In the August 2025 TaxStringer, we examined the tax residency rules for California and New York. The publication detailed the California and New York income tax residency tests, exceptions to the primary rules, presumptions of residency, and residency safe harbors, as well as key factors and actions affecting tax residency in New York and California, and other relevant considerations. We also surveyed income tax residency rules across the United States.

After establishing the baseline residency tests and key residency considerations in California and New York through the August 2025 article, we’re following up by analyzing California and New York residency issues through case studies modeled after real-life tax decisions, and with considerations for taxpayers to prepare for and defend against residency challenges.

California–Change of Domicile & “Temporary or Transitory Purpose” Challenged by the FTB

When the California Franchise Tax Board (FTB) initiates a residency audit—for example, after a taxpayer claims a move from California to Nevada—the audit process may follow a common course. In line with California’s residency rules, the audit process reviews: 1) the taxpayer’s change of domicile, the taxpayer’s intent and actions around the move, and whether the taxpayer succeeded in changing domiciles; 2) after addressing domicile, whether the taxpayer’s presence in California or the new home location was for “temporary or transitory purposes”; and 3) depending on the outcome of the California residency analysis, a host of other issues that may involve the allocation of income to California on a nonresident basis, the application of California resident credits to income taxed in another state, California’s community property regime and income subject to tax by each spouse, the timing of capital gains and losses, and so on.

The FTB typically asks questions and requests documentation related to the taxpayer’s claimed move and residency status, perhaps within a single year, or over the course of multiple years that may be under audit. The residency audit process can feel invasive and require taxpayers to produce troves of information. Factors and actions vital to proving a change of domicile, discussed in the August 2025 article, and also for being ready for an eventual audit, include:  

• Time spent in the new home location and California
• Business connections in both states
• Personal property in both states
• Real and tangible property connections in both states
• And a few dozen other factors
  

At the conclusion of an FTB residency audit, sticking with the California to Nevada move example, different outcomes are possible. The FTB can end the audit without change, accepting the returns and claimed Nevada residency as filed. The FTB can disagree with the taxpayer and assert that the taxpayer is still a California resident, issuing an assessment for California tax on a resident basis. The FTB can agree with the move and change of domicile, but not with when the taxpayer claims it occurred, perhaps moving the change of domicile date back several months or even years. Other options are possible (including a refund!) depending on the specific facts of each case.

Completing the Move & Timing of the Move Challenged by the FTB

In Appeal of Bracamonte, a 2021 precedential residency case decided by the California Office of Tax Appeals, the taxpayers claimed a move from California to Nevada in February 2008. Shortly after their claimed move, in July 2008, the taxpayers sold a business they owned, triggering a large capital gain. The taxpayers closed on the purchase of a Nevada home in September 2008, and the FTB agreed that the taxpayers were Nevada residents in September 2008. The exact date of the taxpayers’ landing in Nevada was in question, and the difference would be seven figures of California tax, interest, and penalties.

Changing domiciles from California to another location requires intent and action to support the move. For the Bracamontes, they had several important facts supporting their intent and change of domicile beginning early in February 2008, and in the months leading up to Jul. 18, 2008, when they sold the business. For example, the Bracamontes traveled to Nevada and leased an apartment on Feb. 26, 2008, and they secured access to the Nevada apartment in early March 2008. Around the same time that they secured living quarters in Nevada, they took several other steps to confirm their intent to live in Nevada, including registering to vote in Nevada, securing Nevada driver’s licenses, setting up a Nevada PO Box, opening a new Nevada bank account, and securing a new cell phone number with a Nevada area code. 

In the weeks and months that followed, the Bracamontes took other steps consistent with moving to and living in Nevada, including visiting a Nevada eye doctor, registering a vehicle in Nevada, updating their trust from California to Nevada, purchasing a motorcycle in California that was shipped to Nevada, and changing their mailing address for other accounts and correspondence to Nevada among other similar steps. The Bracamontes also began working with a Nevada realtor in the months after their initial move, and during the summer of 2008, they made offers to purchase three Nevada homes, but none were accepted. The OTA notes that between Feb. 25, 2008, and Jul. 18, 2008, the Bracamontes made several trips between their properties in California, Nevada, and Arizona. They spent 28 days in Henderson, Nevada during this period, 90 days in Escondido, California, and 19 days in Lake Havasu City, Arizona.

