Woman filing her taxes

Ohio Domicile Tax Updates: The “Bright Line” Tests

House Bill 292, which was signed into law on June 14, 2018, implements changes to Ohio’s “bright line” residency tests. Taxpayers that have abodes in Ohio or spend time in the state, but claim non-residency status will be impacted by these changes.

Effective for tax years beginning January 1, 2018, the following taxpayers will now be presumed NOT to be an Ohio resident under the revised “bright line” tests:

  1. An individual is presumed to NOT be domiciled in Ohio for the entire taxable year if the individual has less than 213 contact periods with the state. These contact periods in Ohio do not need to be consecutive. A “contact period” occurs when a person whose abode is outside Ohio spends time in Ohio during two consecutive days while away overnight from that abode.
  2. The taxpayer files the Ohio Form IT-DA with the tax commissioner by October 15 following the close of the tax year. This form is an affidavit that states the taxpayer is not an Ohio resident and meets the qualifications under penalty of perjury.
  3. The taxpayer has to have at least one abode outside of Ohio that they are not using for business purposes subjecting to depreciation.
  4. The taxpayer does not have a valid current Ohio driver’s license.
  5. The taxpayer does not claim any homestead exemptions on their home in the state of Ohio.
  6. Finally, the taxpayer is not receiving reduced tuition at a state institution/college due to being an Ohio resident.

These changes have been enacted as a result of the 2015 Ohio Supreme Court Case, Cunningham v. Testa. The Ohio Supreme Court reversed the determination by the Board of Tax Appeals (BTA) and found that the taxpayer failed to rebut the presumption of Ohio domicile in light of filing an Ohio homestead exemption in the same year he had filed an affidavit of non-Ohio domicile.

Not meeting these bright line tests does NOT necessarily preclude someone from being a nonresident; however, the taxpayer would need to prove otherwise that they were in fact not domiciled in Ohio.

The presumptions of being domiciled or not being domiciled in Ohio does not apply to an individual changing domicile from or to Ohio during a year. If you were to change domicile from Ohio to “Other State” in the middle of a year, you will be considered to be domiciled in Ohio for that portion of the tax year before the change and not domiciled after the change. The law is not clear on the standards to be applied for a change in domicile in a year. The number of days for the presumptive test is not prorated. At this point, we expect Ohio will apply a facts-and-circumstances test to a part year.

Previously, the presence of depreciation on an out-of-state abode, having an Ohio driver’s license, or claiming a homestead were not deal breakers for the presumption of non-Ohio residency. However, taxpayers that have been treating themselves as nonresidents may now be at risk of damaging this presumptions and putting their status as nonresidents in question. Anyone in this situation should contact their advisor immediately to implement changes that would help mitigate these risks.

The following actions can be viewed as evidence of domicile. Due to the changes in House Bill 292, and the results of previous case law, the following recommendations are all appropriate actions to take when changing residency as opposed to simply relying on “bright line” tests.

  1. File a “Other State” Declaration of Domicile with the local County Clerk’s office
  2. Rent a home in “Other State”
  3. Buy a home in “Other State”
  4. Do not claim homestead exemption for Ohio residence
  5. Spend less than 213 days in Ohio
  6. Maintain a log of time spent out of Ohio
  7. Obtain “Other State” driver's license and surrender Ohio license
  8. Register automobiles in “Other State”
  9. Notify the Ohio Board of Elections that you are no longer eligible to vote
  10. Change voter registration to “Other State” and actually vote
  11. File for “Other State” homestead exemption when purchasing a “Other State” home
  12. File Federal income tax returns using the “Other State” address
  13. Have “Other State” bank accounts
  14. Close Ohio safe deposit boxes
  15. Open “Other State” safe deposit box
  16. Change Last Will and Testament to show a “Other State” resident
  17. If Ohio social clubs and country clubs are maintained, change the memberships to nonresident status
  18. Join “Other State” country club and social clubs, if desired
  19. Have credit card bills addressed to “Other State”
  20. Establish a business office in “Other State”
  21. Consider establishing a business entity under “Other State” law for your business activities
  22. Mail payroll checks to “Other State”
  23. Have some doctors in “Other State”
  24. Use “Other State” domicile on passports, contracts, deeds, and hotel registrations
  25. Use “Other State” address for correspondence, credit card charges, Social Security Administration and for all other purposes

Many taxpayers with residencies in Ohio may have questions related to these updates. For more information, please contact Nicholas Demetrios, CPA, MBA and Principal in the Tax Advisory Group of HBK CPAs & Consultants at NDemetrios@hbkcpa.com or 330-758-8613.

About the Author(s)

Nick is a Principal in the Youngstown, Ohio office of HBK CPAs & Consultants. He is a member of the HBK Tax Advisory Group and has experience with individual, partnerships and corporate tax compliance and research issues.

Nick is also involved in evaluating and assisting with tax software implementation and administration. He is involved in internal staff training and is active in firm sponsored continuing education efforts. Nick provides support to the entire firm regarding federal, state and local tax issues.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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