Did a worker become a Texas resident by renting an apartment for a job while his wife, family home, voting, license, and vehicles stayed in New Mexico?
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This page answers the general question as of 2006. Ezel answers yours, under current New Mexico tax law, with citations.
Plain-English summary
Howard Henderson remained domiciled in New Mexico while working in Texas, so New Mexico taxed all of his 2000 and 2001 Texas wages. His furnished Texas apartment was a temporary work residence, while his enduring family home and formal ties remained in Albuquerque.
Henderson and his wife had rented and furnished the same Albuquerque house since the mid-1990s. Over 10 to 12 years, Henderson took jobs in several states, but his wife and children stayed in that home, and he returned whenever an assignment ended.
In September 2000, his employer closed its Albuquerque store and transferred him to Texas. Henderson rented a furnished East Dallas apartment while his wife stayed in Albuquerque. He kept his New Mexico voter registration, driver's license, and vehicle registrations and did not register to vote in Texas.
When the job ended in July 2002, he returned to the Albuquerque home. He later took another Texas job and again returned there after that job ended in January 2006.
The Department assessed $2,720.13 of tax, penalty, and interest for 2000 and $5,537.21 for 2001. Henderson argued that he had been a Texas resident from September 2000 through July 2002.
Residents report wages earned outside New Mexico
Section 7-2-11(A)(3) and Regulation 3.3.11.11 required New Mexico residents to allocate all compensation for personal services to New Mexico, regardless of where the work occurred.
Both a state of residence and a state where services are performed may have authority to tax the income. New Mexico offered a credit under Section 7-2-13 when the second state actually imposed tax, but Texas had no personal income tax, so no double-tax credit applied here.
Domicile required more than a work apartment
Under the law then in effect, residence for income-tax purposes followed domicile. Changing domicile required physical presence in Texas plus intent to abandon New Mexico and make Texas the permanent home.
Henderson satisfied the physical-presence element but not abandonment and permanent intent. His spouse and household belongings remained in their established Albuquerque home. He preserved New Mexico voting, licensing, and vehicle ties and repeatedly returned after temporary out-of-state jobs.
Regulation 3.3.1.9(C) presumed New Mexico domicile when a person remained registered to vote or held a valid driver's license here without later registering or obtaining a license elsewhere.
The hearing officer found no evidence that the 2000 Texas move differed from Henderson's other frequent but temporary assignments.
Result: protest DENIED. Henderson was a New Mexico resident, and his Texas wages were subject to New Mexico personal income tax.
What this means for you
Employees on temporary out-of-state assignments
Renting housing near a job does not necessarily change domicile. The decision looked at whether the worker abandoned the established home and intended the new location to be permanent.
Married taxpayers living apart for work
A spouse's continued residence in the family home can be powerful evidence that the worker's fixed home remains there.
Taxpayers retaining state documents
Voter registration, driver's licenses, and vehicle registrations can create or reinforce a presumption of continuing domicile.
New Mexico residents working in no-income-tax states
New Mexico may tax the wages as resident income, while no other-state credit is available if the work state imposes no personal income tax.
Common questions
Q: Did Henderson physically live in Texas?
A: Yes. He rented a furnished apartment and worked there, but physical presence alone did not change domicile.
Q: What remained in New Mexico?
A: His wife, their long-term furnished home, his voter registration, driver's license, and vehicle registrations.
Q: What happened when his Texas jobs ended?
A: He returned to the Albuquerque home, consistent with his pattern after other out-of-state assignments.
Q: Why were all Texas wages taxable in New Mexico?
A: The hearing officer found he remained a New Mexico resident, and resident personal-service compensation was allocated to New Mexico.
Q: Was there a credit for Texas tax?
A: No. Texas did not impose personal income tax on the wages.
Citations and references
Statutes and regulations:
- NMSA 1978, §§ 7-2-1 et seq. — New Mexico personal income tax
- NMSA 1978, § 7-2-2 — 2000-2001 definition of resident
- NMSA 1978, § 7-2-11(A)(3) — resident allocation of personal-service compensation
- NMSA 1978, § 7-2-13 — credit for tax paid to another state
- Regulation 3.3.1.9(B)-(C) NMAC — domicile and New Mexico-document presumptions
- Regulation 3.3.11.11 NMAC — allocation of resident compensation
Cases cited:
- Shaffer v. Carter, 252 U.S. 37 (1919)
- Lawrence v. State Tax Commission of Mississippi, 286 U.S. 276 (1932)
- Murphy v. Taxation and Revenue Department, 94 N.M. 54, 607 P.2d 592 (1980)
- Estate of Peck v. Chambers, 80 N.M. 290, 454 P.2d 772 (1969)
- Hagan v. Hardwick, 95 N.M. 517, 624 P.2d 26 (1981)
- Snyder v. Pitts, 241 S.W.2d 136 (Tex. 1951)
- Pecos & N.T. Ry. Co. v. Thompson, 167 S.W. 801 (Tex. 1914)
- Owens Corning v. Carter, 997 S.W.2d 560 (Tex. 1999)
Source
- Listing: New Mexico Decisions & Orders
- Decision post: Howard B. Henderson
- Decision PDF: D&O 06-09
Original ruling text
BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO
IN THE MATTER OF THE PROTEST OF
HOWARD B. HENDERSON TO ASSESSMENTS OF No. 06-09
2000 and 2001 PERSONAL INCOME TAX ISSUED
UNDER LETTER ID L1760393728 & L1257887232
DECISION AND ORDER
A formal hearing on the above-referenced protest was held on May 3, 2006, before
Margaret B. Alcock, Hearing Officer. The Taxation and Revenue Department (“Department”)
was represented by Elizabeth K. Korsmo, Special Assistant Attorney General. Howard B.