Why was the OTA, and perhaps the audit before the decision was issued, focused on Jul. 18, 2008? The taxpayers closed on the sale of their company, Jimsair, on Jul. 18, 2008. They generated over $16.5 million of proceeds from the sale in 2008, and $600,000 of proceeds from the sale in 2009. Per the OTA, the parties had agreed that the only issue in the case was whether the taxpayers were California residents on Jul. 18, 2008. “In this appeal, the dispute over appellants’ residency is focused on a single transaction–the sale of Jimsair on Jul. 18, 2008. The result of the dispute controls whether appellants must pay California income tax on the gain from appellants’ sale.” Per a footnote in the decision, the FTB conceded that the Bracamontes changed their domicile to Nevada as of Sept. 29, 2008.

The Bracamontes’ case hung on key residency facts and actions over the course of several months within 2008. This was not a “forever” case; the domicile issue was resolved on Sept. 29, 2008. The OTA went on to review additional actions and shifts in the Bracamontes’ lifestyle between Jul. 18 and Dec. 31, 2008. For example, the OTA notes that the Bracamontes spent 72 days in Nevada, 24 days in California, and 25 days in Arizona during this July – December 2008 period, they closed on a home in Henderson, Nevada on Sept. 22, 2008, and they registered vehicles and other craft in Arizona in August 2008.

Domicile—the OTA’s Holding

Consistent with California law, the OTA first applied California’s domicile test and standard to the Bracamontes’ claimed move in February 2008. The burden of proof was on the Bracamontes to demonstrate their claimed move to Nevada in February 2008. The OTA considered all the facts and circumstances, including the taxpayers’ testimony, and found the Bracamontes did not prove their intent to change domiciles in February 2008 or before Jul. 18, 2008. In finding the Bracamontes still domiciled in California, the OTA cited testimony from Mr. Bracamonte that they rented the initial apartment in Nevada because they “needed a temporary place to live,” the taxpayers’ retention of a large California home, the retention of “precious mementos and other valuable items in California” until they acquired a “permanent” home in Nevada, among other factors that suggested to the OTA that the Bracamontes retained their California domicile through Jul. 18, 2008.

Temporary or Transitory Purpose—the OTA’s Holding

After deciding the Bracamontes were domiciled in California, the OTA next turned to whether they were outside of California—in Nevada—for “other than temporary or transitory purposes” between February and July 2008. If the Bracamontes were outside of California for other than temporary or transitory purposes during this period, despite their California domicile status, they would be taxable as California nonresidents.

Unfortunately for the Bracamontes, the OTA held their presence in Nevada to only be for “temporary or transitory” purposes between February and July 2008, as they prepared for their permanent move to Nevada. The OTA applied the multi-factor “closer connections” analysis that we detailed in the prior August 2025 article, citing the Appeal of Bragg and Appeal of Mazer matters.[1] In finding the Bracamontes to be California residents, the OTA leaned into their time patterns that appeared to favor California between February and July 2008. The OTA stated: “Most significantly, appellants’ physical presence in California from Feb. 26, 2008, the date appellants argue they moved out of California, to Jul. 18, 2008, far outweighed their presence in any other state … Indeed, physical presence is a factor of greater significance than mental intent and the formalities that tie one to a particular state. [citations omitted]”

The OTA acknowledged that the Bracamontes had increased their connections with Nevada before the Jul. 18, 2008, sale event. In the end, with the taxpayers holding the burden of proof, the OTA ruled against them, finding they were still domiciled in California through Jul. 18, 2008. The gain from the sale of Jimsair in 2008, and the installment payment from the sale received later in 2009, were thus subject to California tax on a resident basis.

Practice Pointers from the Bracamonte Decision

California residency audits and appeals can be challenging as demonstrated in the Bracamonte decision. If the Bracamontes completed the sale of Jimsair after Sept. 29, 2008, would the FTB have walked away from the residency issue and not imposed California income tax? Possibly. If the Bracamontes had closed on the purchase of their Nevada home and moved into that home before the Jul. 18, 2008, sale of Jimsair—as they were clearly trying to do—would the FTB have walked away from the issue and not imposed California income tax? Possibly. Residency audits and appeals are subjective and premised on the balancing of potentially dozens of unique facts and circumstances. A different OTA judge considering the facts of this case could have generated a different outcome.

