Can I stop owing New Mexico income tax by registering to vote and renting an apartment in a no-income-tax state, if I keep actually living in New Mexico?

Plain-English summary

A couple who took many of the formal steps to become Texans — voter registration, driver's licenses, a leased apartment, a mailbox — but kept actually living in Santa Fe remained New Mexico residents, so all of their 1998 income was taxable by New Mexico. Protest DENIED; the $244,870 refund was denied.

Paul and Nancy Jacobs had lived full-time at their 3,000-square-foot Quail Run condominium in Santa Fe since 1997 and filed as New Mexico residents for 1994–1997. In 1998 Mr. Jacobs, chairman of SLH Corporation, saw it merge into Syntroleum Corporation, and large compensation was paid to him that year. Planning to retire and wanting a state with a friendlier tax climate than New Mexico, they set their sights on Austin, Texas. In July 2000 they filed an amended 1998 New Mexico return as nonresidents, allocated all their income to Texas, and claimed a refund of $244,870 in withheld tax. The Department denied it.

Why residency decided the case

New Mexico taxes its residents on all of their compensation, including income earned in other states, by requiring residents to allocate all compensation to New Mexico (Section 7-2-11). A "resident" is someone domiciled in New Mexico on the last day of the year (Section 7-2-2(S)). Most of Mr. Jacobs's 1998 Syntroleum compensation was earned outside New Mexico, so the whole dispute turned on whether the Jacobses were still domiciled in New Mexico on December 31, 1998. If so, all of it was taxable here; if they had become Texans first, only the New Mexico-earned portion would be.

What it takes to change domicile

Residency for income tax equals domicile (Murphy). Domicile is a true, fixed, permanent home to which one intends to return (Regulation 3.3.1.9). A domicile once established is presumed to continue, and changing it requires two things at once: an actual residence in the new place and the intent to abandon the old home and make the new one permanent (Estate of Peck; Hagan v. Hardwick, quoting Shilkret). Texas law is the same (Snyder v. Pitts; Texas v. Florida): residence means bodily presence, domicile means bodily presence plus the intent to stay. Intent alone, or an intent that depends on a future event, is not enough (Prince v. Inman).

The three Austin trips did not add up to a Texas domicile

Because the presumption was that their New Mexico domicile continued, any change had to happen during their three short 1998 Austin trips. It did not:

• June 1998 (2–3 days): they contracted to buy a lot, opened a bank account, and got a mailbox — forming an intent to live in Austin eventually, but with no residence there, and they returned to Santa Fe.
• July 1998 (a few days): they got Texas driver's licenses, registered to vote, and bought and registered a vehicle in Texas. Voter registration and a driver's license are usually strong signs of domicile — but here they did not comply with Texas law, which requires a voter to be a resident. They used the address of an unimproved lot they had not even closed on (that came in September), which was not a "home and fixed place of habitation." They had no Texas residence, and drove their new Texas-registered SUV back to Santa Fe.
• November 1998 (2–3 days): Mr. Jacobs signed a construction contract and a six-month lease on a small, unfurnished Austin apartment — a place they could have lived — but they never occupied it in 1998. They returned to Santa Fe, spent the holidays there, and did not even visit the apartment until January 1999; it was never fully furnished.

Form over substance — and it caught up with them

Over 1999 and 2000 the Jacobses spent less than a week a year in Austin and 265–290 days a year in Santa Fe; they made no Austin trips in early 2001. They kept their Texas-registered vehicles garaged and driven in Santa Fe (which, the Department noted, itself violated the New Mexico rule requiring registration after 180 days of in-state use, Section 66-3-301), used an Austin mailbox that forwarded everything to Santa Fe monthly, and never joined the Austin business or social community — when asked why, Mr. Jacobs answered, "Because we weren't there." In June 2000 they sold the Quail Run condo and bought a $1.9 million house in Santa Fe. The construction project in Austin stalled and was largely abandoned. The hearing officer concluded that while the Jacobses genuinely intended at one point to move to Austin, that intent never came to fruition; the outward steps were form over substance, driven by a desire to avoid New Mexico tax. It is legitimate to change domicile to lower one's taxes, but only if the intent is matched by actually moving — declarations of residence carry little weight when they conflict with where a person in fact lives (Texas v. Florida).

Result: on December 31, 1998, the Jacobses were still domiciled in and residents of New Mexico, so all of Mr. Jacobs's Syntroleum compensation was allocated to New Mexico. Protest DENIED.

