent place of abode” in the state and spent over 183 days there. Gaied conceded the 183-day requirement but argued he didn’t maintain the apartment as his residence. The Court of Appeals reversed the lower court’s decision, holding that a taxpayer must have a residential interest in the property for it to qualify as a “permanent place of abode” under the statute.

Facts

John Gaied, domiciled in New Jersey, owned an automotive business on Staten Island, New York.

In 1999, he purchased a multi-family apartment building in Staten Island, intending it as a residence for his elderly parents and as an investment property.

His parents lived in one apartment and were claimed as dependents on his tax returns. Gaied paid the utilities for their apartment.

Gaied leased the other apartments to tenants and reported rental income and expenses on his federal tax return.

He claimed he did not reside in the apartment, keep personal belongings there, or have sleeping accommodations, though he occasionally stayed overnight to attend to his parents’ medical needs.

In 2003, he sold his New Jersey residence to pay federal taxes and began residing in the renovated boiler room of the Staten Island property in 2004 (after the tax years in question).

Procedural History

Gaied filed nonresident income tax returns in New York for the tax years in question.

The Department of Taxation and Finance assessed a deficiency, claiming he was a statutory resident.

An Administrative Law Judge (ALJ) sustained the deficiency.

The Tax Appeals Tribunal initially reversed, then, on reargument, affirmed the ALJ’s decision.

The Appellate Division confirmed the Tribunal’s determination.

Gaied appealed to the Court of Appeals.

Issue(s)

Whether, under Tax Law § 605 (b) (1) (B), the definition of “maintains a permanent place of abode” requires the taxpayer to have a residential interest in the property for it to be considered their abode for tax purposes.

Holding

Yes, because the legislative history and the regulations support the view that for a taxpayer to have maintained a permanent place of abode in New York, the taxpayer must, himself, have a residential interest in the property. Nowhere in the statute does it provide anything other than the “permanent place of abode” must relate to the taxpayer.

Court’s Reasoning

The Court emphasized the statutory residency provision’s intent to prevent tax evasion by those who are, for all intents and purposes, New York residents but claim non-residency to avoid taxes. Quoting Matter of Tamagni v Tax Appeals Trib. of State of N.Y., the Court reiterated the statute’s aim to discourage tax evasion by New York residents.

The Court addressed the definition of “permanent place of abode” as “a dwelling place of a permanent nature maintained by the taxpayer” (20 NYCRR 105.20 [e] [1]).

The Court found the Tax Tribunal’s interpretation, which required only maintenance, not residency, to be inconsistent with the statute’s intent. The Court stated, “Notably, nowhere in the statute does it provide anything other than the “permanent place of abode” must relate to the taxpayer.” It reasoned that the legislative history and regulations support the view that the taxpayer must have a residential interest in the property to qualify.

The Court concluded that Gaied’s mere ownership and maintenance of the apartment building, without using it as his residence during the tax years in question, did not satisfy the “permanent place of abode” requirement for statutory residency.

A dissenting opinion in the Appellate Division argued that the critical factor should be whether the taxpayer maintains “living arrangements” in the dwelling, which Gaied did not.