If President Donald Trump wants to avoid New York's steep income taxes by claiming Palm Beach is his new home after leaving the White House, he will need to do more than file some court papers and change his voter registration, tax experts say.
In fact, Trump's biggest challenge will not be proving Florida is his primary residence but rather convincing New York tax officials that the Empire State — where Trump has lived all but four years of his life, built a billion-dollar real estate empire and starred in a reality television show — is not his home.
"Florida is very liberal in allowing people to declare Florida as their legal domicile," said Richard Rampell, a Palm Beach CPA who has represented clients in residency audits — tax investigations often launched when high-wealth taxpayers move to tax havens like Florida.
That's because Florida has no state income tax and has nothing to gain or lose by allowing a Snowbird to declare Florida home. But states such as New York, with hefty state income taxes, stand to lose vast amounts of revenue when wealthy residents like Trump flee.
New York's top income tax rate is 8.82 percent. The Big Apple imposes its own income tax of up to 3.8 percent on top of the state rate — meaning that as a New York resident, Trump would likely be taxed 12.6 percent on income earned in New York.
In late September, Trump changed his primary residence from Manhattan to Palm Beach, according to documents filed with the Palm Beach County Circuit Court and first reported by the New York Times.
Trump and first lady Melania Trump took the first step toward becoming Florida residents when they each filed a “declaration of domicile” saying that Mar-a-Lago, the president's private club in Palm Beach, will be their permanent residence. The couple also changed their voter registration from New York to Florida.
Trump announced his decision in a three-part tweet on Oct. 31, 2019.
"I cherish New York, and the people of New York,” Trump wrote in the first segment of the tweet.
Trump then criticized New York officials in the following two segments of the tweet.
“I have been treated very badly by the political leaders of both the city and state. Few have been treated worse,” he said, describing his decision as the “best for all concerned.”
While Trump has claimed for years to be the victim of relentless IRS audits, a new world of tax trouble awaits Trump if New York tax auditors decide to scrutinize Trump's claim of being a Florida resident.
"Just because he has declared Florida his legal domicile doesn’t mean another state will accept it," Rampell said. "New York is the worst."
The New York State Department of Taxation and Finance conducts more residency audits and nonresident income allocation audits than any other state, according to the website of Hodgson Russ, a New York law firm at the forefront of many of the audits.
"It is a heavy burden," said attorney Paul Comeau, senior partner with Hodgson Russ and renowned tax expert who literally co-authored the residency audit handbook. Under New York tax law, Trump has the burden of proving he is no longer a New York resident.
Simply filing a declaration of domicile in a Florida court, getting a new driver license and changing the address for banking, vehicle and voter registration is not enough if New York tax officials decide to conduct a residency audit, Comeau said. In some cases, those actions can even appear self-serving.
The burden of proof in a residency audit is not on the state, but rather on the taxpayer, Comeau said.
"New York doesn’t have to prove a thing," Comeau said. "You are still a New Yorker until you prove you are not."
So, what will Trump and the first lady need to do to prove Mar-a-Lago is their legal residence?
Like most questions about taxes, it's complicated.
New York uses two separate tests to determine residency. One test is based on math — does the taxpayer spend at least 183 days in New York and have a residence in New York? Trump owns the top three floors of Trump Tower in Manhattan, where he has lived with various wives and his children since the mid-1980s.
As for keeping track of the days, New York considers any amount of time spent during a 24-hour period to be a full day. That means if Trump jets to New York and arrives in the evening, does some business the next morning and returns to Palm Beach in time for an afternoon round of golf, he will have been considered in New York for two days.
Auditors are so fastidious about counting days that in some cases, cell phone records and credit card receipts have been subpoenaed to determine whether a taxpayer crossed state lines to have dinner in Manhattan.
More: Melania Trump votes on Election Day in person, without mask on Palm Beach, not far from Mar-a-Lago
"If he steps foot in New York for more than 183 days, he’s going to be deemed a resident of New York State," said Mark Nickerson, a Buffalo-based CPA. Mar-a-Lago is open only between Halloween and Mother's Day — about 190 days — and closes for the sweltering summer months, meaning Trump would have to live elsewhere five months.