What this means for you

Moving your tax home requires actually moving, not just paperwork

Registering to vote, getting a driver's license, renting a place, and registering vehicles in a new state do not change your domicile if you keep living in your old state. Domicile requires real physical presence in the new state combined with the intent to stay — at the same time.

Where you actually spend your days is powerful evidence

The Jacobses lost largely because they spent the vast majority of their time in Santa Fe and almost none in Austin. Day counts, where your daily life happens (doctors, shopping, social life), and where you keep and use your cars all weigh heavily — often more than formal documents.

An intent to move "once the house is built" is not a change of domicile

An intention that depends on a future event — like completing construction — does not establish a new domicile now. Until you have an actual home and are living in the new state, your old domicile continues.

Tax-motivated moves are legal, but must be real

You may lawfully relocate to a lower-tax state, but the move has to be genuine. Statements and formalities designed to create a "nominal residence" for tax purposes carry little weight when they conflict with the facts of where you live.

Common questions

Q: I got a Texas driver's license, registered to vote, and rented an apartment there. Isn't that enough to change my residency?
A: Not by itself. Those are evidence, but domicile also requires actually residing in the new state with the intent to make it your permanent home. The Jacobses did all of that yet never really lived in Texas, so they stayed New Mexico residents.

Q: I plan to move once my new house is finished. Am I already a resident of the new state?
A: No. An intent to move that depends on a future event does not change your domicile. You remain domiciled where you actually live until you both move and intend to stay.

Q: Why does New Mexico tax income I earned in other states?
A: Because New Mexico taxes its residents on all of their compensation, allocating it 100% to New Mexico. Since the Jacobses were still New Mexico residents at year-end, even out-of-state earnings were taxable here.

Q: Is it illegal to move to another state to save on taxes?
A: No. Changing your domicile to reduce taxes is legitimate. But the move must be real — matched by physical presence and genuine intent — not just paperwork designed to create a residence on paper.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-2-2(S) — a "resident" is an individual domiciled in New Mexico who does not change domicile out of state by the last day of the year
• NMSA 1978, § 7-2-11 — allocation and apportionment; a resident's compensation is allocated 100% to New Mexico
• NMSA 1978, § 66-3-301 — a nonresident's out-of-state-registered vehicle may be used in New Mexico only 180 days before it must be registered here
• Regulation 3.3.1.9 NMAC — defines "domicile" as a true, fixed, permanent home to which one intends to return

Cases cited:

• Murphy v. Taxation and Revenue Department, 94 N.M. 54, 607 P.2d 592 (1980) — a New Mexico resident is one domiciled here who does not intentionally change domicile by year-end
• Estate of Peck v. Chambers, 80 N.M. 290, 454 P.2d 772 (1969) — a change of domicile requires physical presence in the new locality and intent to abandon the old
• Hagan v. Hardwick, 95 N.M. 517, 624 P.2d 26 (1981) (quoting Shilkret v. Helvering, 138 F.2d 925 (D.C. Cir. 1943)) — change of domicile requires residence in the new locality plus intent to remain
• Snyder v. Pitts, 241 S.W.2d 136 (Tex. 1951); Pecos & N.T. Ry. Co. v. Thompson, 167 S.W. 801 (Tex. 1914); Prince v. Inman, 280 S.W.2d 779 (Tex. 1955) — Texas domicile requires bodily presence plus intent; a future-contingent intent is insufficient
• Texas v. Florida, 306 U.S. 398 (1939) — declarations of residence carry little weight when they conflict with the fact of where a person lives, especially when made for tax purposes

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Paul and Nancy Jacobs
• Decision PDF: D&O 01-04

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
PAUL A. AND NANCY E. JACOBS
PROTEST TO DENIAL OF REFUND No. 01-04
OF 1998 PERSONAL INCOME TAX

DECISION AND ORDER

A formal hearing on the above-referenced protest was held March 28, 2001, before

Margaret B. Alcock, Hearing Officer. Paul A. Jacobs and Nancy E. Jacobs (“Taxpayers”) were

represented by John N. Lieuwen, an attorney with Laflin, Lieuwen, Tucker, Pick, Heer &

Neerken, P.A. The Taxation and Revenue Department (“Department”) was represented by Bruce

J. Fort, Special Assistant Attorney General. At the close of the hearing it was agreed that the record

would be left open to allow for the submission of an additional joint exhibit. The exhibit was filed

on April 12, 2001, at which time the case was submitted for decision. Based on the evidence and

arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. In July 2000, the Taxpayers filed an amended 1998 New Mexico personal income

tax return seeking a refund of $244,870 of income tax withheld from compensation paid to Paul

A. Jacobs by Syntroleum Corporation during tax year 1998.

2. The basis for the refund was the Taxpayers’ assertion that they changed their

residence and domicile from New Mexico to Texas in mid-1998. Based on this assertion, they

filed their 1998 New Mexico return as nonresidents and allocated all of their 1998 income to

Texas.

