Avoiding state income tax when out of state?

I take it that divorce isn't the answer you're looking for - but such would
certainly satisfy the requirements.

If you vote and register your vehicle in TX, that would help.  Leaving a
family behind does not.

Under IRS rulings and procedures, a "relocation" is not temporary if it
exceeds one year but becomes indefininte.  It becomes permanent at 2 years.
How long is the job supposed to last?

[For Katie to chime in:  Will the FTB follow the IRS on this point?]

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wrote:

No,  IRS rulings as to the determination of residence or relocation
have no bearing at all on the determination of residence for state
income tax purposes.  State residence is defined by each state's
statutory and judicial law.

I'm a little late chiming in here; I hope the OP is still around.

Removesps posted excerpts from the FTB's explanatory publication.
California law (CRTC Sec. 17014) defines a resident as a person who is
present in the state for a purpose that is not temporary or
transitory, or who is domiciled in the state and absent for a
temporary or transitory purpose.  The OP did not state whether the
spouses are estranged, or how long his absence from California is
expected to be, or whether his wife expects to follow him to Texas at
some future time, all of which could enter into the determination of
whether he will have changed his domicile from California to Texas,
and if not, whether his absence will or will not be temporary.  The
intentions of the parties also enter into the determination of what
law determines the division of income between the spouses, since that
determination with respect to each spouse's earnings is made in
accordance with the law of his or her domicile.  We do not have enough
information here to give more than general advice.

The OP's wife and children will remain in California, and it does not
appear that the spouses are estranged or separated without the
intention of resuming or continuing the marital relationship.  Under
those circumstances the OP will remain domiciled in California (not
having severed his ties to California), and his earnings and those of
his wife will continue to be community income under California law,
assuming no interspousal agreement to the contrary.   (Even if his
domicile has changed to Texas, his earnings will be community income
under Texas law.)   Assuming the OP will be absent from California
under an employment-related contract for at least 546 days, spending
no more than 45 days of any taxable year in California during his
absence, he will be a nonresident of California for income tax
purposes under the safe harbor (CRTC Sec 17014(d)) unless the taxpayer
has more than $200,000 of income from intangibles or the absence is
primarily for tax avoidance purposes.

If the OP is a nonresident and his wife is a resident, regardless of
his domicile, half of his earned income is hers and half of hers is
his.  If they file a joint federal income tax return, they MUST file a
joint return in California on Form 540NR.  They do not meet the
requirements for filing separately because in this case, the
nonresident spouse would have California source income, viz., his 50%
of his wife's California earnings (and his 50% of any other California
source income from community property other than intangibles).
California AGI under these rules would include both halves of her
earned income plus her half of his Texas earnings; it would also
include both halves of any other California source income, and her
half of any other community income from sources other than
California.  (His half of community income from intangibles would be
Texas source income, not included.)

If the spouses have separated with no intention of resuming the
marital relationship, then under California law each spouse's earned
income is his or her separate income from the date of separation.  In
that case, a joint return would be required only if there is
California source community income other than earned income.  If the
nonresident spouse is a full year nonresident and has no California
source income, the spouses may file jointly or separately regardless
of the federal filing.  None of the OP's Texas source earnings would
be included in the California resident spouse's income, unless he is
domiciled in Texas and Texas has a different rule from California's.
(I'm not sure at what point the community is deemed to end for that
purpose under Texas law.)

If the OP will not meet the safe harbor, he probably remains a
California resident for tax purposes during his absence; however, more
information would be needed to determine that.

Katie in San Diego

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The main question is whether you intend to return to CA.

See publication 1031 from the FTB website.
http://www.ftb.ca.gov/forms/2008/08_1031.pdf .
They have general rules and a safe harbor rule.

General Rules:

<Quote>

D Guidelines for Determining Residency

The underlying theory of residency is that you are a resident of the
place where you have the closest connections.
The following list shows some of the factors you can use to help
determine your residency status. Since your residence is usually the
place where you have the closest ties, you should compare your ties to
California with your ties elsewhere. In using these factors, it is the
strength of your ties, not just the number of ties, that determines
your residency.

Factors to consider are as follows:

• Amount of time you spend in California versus amount of time you
spend outside California.
• Location of your spouse/RDP and children.
• Location of your principal residence.
• State that issued your driver’s license.
• State where your vehicles are registered.
• State in which you maintain your professional licenses.
• State in which you are registered to vote.
• Location of the banks where you maintain accounts.
• The origination point of your financial transactions.
• Location of your medical professionals and other healthcare
providers (doctors, dentists etc.), accountants, and attorneys.
• Location of your social ties, such as your place of worship,
professional associations, or social and country clubs of which you
are a member.
• Location of your real property and investments.
• Permanence of your work assignments in California.

This is only a partial list of the factors to consider.
Consider all the facts of your particular
situation to determine your residency status.


Because your wife and kids go to school in CA, the odds are that you
are a CA resident.


The safe habor rule allows you to be a CA non-resident.

<Quote>

Safe Harbor

For taxable years beginning on or after January 1, 1994, a safe harbor
is available for certain individuals leaving California under
employment-related contracts. The safe harbor provides that an
individual domiciled in California who is outside California under an
employment-related contract for at least 546 consecutive days will be
considered a nonresident unless any of the following is met:

• The individual has intangible income exceeding $200,000 in any
taxable year during which the employment- related contract is in
effect.
• The principal purpose of the absence from California is to avoid
personal income tax.

The spouse/RDP of the individual covered by this safe harbor rule will
also be considered a nonresident while accompanying the individual
outside California for at least 546 consecutive days.  Return visits
to California that do not exceed a total of 45 days during any taxable
year covered by the employment contract are considered temporary.
Individuals not covered by this safe harbor determine residency status
based on facts and circumstances. The determination of residency
status cannot be solely based on an individual’s occupation, business,
or vocation. Instead, consider all activities to determine residency
status. For instance, students who are residents of California leaving
this state to attend an out-of-state school do not automatically
become nonresidents, nor do students who are nonresidents of
California coming to this state to attend a California school
automatically become residents. In these situations, individuals must
determine their residency status based on their facts and
circumstances (as described in Section D, Guidelines for Determining
Residency, and Section E, Temporary or Transitory Purposes).


Supposing the safe harbor rule applies to you, then since your spouse
remains in CA, she is a resident.  Half of your income belongs to her,
assuming there is no prenup to state otherwise, so I guess you would
not need to file a CA-540, but she would on half of the income.

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Keep in mind that Kal-E-forn-ya will tax anyone for any reason.

My suggestions are:
   1. Take your wife and children to Texas.
   2. Take your children to Texas and have your wife commute.
   3. File for divorce with a separate maintenance agreement
      and let it die of old age.

I had a bachelor pad in Baltimore for a year and went home on
the weekends.  It was a 5 hour drive.  Sometimes my childbide
came up for the weekend.  But, Texas to the Land of Fruits and
Nuts is a hell of a drive and airfare is not cheap.  

The best advice you can get on this will come from Katie Jacques,
MTM's resident State Taxation Authority.

Dick

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