Over the past few years, FMJ’s Trusts & Estates Team has seen a growing number of snowbirds looking into what it takes to shift their permanent residency to their home in a warmer location. As such, we spend a considerable amount of time educating clients on residency and items to consider.
A change of residency is not a one-time action, but a series of actions demonstrating that a person intends to establish residency in a different state. When changing residency, we encourage clients to do whatever they can to help “tell the story” about a change of residency. It’s not just one factor, it’s a variety of factors that show that you are making an intentional choice to leave Minnesota and make some other state your permanent home.
The Minnesota Department of Revenue uses two tests to determine whether a taxpayer is a resident. The first test is often referred to as the 183-Day Rule. Under that rule, you are considered a Minnesota resident if (1) you spend at least 183 days in Minnesota during the year, and (2) you rent, own, maintain or occupy a residence in Minnesota suitable for year-round use. The second, more subjective test looks at whether a person is “domiciled” in Minnesota.
The 183-Day Rule
This rule analyzes whether a person is physically present in Minnesota for more than half the year. In other words, is someone in the state for 183 days or more? Partial days, such as days when a person is in the state for less than 24 hours, are still counted, unless a person is only present in the state as they are traveling from one state to another state. As an example, say you leave Florida and fly to Minnesota to visit family. Your flight lands late in the evening on the first day. You visit with family for the next three days. Then, you fly out early the following day. For purposes of the 183-Day Rule, you have been “present” in Minnesota for a total of five days. By contrast, if you are driving from Wisconsin to South Dakota, and you merely pass through Minnesota, that time in Minnesota should not count.
Please note that even if you are not technically domiciled in Minnesota, you are a resident if you “maintain an abode” in Minnesota and are physically present in the state for more than half of the year. An “abode” means a dwelling (i.e., house or cabin) that is maintained continuously by a person or their spouse and is owned or rented by either of them. Excepted from the definition of “abode” are dwellings that are not suitable for year-round use (like a seasonal cabin) and dwellings that do not have facilities for cooking or bathing.
As such, if you cannot spend more than 183 days outside of Minnesota, then you would likely be deemed a Minnesota resident even if you believe your “domicile” is in some other state. It is important to note that it is your responsibility to be able to show where you spent your time and how many days you were in Minnesota. Keeping accurate records is essential.
Domicile Assessment
The second, more subjective test looks at whether a person is “domiciled” in Minnesota. A person is “domiciled” in Minnesota if they are physically present in the state, and they intend for Minnesota to be their home. Even if you are not physically present in Minnesota for 183 days of the year, you are still a resident of Minnesota if you are found to be domiciled in Minnesota. Simply forming a personal intent to live somewhere else (e.g., “gee, I’d really like to live in Florida!”) is not enough.
Minnesota looks at numerous criteria to determine whether, objectively, a person has demonstrated their intent to make Minnesota or some other state their home. Below is a list of some of the key factors:
- Where you spend a majority of your time;
- Location of your spouse, children, dependents, and other relationships;
- Location of keepsakes;
- Location of memberships, clubs, and other organizations;
- Where you attend church or worship services;
- Where you or family members attend school and whether resident or nonresident tuition was charged;
- Location and status of professional licenses;
- Location of union membership;
- Location of employment (permanent or temporary);
- Location of real and personal property;
- Location of business relationships;
- Location of newly acquired living quarters;
- Status of former living quarters;
- Size and value of residences;
- Address change notifications;
- Location of domicile for prior years;
- State that issued your driver’s license;
- Voting registration and history;
- Location where financial transactions occur;
- Address on military records;
- Address on legal documents;
- Statements to insurance companies;
- Where resident or nonresident hunting or fishing licenses were purchased;
- Location of jury duty; and,
- Statements to other taxing authorities.
It is also important to note that Minnesota presumes that a married couple is domiciled in the same state, unless they are separated.
There are, however, a few factors that the state will not consider. First, the location of charities that you make donations to is not considered in determining where you are domiciled. Second, and effective only as of the 2017 tax year, Minnesota will not consider where you bank or where your legal, tax, or financial advisors are located. This relatively new guidance allows a former Minnesota resident to maintain the same relationships with their banks, financial advisors, accountants, and lawyers that they had before they moved. Essentially everything else is fair game.
Regarding the domicile test, your goal should be to have as many of the factors weigh in your favor as possible. In making an assessment as to residency, your actions will carry more weight than just simply declaring that you are no longer a Minnesota resident.
Suppose you have lived in Minnesota for a number of years and have clearly established your domicile in Minnesota, but you want to move somewhere else. Does selling your home in Minnesota revoke your resident status for tax purposes? Not by itself. Take the case of a couple who sold their home, purchased an RV, and decided to travel the country for a while. They took steps to establish their domicile in a neighboring state by getting a mailing address there, registering to vote there, and obtaining a driver’s license in the state. Despite these measures, the couple were still deemed Minnesota residents because they had failed to establish their physical presence in the other state. Simply moving away from Minnesota does not prevent Minnesota from treating you as a resident. You must affirmatively establish a new domicile somewhere else, which generally means you must set down roots in a new state.
The best thing you can do if you are trying to establish that you are a resident of another state is to keep good records. Keep copies of travel documents, calendars, and receipts that can establish your presence outside of Minnesota for more than half of the year. There are a number of phone apps and computer programs that can help with tracking your days and where you spent your time. Also, remember that merely staying away from Minnesota for half the year alone is not enough. You must affirmatively establish domicile in another state. Make sure that you have a home in your new state of residence and that you have more ties connecting you to the new state than you have to Minnesota.
If you do get audited by the Minnesota Department of Revenue, seek guidance from the Trusts & Estates Attorneys at Fafinski Mark & Johnson, P.A., and please reach out with any other questions about residency, Minnesota tax issues, and so on.
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