3. By letter dated August 15, 2000, the Department denied the Taxpayers’ claim for

refund of 1998 personal income tax.

4. On October 31, 2000, the Taxpayers filed a written protest to the Department’s

denial of their refund claim.

5. In 1994, the Taxpayers sold their house in Johnson City, Kansas, where they had

lived for many years, and purchased a condominium in Kansas City. Mr. Jacobs was then

working for SLH Corporation, which was headquartered in Overland Park, Kansas.

6. Also in 1994, the Taxpayers purchased a 3,000-square-foot condominium at Quail

Run in Santa Fe, New Mexico. At that time, Quail Run was owned by Scout Development, a

subsidiary of SLH Corporation.

7. From 1994 to 1997, the Taxpayers divided their time between New Mexico and

Kansas.

8. In 1997, the Taxpayers sold their Kansas condominium and thereafter resided full

time at the Quail Run condominium in Santa Fe.

9. The Taxpayers listed themselves as New Mexico residents on their 1994, 1995,

1996 and 1997 personal income tax returns.

10. During 1998, Mr. Jacobs was chairman of SLH Corporation, which was in the

process of merging with Syntroleum Corporation. The merger was completed in August 1998.

11. Mr. Jacobs was involved in every aspect of the merger and attended regular

meetings, all of which were held outside New Mexico. While in Santa Fe, Mr. Jacobs generally

spent a few hours each day reviewing documents and other matters connected with the merger.

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12. In late 1996 or early 1997, the Taxpayers began to discuss their plans for

retirement after the merger was completed. Although Mrs. Jacobs wanted to maintain a presence

in Santa Fe, the Taxpayers did not plan to live in Santa Fe full time.

13. Mr. Jacobs’ Kansas attorney advised him it would be wise to establish residence

in a state with a more favorable tax climate than New Mexico, and this was one of the factors the

Taxpayers considered when looking for a retirement location.

14. Based on their research, the Taxpayers decided that Austin, Texas, might be the

best place to move. Having never been there, they decided to visit Austin and some other areas

of Texas before making a final decision.

15. In February 1998, Mr. Jacobs’ New Mexico driver’s license expired; in June

1998, Mrs. Jacobs’ driver’s license expired. Because the Taxpayers planned to change their state

of residence in the near future, they decided not to renew their New Mexico drivers’ licenses,

even though they did not hold current licenses from any other state.

16. In June 1998, the Taxpayers made their first trip to Austin and met with a realtor

who showed them different housing developments in the area.

17. The Taxpayers were favorably impressed with the Marina Club Condos in Austin

and discussed building plans with the architect and builder for the development. They contracted

to purchase a lot in the development for $85,000 and put down a deposit.

18. The Taxpayers spent two or three days in Austin during this first trip. In addition

to entering into a contract to buy the lot at Marina Club Condos, they obtained a mail box at Mail

Boxes, Etc. and opened a bank account with a $1,000 deposit.

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19. In late July 1998, the Taxpayers made their second trip to Austin and again stayed

for just a few days.

20. Prior to the trip, Mr. Jacobs conducted telephone negotiations with an Austin

automobile dealer for the purchase of a Toyota SUV. The dealer met the Taxpayers at the airport

when they arrived in Austin and drove them back to the dealership to complete the paperwork on

the purchase of the vehicle, which was then registered in Texas.

21. During this second trip, the Taxpayers obtained Texas drivers’ licenses and

registered to vote. The physical address they used to obtain their drivers’ licenses and voter

registration was the address of the unimproved lot they had contracted to purchase at Marina

Club Condos.

22. At the conclusion of the July 1998 trip, the Taxpayers returned to Santa Fe in the

Toyota SUV. They subsequently purchased another vehicle from the Austin dealer and had it

registered in Texas. This vehicle was then delivered to the Taxpayers in Santa Fe.

