BILL NUMBER:S3642

TITLE OF BILL:  An act to amend the tax law, in relation to the defi-
nition of a resident for the purposes of the personal income tax

PURPOSE:  To clarify the definition of permanent place of abode for the
purposes of the residency rules under the personal income tax.

SUMMARY OF PROVISIONS:  Subparagraph (B) of paragraph 1 of subsection
(b) of Section 605 of the tax law, as amended by Chapter 28 of the Laws
of 1987, is amended to clarify the definition of a permanent place of
abode.

JUSTIFICATION:  Earlier this year, the State of New York division of Tax
Appeals upheld the decision of an Administrative Law Judge that ruled
all income earned by a Connecticut couple who own a second home on Long
Island is subject to New York State taxes. This ruling has sent a shud-
der of concern through vacation-home communities across the State as
vacation homeowners relied upon an exemption in the tax regulations.

Current law states that if you are domiciled in another state, own a
permanent place of abode in New York and spend more than 183 days in New
York, you are a resident for income tax purposes. The tax regulation,
however, excludes camps or cottages suitable and used only for
vacations. In the above referenced case, the family lived in Connecticut
and had a vacation home on Long Island's East End which they used only
              

five or six weekends a year. The husband worked in New York City,
returning each night Connecticut. They has pad New York State income
tax, but at the non-resident rate because they live in Connecticut. The
ruling determined their Long Island vacation home was a permanent place
of abode in New York and the husband was in the State more than 183 days
between work and vacation. As such, they were deemed residents of New
York State pursuant to provisions of the Tax Law and held accountable
for additional taxes.

Vacation-home communities heavily depend on out-of-state residents who
enjoy spending their precious free time and their hard-earned dollars in
New York. If left unchanged, the implications of this decision will
surely discourage vacation home ownership in New York causing further
damage to an already struggling housing market and impeding New York's
economic recovery. This legislation amends the Tax Law to expand the
definition of "permanent place of abode" for the purposes of personal
income tax.

Under this legislation, the usage or ownership of a vacation home will
not be sufficient to establish a permanent place of abode for personal
income tax purposes so long as the taxpayer spends less than 90 days a
year at the vacation home and the home is located more than 50 miles
from the taxpayer's primary place of employment in New York and is not
used as the principal residence. This proposal has the benefit of being
narrowly tailored to address usage and ownership of a dwelling in vaca-

tion communities. It also is similar to a proposal that was under
consideration by the Tax Department several years ago when efforts were
being made to exclude vacation homes from classification as 'permanent
places of abode' under New York's residency rules.

This change is being made to clarify existing law. Despite the decision
in the New York Division of Tax Appeals, it is clear that it was never
the Legislature's initial intent to include or to classify as 'resi-
dent's those taxpayers who made limited use of vacation homes located in
New York State. Instead, the statutory provisions were added to the Tax
Law in the 1920's to ensure that only those people with no transitory
and abiding connections to New York State be classified as residents
under the Tax Law. Taxpayers with limited-use vacation homes were never
supposed to be taxed as 'residents' in New York.

LEGISLATIVE HISTORY: 2011-12 S.3998C.

FISCAL IMPLICATIONS: To be determined.

EFFECTIVE DATE:  Immediately and shall be applicable to taxable years
beginning on or after January 1, 2013.