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Home Away From Home - Another Twist on the Domicile Question

Moving to the West Coast doesn't necessarily change your domicile away from Alabama for tax purposes, even if you intend to work there for five years. That was the message given to the taxpayer by the Administrative Law Judge in a recent case, Kara J. Kolstad v. State of Alabama Department of Revenue, Docket #05-443, 7/11/05.

Ms. Kolstad graduated from UAB in 2002 and worked part-time in Birmingham until February, 2003, when she landed a job with a cruise line operating out of Seattle. After accepting the cruise line job, she sublet her Birmingham apartment, sold or gave away her furniture, canceled her car insurance, gave her car to her brother, and took a one-way flight to Seattle. Ms. Kolstad testified that her intention was to remain with the cruise line until she had traveled on every cruise the line offered. She estimated that this program would have taken her about five years.

She changed her plans in November, however, when UAB offered her a permanent research position. Kolstad returned to Birmingham and resumed her life in Alabama. In the spring of 2004, she filed a 2003 Alabama income tax return, but she failed to include the income earned from the cruise line (presumably she filed a Part-Year Resident return). ADOR assessed her for the tax on the Seattle income, and she appealed.

According to the ALJ, the question of whether or not the cruise line income was taxable in Alabama depended on whether the taxpayer was domiciled in Alabama at the time she earned the income. If she was so domiciled, the income was taxable in Alabama. The judge relied on an earlier Administrative Law Division case, (Cobb v. State of Alabama, #96-272, 1/21/97) in asserting that

"A person's domicile is his true, fixed home to which he intends to return when absent. The burden is on a person claiming a change of domicile to prove that a change has in fact occurred. There is a presumption in favor of the former domicile, and a change occurs only if the person (1) abandons Alabama with the intent not to return, and (2) establishes a new residence outside of Alabama with the intent to remain at the new location permanently, or at least indefinitely."

Kolstad may have abandoned Alabama when she flew to Seattle for her new job, but she did intend to return eventually, even though it might have taken five years. Furthermore, since she lived on board one or the other of the cruise ships for most of the time she was out of Alabama, she did not establish a new permanent residence in Seattle, or anywhere else outside of Alabama. The Administrative Law Judge held that she was still domiciled in Alabama at the time she worked on the cruise line, and that the income received from that work should be included on her Alabama income tax return.

This page last updated 8/23/05

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