Henderson (“Taxpayer”) represented himself. Based on the evidence and arguments presented,
IT IS DECIDED AND ORDERED AS FOLLOWS:
FINDINGS OF FACT
- Since the mid-1990s, the Taxpayer and his wife have rented the same house in
Albuquerque, New Mexico, which they have furnished with their own belongings.
- During the last 10 to 12 years, the Taxpayer has had job assignments in several
states, including New Mexico, California, Arizona, Colorado and Texas.
- The Taxpayer’s wife did not move to each new job location with her husband, but
remained in their Albuquerque home with their two children (until they left for college). Whenever
one of his out-of-state jobs ended, the Taxpayer returned to the house in Albuquerque.
- In 1998, the Taxpayer signed a 5-year employment agreement with A-1 Homes
Group, Inc. to work as the general manager of the Albuquerque division of the company’s mobile
home business.
- The Taxpayer remained in Albuquerque until September of 2000, when A-1 Homes
Group closed its Albuquerque store and transferred the Taxpayer to Texas. At that time, he rented a
furnished apartment in East Dallas, Texas, while his wife remained in the house in Albuquerque.
- When he filed his 2000 New Mexico personal income tax return, the Taxpayer
reported the income he earned in New Mexico during 2000, but did not report the income he
earned in Texas between September and December 2000.
- The Taxpayer did not report or pay New Mexico personal income tax on the
income he earned in Texas during the 2001 tax year.
- The Taxpayer, who was registered to vote in New Mexico, did not register to vote in
Texas after he was transferred to Texas in September 2000.
- The Taxpayer maintained his New Mexico driver’s license and the New Mexico
registration on his automobiles during the period of time he worked in Texas.
- In July 2002, the Taxpayer’s employment with A-1 Homes Group ended and he
returned to Albuquerque to the home he shared with his wife.
- The Taxpayer filed a New Mexico personal income tax return for the 2002 tax year
and voted in New Mexico in 2003.
- The Taxpayer subsequently obtained work with Fleetwood Homes in Amarillo,
Texas, and moved to that location while his wife remained in Albuquerque.
- When the job with Fleetwood Homes ended in January 2006, the Taxpayer returned,
once again, to his Albuquerque home.
- On May 9, 2005, the Department assessed the Taxpayer under Letter ID
L1760393728 for $2,720.13 of personal income tax, penalty and interest for the 2000 tax year.
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- On August 1, 2005, pursuant to an extension of time granted by the Department,
the Taxpayer filed a written protest to the assessment of tax for the 2000 tax year.
- On August 15, 2005, the Department assessed the Taxpayer under Letter ID
L1257887232 for $5,537.21 of personal income tax, penalty and interest for the 2001 tax year.
- On October 7, 2005, pursuant to an extension of time granted by the Department,
the Taxpayer filed a written protest to the assessment of tax for the 2001 tax year.
DISCUSSION
The Taxpayer challenges the Department’s assessments of New Mexico personal income
tax for the 2000 and 2001 tax years based on his contention that he was a resident of Texas from
September 2000 through July 2002. The Department asserts that although the Taxpayer was
living in Texas during the relevant time period, he did not abandon his New Mexico domicile
and was a New Mexico resident for personal income tax purposes.
