This is part two of an article that addresses the legal and tax factors involved in shifting a taxpayer’s residence or domicile to another state. Part one addressed the New York statutory framework for residency analysis and related matters, as well as the first of five primary factors used in determining an individual’s domicile (the location of an individual’s home). The other four primary factors are discussed below, as well as other factors and part-year residency.
(2) Active Business Involvement. A taxpayer’s employment or active participation in a New York trade, business, occupation or profession, and/or substantial investment in, and management of, any New York closely-held business will usually result in a finding against a change of domicile. It does not matter if the taxpayer’s involvement does not actually take place in New York. However, passive investments in New York entities is not indicative of domicile. The Guidelines specifically state that the fact that funds are left on deposit with a New York bank must not enter into the determination of domicile (presumably on account of concern that New York banks and brokerage firms not lose business to out-of-state entities).
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