Most of Trump's other residences including condominiums, apartments and another mansion, are in New York. Trump could also crash at his golf club in Bedminister, N.J., his winery in Virginia or his beachfront estate in St. Martin. Trump also has golf clubs in Scotland.
There is also the question of whether Trump can legally claim Mar-a-Lago as his residence. The 1993 agreement Trump made with the Town of Palm Beach to convert Mar-a-Lago from a residence to a private club did not address whether Trump could live at the club.
Trump conveyed the title of the property from his personal possession to a corporate entity he controlled named Mar-a-Lago Club, Inc. Under the agreement, the club's 10 guest suites could be used only by members for a maximum of three times a year for no longer than seven days at a time. And those seven-day stays couldn’t be strung together consecutively.
Whether that provision applies to Trump, who has private quarters at the club, has never been questioned, and it is not known how New York auditors might view Trump's residency there.
Even if Trump does not spend more than 183 days in New York, he is not in the clear. New York has a secondary test for determining residency. That test assesses five factors and is far more subjective than the 183-day residency test: A taxpayer's true home; active business involvement; time spent at the home; family connections; and where the taxpayer keeps items that are "near and dear" — also known in the accounting world as the "teddy bear test."
"He’s got a lot of hoops to make it through before New York says we’re not going to tax you," Nickerson said.
New York considers a taxpayer's home or domicile the place "to which the individual intends to return whenever absent."
For wealthy taxpayers who have multiple homes, it is not enough to show you spend most of your time at your residences outside New York, Comeau said.
"There must be clear and convincing evidence that you've abandoned your home in New York and that you stick the landing," Comeau said, meaning it is undisputed that you have put down roots in residence outside the state.
To determine whether Trump has staked a claim in Palm Beach, auditors would likely ask where are the doctors and dentist that Trump has traditionally gone to. Where does Barron, the couple's teenage son, go to school? Before moving to Washington, DC, Barron Trump attended a private school in New York. None of Trump's other four children attended school in Palm Beach County.
The physical residence itself could also come into play, Comeau said.
"New York would say, 'Let’s compare the housing in New York with the housing in Florida,'" Comeau said. That comparison could include the size and value of each residence, "which have you had longer and which one historically has been your home," Comeau said.
Although the Trump family has traditionally spent Thanksgiving, Christmas, New Year's and Easter together at Mar-a-Lago, that might not convince auditors that the club is actually the Trumps' residence, Nickerson said.
"The fact is we go there for Thanksgiving, but we come back here," Nickerson said. "Sure, you went there as a family, but you came back here (New York)."
When he became president, Trump turned over control of his business empire to his sons Eric and Donald Jr. Although Trump has several businesses in South Florida, including the Trump National Doral in Miami, the Trump National Golf Club in Jupiter and the Trump International Golf Club in West Palm Beach, The Trump Organization, a group of about 500 business entities, has been based in New York for nearly 100 years.
What Trump's involvement with the company will be after leaving the White House is not known. Recent news reports indicate Trump may launch a new digital media company to challenge Fox News. Auditors would likely look at where that business would be headquartered and how involved Trump will be in the New York businesses he turned over to his sons.
As for the near-and-dear teddy best, auditors can ask the whereabouts of sentimental items such as family photos, wedding albums and the whereabouts of family pets. Mar-a-Lago is home to many invaluable and irreplaceable pieces of art and architectural fixtures. It is also home to the famous portrait of Trump in white tennis togs that hangs in the club's lounge.
If Trump tries to claim he is a Florida resident on his tax returns, it is likely he will face a residency audit, not only because Trump — like other wealthy New Yorkers — wants to avoid the state's high income taxes but also because he has incurred the wrath of New York's governor.
When Trump took a swipe at state and local officials in announcing his move to Florida, New York Gov. Andrew Cuomo responded with a “good riddance.”
“It’s not like Mr. Trump paid taxes here anyway,” Cuomo said in his statement. “He’s all yours, Florida.”
The Link LonkNovember 20, 2020 at 04:38AM
https://www.palmbeachpost.com/story/news/2020/11/19/trump-becoming-florida-resident-easy-but-n-y-let-go/6264499002/
For Trump, being a Florida resident is easy. But will N.Y. let go? - Palm Beach Post
https://news.google.com/search?q=easy&hl=en-US&gl=US&ceid=US:en
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