Effect of Residency on Liability for New Mexico Income Tax. Payment of New
Mexico personal income tax is governed by NMSA 1978, §§ 7-2-1, et seq. When a taxpayer has
income that is taxable both within and without New Mexico, NMSA 1978, § 7-2-11 allows the
taxpayer to allocate and apportion certain categories of income between New Mexico and non-
New Mexico sources. Pursuant to § 7-2-11(A)(3), New Mexico residents are required to allocate
100 percent of certain categories of income—including compensation for personal services—to
New Mexico, regardless of the source of that income. See also, Department Regulation
3.3.11.11 NMAC.
In this case, the Taxpayer reported the income he earned in New Mexico on his 2000
New Mexico income tax return, but did not report the income he earned in Texas between
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September and December 2000. The Taxpayer did not report or pay tax on the income he earned
in Texas during the 2001 tax year. If the Taxpayer was still a New Mexico resident, however, he
was required to report all of the compensation he earned from his employment with A-1 Homes
Group to New Mexico, without regard to the state in which the income was earned. The right of
a state to impose tax on all income received by its residents, including income attributable to
activities in other states, is one of long-standing. More than 85 years ago, the United States
Supreme Court recognized the rights of the several states “to exercise the widest liberty with
respect to the imposition of internal taxes” noting that “states have full power to tax their own
people....” Shaffer v. Carter, 252 U.S. 37, 51 (1919). See also, Lawrence v. State Tax
Commission of Mississippi, 286 U.S. 276 (1932) (upholding Mississippi’s right to tax a
Mississippi resident on income earned from services performed on a construction project in the
state of Tennessee).
At the administrative hearing, the Taxpayer cited to NMSA 1978, § 7-4-4, which states
that a taxpayer is taxable in another state if that state has jurisdiction to subject the taxpayer to a
net income tax. Because the Taxpayer earned his income in Texas and Texas would have
jurisdiction to tax that income, the Taxpayer maintains that he cannot be taxed by New Mexico.
Section 7-4-4 is part of the Uniform Division of Income for Tax Purposes Act (“UDITPA”).
Pursuant to NMSA 1978, § 7-2-1(A)(2) and § 7-4-3, the allocation and apportionment rules of
UDITPA do not apply to compensation for personal services, which covers the income the
Taxpayer earned under his employment agreement with A-1 Homes Group, Inc.
In addition, the fact that a person is subject to tax in one state does not mean he cannot be
subject to tax in another state. As discussed above, when a person is a resident of one state, but
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earns income from personal services performed in a second state, both states have jurisdiction to
tax that income. In that situation, New Mexico has taken steps to insure that its residents are not
subject to double taxation by providing a credit for the amount of any tax paid to the second
state. NMSA 1978, § 7-2-13. Because Texas does not impose a personal income tax, double
taxation is not an issue in this case. If it is determined that the Taxpayer was still a resident of
New Mexico during the 2000 and 2001 tax years, tax is due to New Mexico on the income he
earned in Texas.
Determination of Residency Based on Domicile. NMSA 1978, § 7-2-2 of the Income
Tax Act, as it existed in 2000 and 2001, defined the term “resident” as follows:1
“resident” means an individual who is domiciled in this state during any part of
the taxable year; but any individual who, on or before the last day of the taxable
year, changed his place of abode to a place without this state with the bona fide
intention of continuing actually to abide permanently without this state is not a
resident for the purposes of the Income Tax Act.
For the years at issue, residency is synonymous with domicile. Subsection B of Regulation
3.3.1.9(B) NMAC defines “domicile” as “a place of a true, fixed home and a permanent
establishment to which one intends to return when absent and where a person has voluntarily
fixed habitation of self and family with the intention of making a permanent home.” Subsection
C of the regulation provides that an individual who is registered to vote in New Mexico or holds
a valid New Mexico driver’s license, and has not subsequently registered to vote or obtained a
driver’s license in any other state, is presumed to be domiciled in New Mexico.
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Effective for 2003 and subsequent tax years, § 7-2-2 was amended to expand the definition of residency to include
persons who are physically present in New Mexico for 185 days or more during the taxable year. Laws 2003, ch.
275, § 1. The statutes and regulations cited in this decision are to the versions that were in effect during the 2000
and 2001 tax years.
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In Murphy v. Taxation and Revenue Department, 94 N.M. 54, 55, 607 P.2d 592, 593
(1980), the New Mexico Supreme Court held that a "resident" for purposes of New Mexico
personal income tax is an individual domiciled in New Mexico at any time during the taxable
year who does not intentionally change his domicile by the end of the year. A change of domicile
requires both physical presence in the new locality and an intention to abandon the old domicile
and to make a home in the new dwelling place. Estate of Peck v. Chambers, 80 N.M. 290, 292,
454 P.2d 772, 774 (1969). In Hagan v. Hardwick, 95 N.M. 517, 519, 624 P.2d 26, 28 (1981), the
New Mexico Supreme Court set out the following standard for determining a change in domicile:
“to effect a change from an old and established domicile to a new one, there must be...a fixed
purpose to remain in the new location permanently or indefinitely. For domicile once acquired is
presumed to continue until it is shown to have changed….”