The Bracamonte decision highlights the importance of several key factors in planning and analyzing California residency, including:

• Where Taxpayers Spend Time Around a Claimed Change of Domicile and In the Overall California Residency Analysis. The “time” analysis can include the number of days, the type of days, the length of stay, and other considerations. As quoted above, the OTA considered where and the amount of time the Bracamontes spent as the “[m]ost significant” factor in its “temporary or transitory purpose” holding.

   

• Evidencing a Permanent Intent to Land In the New Location. Some of the Bracamontes’ actions, such as renting the initial apartment on a short-term lease, and their testimony about the initial lease being a temporary residence, may have contradicted their legitimate, long-term intent to change domiciles to Nevada in the eyes of the OTA. Taxpayers should be cautious to meet their burden of proof on the key domicile issue, and to have evidence that will confirm their intent to move, and if needed their presence outside of California for other than temporary or transitory purposes after the move.

   

• Even When the Domicile Issue is Lost, California Nonresident Tax Status Is Possible. The Bracamonte decision highlights the different nature of California’s residency rules when compared to New York (and many other states). Even after the Bracamontes lost the “domicile” issue, the OTA continued down the California residency analysis and analyzed whether the taxpayers were outside California for other than temporary or transitory purposes, which could have secured their California nonresident status. Taxpayers have lost the domicile issue and won on the “temporary or transitory purposes” issue before. But all is not lost if the taxpayer fails to prove their intent to change domiciles as of the claimed move date. When considering California residency status, the domicile and temporary or transitory purpose prongs of the test must each be considered.

The Appeal of Bracamonte decision is a recent, precedential case that highlights many of the California residency issues analyzed in the August 2025 article. However, taxpayers have been successful and proven a change of residency out of California as claimed—even when the move is followed by a large income event—in other cases. One such case is the former State Board of Equalization Appeal of Bills decision.[2] In that case, the taxpayers retained the former California residence, spent time in California, and had other connections in California—and they were able to prove their change of domicile to Washington and nonresident California tax status. The facts in Bills were different than the Bracamonte decision, and highlight that taxpayers may be able to keep meaningful ties in California while being taxed as California nonresidents under California’s residency test.

New York—Change of Domicile & Statutory Residency Challenged by the New York Tax Department

When the New York State Department of Taxation and Finance (New York Tax Department) initiates a residency audit, for example after a taxpayer claims a move out of New York to Florida, the audit process may follow a common course. In line with New York’s residency rules, the audit process tends to review: 1) the taxpayer’s change of domicile, the taxpayer’s intent and actions around the move, and whether the taxpayer succeeded in changing domiciles; 2) after addressing domicile, whether the taxpayer maintained a permanent place of abode in New York and if the taxpayer spent in excess of 183 whole or partial days in New York (the New York “statutory residency” test); and 3) depending on the outcome of the New York residency analysis, a host of other issues that may involve the allocation of income to New York on a nonresident basis, the application of New York resident credits to income taxed in another state, the timing of capital gains and losses, and so on.

This process is similar to the California FTB residency audit process. The New York Tax Department typically asks questions and requests documentation related to the taxpayer’s claimed move and residency status, perhaps within a single year, or over the course of multiple years that may be under audit. The residency audit process can feel invasive and require taxpayers to produce troves of information. The five “primary” New York domicile factors, and the various “other” factors and analyzed when a taxpayer changes domiciles, discussed in the August 2025 article, are key to proving a move and change of domicile, and for being ready for a possible audit.

Also similar to the California audit process, at the conclusion of a New York Tax Department residency audit, sticking with the New York to Florida move example, different outcomes are possible. The New York Tax Department can end the audit without change, accepting the returns and claimed Florida residency as filed. The New York Tax Department can disagree with the taxpayer and assert the taxpayer is still a New York resident, issuing an assessment for New York tax on a resident basis. The New York Tax Department can agree with the move and change of domicile, but not when the taxpayer claims, perhaps moving the change of domicile date back several months or even years. Other options are possible (including a refund!) depending on the specific facts of each case.