23. In September 1998, the Taxpayers closed on the purchase of the condominium lot

in Austin. They did not attend the closing, which was handled by their Texas attorney.

24. On November 16, 1998, Mr. Jacobs made a third trip to Austin, where he stayed

for two or three days.

25. Mr. Jacobs met with the architect and builder for Marina Club Condos and

entered into a $420,000 contract for construction of a 3,300-square-foot house on the lot he had

previously purchased. Mr. Jacobs expected the construction to take seven to nine months.

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26. On November 18, 2001, Mr. Jacobs signed a six-month lease on a one-bedroom,

500-square-foot unfurnished apartment in Austin. The lease term ran from December 1, 1998 to

May 31, 1999 at a rent of $570 per month.

27. Mr. Jacobs returned to Santa Fe prior to the beginning of the lease term on the

apartment. The Taxpayers did not return to Austin until January 1999, spending Thanksgiving,

Christmas and New Year’s of 1998 with their family at Quail Run in Santa Fe.

28. Sometime during December 1998, the Taxpayers entered into a contract with a

Santa Fe realtor to sell the Quail Run condominium at a price of between $925,000 to $950,000.

The property was “pocket listed”, which meant it could be shown by only a few designated

agents and was not advertised or included in general real estate listings.

29. In January 1999, the Taxpayers visited the Austin apartment for the first time.

They brought bedding, a television and stereo, kitchen utensils and clothing from Santa Fe and

purchased cleaning supplies and other necessary items in Austin. The Taxpayers did not bring

furniture from their Santa Fe condominium, and the apartment was never fully furnished.

30. The Taxpayers stayed at the Austin apartment for two or three days, meeting with

their Texas architect and builder before returning to Santa Fe.

31. In May 1999, Mr. Jacobs renewed the lease on the Austin apartment for another

six-month term.

32. Sometime during 1999, Mr. Jacobs learned that a problem with the site permit for

Marina Club Condos had put construction of the Austin condominium on hold. In July 1999, the

Taxpayers were told that they could go ahead with their building plans, but that construction of

the condominium had to be completed by 2002.

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33. In August 1999, seven months after his last visit in January 1999, Mr. Jacobs went

to Austin for a few days to meet with the builder. Mr. Jacobs was concerned about the increase

in building costs since the contract was signed. When the builder told Mr. Jacobs construction

could not begin until early 2000, Mr. Jacobs had additional concerns about whether the

condominium could be completed by the 2002 deadline.

34. On October 29, 1999, Mr. Jacobs renewed the lease on the Austin apartment for

another six-month term. The lease was subsequently renewed for two more terms, through May

2001.

35. In November 1999, the Taxpayers received a letter notifying them that a lawsuit

had been filed against the homeowners association of Marina Club Condos. At that point, Mr.

Jacobs became discouraged about his building plans and decided not to go forward with

construction of the Austin house until pending legal matters were resolved.

36. Sometime in 2000, the Taxpayers put the lot at Marina Club Condos in Austin up

for sale at a list price of $150,000. Mr. Jacobs looked at a few other condominiums, but decided

not to buy anything else in Austin until he could get his money out of the lot.

37. In June 2000, the Taxpayers sold their Quail Run condominium in Santa Fe for

$850,000. That same month, they purchased a 5,600-square-foot house on Summit Drive in

Santa Fe for $1.9 million dollars.

38. Most of the funds used to purchase the Santa Fe house came from the liquidation

of a portion of Mr. Jacobs’ stock portfolio. Mr. Jacobs was concerned about the stock market

and believed the house would be a good investment as well as a place to live.

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39. The Taxpayers spent a substantial amount of time and money remodeling,

landscaping and decorating the new Santa Fe house.

40. During each of calendar years 1999 and 2000, the Taxpayers spent less than one

week in Austin. During those same years, they spent 265 to 290 days in Santa Fe.

41. Between January 1, 2001 and March 28, 2001, the date of the hearing on the

Taxpayers’ protest, the Taxpayers did not make a single trip to Austin, but continued to live in

their house on North Summit Drive in Santa Fe.

42. In late 1998 or early 1999, Mr. Jacobs had arranged for telephone service at the

Austin apartment. In 2000, Mr. Jacobs obtained a portable telephone with an Austin telephone

number. Mr. Jacobs carried the portable telephone with him and discontinued service to the

telephone physically located in the apartment.