Texas uses the same basic criteria as New Mexico in determining a person’s domicile. In
Texas, the essential elements of domicile are an actual residence and the intent to make it one’s
permanent home. Snyder v. Pitts, 241 S.W.2d 136, 139 (Tex. 1951). “Home” is defined to mean
a person’s “true, fixed and permanent home and principal establishment, and to which, whenever
he is absent, he has the intention of returning.” Id. In Pecos v. N.T. Ry. Co. v. Thompson, 167
S.W. 801, 803 (Tex. 1914), the Texas Supreme Court defined domicile in the following terms:
“Residence” means living in a particular locality, but “domicile” means living in
that locality with the intent to make it a fixed and permanent home. Residence
simply requires bodily presence as an inhabitant in a given place, while domicile
requires bodily presence in that place, and also an intention to make it one’s
domicile.
See also, Owens Corning v. Carter, 997 S.W.2d 560, 571 (Tex. 1999) (a permanent residence in
Texas requires a home and fixed place of habitation to which a person intends to return when
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away). As the cases makes clear, domicile is not determined by intention alone or by physical
presence alone.
Application of the Law of Domicile to the Facts of this Case. Based on the laws of
both New Mexico and Texas, there is a presumption that once established, the Taxpayer’s
domicile continued to be in New Mexico. In order to overcome this presumption, the Taxpayer
must show that he had an actual residence in Texas coupled with the concurrent intent to
abandon his domicile in New Mexico and make the Texas residence his permanent home.
The Taxpayer meets the first part of this test. There is no dispute that from September 2000
through July 2002, he maintained a furnished apartment in East Dallas and worked for his employer
at various locations in Texas. During the same time period, however, the Taxpayer also maintained
a house in Albuquerque where his wife had lived for a period of at least 12 years and where he lived
between his various out-of-state job assignments. The issue to be decided is whether the
Taxpayer’s true domicile was the apartment in Texas or the house in New Mexico. As set forth
below, the evidence presented supports the conclusion that the Taxpayer’s domicile remained in
New Mexico:
■ Since the mid-1990s, the Taxpayer and his wife have rented the same house in Albuquerque,
New Mexico, which is furnished with their own belongings. The Taxpayer has had job
assignments in several states other than New Mexico during the last 10 to 12 years, including
California, Arizona, Colorado and Texas. The Taxpayer’s wife did not move to each new job
location with her husband, but remained in their Albuquerque home with their children. Once an
out-of-state job ended, the Taxpayer returned to the house in Albuquerque.
■ In 1998, the Taxpayer signed a 5-year employment agreement with A-1 Homes Group, Inc. to
work as the general manager of the company’s Albuquerque division. In September of 2000, A-1
Homes Group closed its Albuquerque store and the Taxpayer’s job was transferred to Texas. At
that time, he rented a small furnished apartment in East Dallas, Texas, while his wife remained in
the house in Albuquerque. The Taxpayer, who was registered to vote in New Mexico, did not
register to vote in Texas after his transfer. The Taxpayer also maintained his New Mexico driver’s
license and the New Mexico registration on his automobiles.
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■ In July 2002, the Taxpayer’s employment with A-1 Homes Group ended and he returned to
Albuquerque to the home he shared with his wife. The Taxpayer filed a New Mexico personal
income tax return for the 2002 tax year and voted in New Mexico in 2003.
■ The Taxpayer subsequently obtained work with Fleetwood Homes in Amarillo, Texas, and
moved to that location while his wife remained in Albuquerque. When the job with Fleetwood
Homes ended in January 2006, the Taxpayer returned, once again, to his Albuquerque home.
The evidence establishes that the Taxpayer has led a somewhat nomadic life and has
physically resided in many different states over the last decade. The one constant has been the
house in Albuquerque where his wife lived continuously for the past 10 or 12 years and where he
lived between out-of-state job assignments. Although the Taxpayer testified that he wanted to
move his wife to Texas after his transfer in September 2000, this never happened. Instead, the
Taxpayer returned to New Mexico when the job with A-1 Homes Group ended in July 2002, just as
he had after all of his other out-of-state jobs. The Taxpayer never registered to vote in Texas and
never changed his driver’s license or car registration to Texas. There is no evidence that the move
to Texas in 2000 was any different than the other frequent, but temporary, moves he had made in
the past and does not support the conclusion that he abandoned his New Mexico domicile in
September 2000 with the intent of making Texas his permanent home.
CONCLUSIONS OF LAW
A. The Taxpayer filed timely, written protests to the assessments issued under Letter ID
Nos. L1760393728 and L1257887232, and jurisdiction lies over the parties and the subject matter
of this protest.
B. The Taxpayer did not abandon his New Mexico domicile and establish a new
domicile in Texas after he was transferred to Texas in September 2000.
C. The Taxpayer was a resident of New Mexico during tax years 2000 and 2001.
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D. The income the Taxpayer earned in Texas during 2000 and 2001 was subject to
New Mexico personal income tax.
For the foregoing reasons, the Taxpayer's protest IS DENIED.
DATED May 9, 2006.
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