New York Domicile & Residency Status Challenged by the New York Tax Department

We could highlight New York’s residency rules by reviewing several New York to Florida, or New York to other places domicile cases from the New York Division of Tax Appeals (New York’s specialized tax tribunal) and New York’s other courts. For example, the Matter of Newcomb’s Estate decision from the New York Court of Appeals (New York’s highest court) involves a move from New York to New Orleans, Louisiana. The case, decided in 1908, is still routinely cited by New York courts, the New York Tax Department, and taxpayers.

We reviewed a typical domicile case (a move from California to Nevada) in Appeal of Bracamonte, above. For the New York case study, let’s shift gears into a different situation—where the New York Tax Department attempted, unsuccessfully, to pull a taxpayer who lived in New Jersey into New York against his will.

In Matter of Craig F. Knight,[3] the New York Division of Tax Appeals Tribunal reviewed whether the taxpayer changed his domicile from nearby New Jersey into New York City. Mr. Knight had been a New Jersey resident for many years. He lived in his New Jersey home with his wife and children in the years leading up to the period at issue (1996–1997). Mr. Knight worked at and co-owned a business in New York. Mr. Knight separated from his wife in March 1996 and moved in with his parents, who also lived in New Jersey, around the same time.  

Following an audit of the 1996 and 1997 tax years, the New York Tax Department found that Mr. Knight changed his domicile into New York in April 1996, and that he was also a “statutory” resident of New York during the 1997 tax year, as he maintained living quarters in New York in 1997 and spent more than 183 days in New York in 1997. Mr. Knight lost his initial tax appeal in front of a New York Division of Tax Appeals Administrative Law Judge,[4] but he won on all issues in a precedential decision in front of the New York Division of Tax Appeals Tribunal.

There’s no doubt that Mr. Knight had material New York connections during 1996 and 1997. He worked in New York, spent time in New York, he was dating a woman who lived in New York, and spent some time at her residence in New York. Mr. Knight’s business also maintained a corporate apartment in New York that he and others could use, among other New York connections. At the same time, Mr. Knight had been a New Jersey domiciled resident for many years leading up to 1996/1997, and he continued to maintain material connections in New Jersey during the years in question. These New Jersey connections included his primary residence at his parents’ New Jersey home after his marital separation, spending time with his ill father in New Jersey, coaching and refereeing soccer games in New Jersey, receiving medical care in New Jersey, and other formalities and connections in New Jersey (registration to vote in New Jersey, etc.). 

In finding that Mr. Knight did not change his domicile to New York from New Jersey as claimed by the Tax Department, the New York Tax Appeals Tribunal stated:

The exercise we are now engaged in is not to choose among these three places based on the number of nights [the Petitioner] stayed in each or the quality of the welcome that he would receive in each place. It is the burden of the Division to establish that petitioner had a place of residence in New York and that he intended to establish a new permanent home in New York displacing his [former] domicile.

In Matter of Knight, despite Mr. Knight’s ties to New York, the Tribunal relied heavily on the burden of proof issue in finding that the taxpayer had not changed his domicile from New Jersey into New York. The three “places” referred to by the Tax Appeals Tribunal were the New Jersey residence of Mr. Knight’s parents; the New York City corporate apartment; and the significant other’s New York City apartment. For other reasons discussed in detail in the decision, which is worth a close read, Mr. Knight was also found not to be a New York “statutory” resident in 1997, primarily on account of neither New York City abode constituting a “permanent place of abode” he maintained in New York City during the years in question.

Practice Pointers from the Knight Decision

The New York Tax Department, like the California FTB, tends to vigorously audit and analyze when taxpayers—particularly high earners—change residency out of New York. In other cases, like Matter of Knight, the New York Tax Department also pursues taxpayers with increased New York connections, sometimes suggesting that the taxpayer changed domiciles into New York even when they haven’t claimed such a move or have the stated intent to move and change domiciles. It tends to be more difficult for the New York Tax Department to pull a taxpayer into New York against their will, when the New York Tax Department bears the burden of proof on the key “domicile” issue.

The Knight decision highlights the importance of several key factors in planning and analyzing New York residency, including:

• The Impact of Who Bears the Burden of Proof In a Domicile Case. The burden of proof in a New York domicile audit or appeal is on the party asserting the change of domicile. In many cases, the taxpayer bears the burden of proof—the taxpayer is asserting a move and change of domicile from New York to some other location. In Bracamonte, with a similar rule in California, the taxpayers bore the burden to prove the move from California to Nevada. In New York, the burden must be met by “clear and convincing” evidence, which is a substantial burden of proof.[5]
  
  

  For Mr. Knight, as quoted above by the New York Tax Appeals Tribunal, the Tax Department could not meet its burden of proof to demonstrate the taxpayer’s intent to change domiciles, by clear and convincing evidence. Every taxpayer needs to be aware of the burden and standard of proof involved in changing domiciles from New York to another location, or potentially from another location into New York. The burden of proof can have a material impact on a residency audit/appeal, and for a taxpayer like Mr. Knight make a substantial difference.

• Importance of Key Factors In a New York Domicile Case. The taxpayer in the Knight decision and the New York Tax Department clearly spent substantial time during the audit and appeal processes addressing the taxpayer’s time spent in New Jersey and New York, living quarters in New Jersey and New York, business connections, personal property, family ties, and numerous “other” factors. These factors, especially the five “primary” domicile factors, have outsized importance in a New York domicile audit and appeal. The taxpayer’s overall pattern of living is taken into consideration to support the taxpayer’s intention, with focus on these key aspects of the taxpayer’s residency status. Residency planning in New York (and many other places) should consider these factors, which New York routinely compare to determine shifts in the taxpayer’s pattern of living and domicile status.
• Knight & Bracamonte—Taxpayer Testimony. As discussed above, the California OTA seemed to rely on a piece of testimony from Mr. Bracamonte that the first Nevada rental was a “temporary place to live” as they searched for a more permanent home. Mr. Bracamonte needed to prove that his presence in Nevada was for other than temporary or transitory purposes (or, if he was found domiciled in Nevada, that his presence in California was only for temporary or transitory purposes).  Beyond the quote offered by the OTA, there are likely pages of additional testimony from Mr. Bracamonte that could have explained or eliminated the negative connotation with the “temporary place to live” comment.

We only see a handful of quotes from the taxpayer’s testimony in the OTA’s decision, or in the New York Division of Tax Appeals Tribunal decision. The quotes we see demonstrate the importance of testimony in residency appeals, and more broadly the importance of a taxpayer’s statements and comments regarding residency during the audit and appeal processes.  Mr. Knight’s credible testimony regarding his primary home and domicile, including details of personal facts, seemed to break in his favor.  When discussing state tax residency, a taxpayer’s testimony and recollection of key facts and issues can be critically important, as seen in both examples reviewed here.

Conclusion

The decisions highlighted for review in this article are just two of dozens of relevant California and New York residency cases.  These two decisions offer windows into several key California and New York residency issues and demonstrate that some income tax residency concepts—including domicile, the burden of proof, the audit and information gathering processes, and so on—have overlap between jurisdictions.

Our August 2025 article focused on the specific California and New York residency rules, and this article applies and highlights those rules in the context of real income tax residency decisions.  State tax residency cases are resolved based on the unique facts of the taxpayers under review, and these two articles demonstrate the importance of understanding California and New York’s residency rules and factors when planning or defending a taxpayer’s change of residency.

Joseph F. Tantillo, Esq., is a member of Hodgson Russ’s Tax Practice. He is licensed to practice in New York, California, and Washington, D.C., and focuses on a multitude of state and local tax matters in jurisdictions across the United States. Joe works to simplify the ins-and-outs of the New York State Department of Taxation and Finance for his clients. During his tenure, he has worked on hundreds of audits, allowing him to help craft nuanced strategies focused on efficiently resolving each client’s audit across various tax types, including personal income tax, sales and use tax, corporate franchise tax, and several other lesser-known taxes. Joe also counsels clients moving out of New York and California through the residency planning process – including helping to develop a legally-grounded strategy for a move that aims to help clients strengthen their change of domicile position. In addition to his work with clients, Joe also is the host of the first ever Hodgson Russ LLP podcast, “State Tax Talks with Joe Tantillo.”