43. From mid-1998 through March 2001, the two vehicles the Taxpayers purchased in

Austin were garaged and driven in Santa Fe, although the Taxpayers maintained the Texas

registration on both vehicles.

44. From mid-1998 through March 2001, the Taxpayers used the address of the

private post office box at Mail Boxes, Etc., in Austin for tax filing purposes and other business

correspondence. Once a month, Mail Boxes, Etc. packaged up the mail received at the Austin

address and forwarded it to Mr. Jacobs in Santa Fe.

45. From mid-1998 through March 2001, the Taxpayers made no attempt to involve

themselves in the business or social community of Austin. During this period, the activities of

the Taxpayers’ daily life continued to be centered in Santa Fe, including doctor visits, car repairs,

haircuts, grocery shopping, dining out, theater going, and garden club meetings.

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DISCUSSION

The issues to be considered are: (1) whether the Taxpayers were residents of New

Mexico or residents of Texas on December 31, 1998; and (2) if the Taxpayers were residents of

Texas, whether any part of the compensation Mr. Jacobs earned during 1998 was earned for

services performed in New Mexico.

Effect of Residency on Liability for New Mexico Income Tax. Payment of New

Mexico personal income tax is governed by the Income Tax Act, Sections 7-2-1, et seq., NMSA

1978. New Mexico is among the majority of states that "piggy-back" or use the federal income tax

system as the basis for calculating state income taxes. As reflected on the Department’s 1998 form

PIT-1, New Mexico taxable income is calculated by starting with the taxpayer's federal adjusted

gross income, deducting the taxpayer's federal personal exemption and itemized deductions, and

making certain adjustments reflected on Schedule A. The amount of tax is then drawn from the tax

rate table or tax schedule.

When a taxpayer has income that is taxable both within and without New Mexico, Section

7-2-11 NMSA 1978 allows the taxpayer to file Form PIT-B to allocate and apportion certain

categories of income between New Mexico and non-New Mexico sources. The percentage of

total income allocated or apportioned to New Mexico is then applied to the tax previously

calculated to determine the tax due. There are some categories of income that must be allocated

100 percent to New Mexico on Form PIT-B, regardless of the source of the income. Subsection

A(3) of Section 7-2-11 NMSA 1978 requires all compensation earned by New Mexico residents

to be allocated to New Mexico. See also, Regulation 3 NMAC 3.11.11.1. For purposes of the

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income tax act, a resident is someone who is domiciled in New Mexico on the last day of the

taxable year. Section 7-2-2(S) NMSA 1978.

In this case, the major portion—if not all—of the compensation Mr. Jacobs received from

Syntroleum Corporation during 1998 was earned outside New Mexico. This is the reason the

issue of residency is important. If the Taxpayers were residents of New Mexico on the last day

of 1998, all of Mr. Jacobs’ compensation from Syntroleum would be subject to New Mexico

income tax, including the portion earned outside New Mexico. Conversely, if the Taxpayers

changed their residence to Texas prior to December 31, 1998, then only that portion of income

earned in New Mexico would be subject to New Mexico income tax.

Determination of Residency Based on Domicile. Section 7-2-2(S) NMSA 1978 of the

Income Tax Act defines the term “resident” as follows:

“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.

As defined for income tax purposes, residency is synonymous with domicile. See also, Murphy

v. Taxation and Revenue Department, 94 N.M. 54, 55, 607 P.2d 592, 593 (1980) (a New Mexico

"resident" 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). Regulation 3.3.1.9 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.” A change of domicile requires both

physical presence in the new locality and an intention to abandon the old domicile and to make a

9
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, quoting from

Shilkret v. Helvering, 138 F.2d 925, 927 (D.C. Cir.1943):

[T]o 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, and to show the change two things are
indispensable,--"First, residence in the new locality; and, second, the
intention to remain there....”

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. See also, Texas v. Florida, 306 U.S. 398, 424

(1939) (residence in fact, coupled with the purpose to make the place of residence one's home,

are the essential elements of domicile). 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.

As the cases makes clear, domicile is not determined by intention alone. The intent to make a

place one’s home must be concurrent with “bodily presence as an inhabitant.” 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 away). An intent

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subject to a future contingency does not establish domicile. Prince v. Inman, 280 S.W.2d 779,

782 (Tex. 1955); Tovar v. Board of Trustees of Somerset Independent School District, 994

S.W.2d 756, 762 (Tex. App.—Corpus Christi 1999).

Application of the Law of Domicile to the Facts. Based on the law of both New

Mexico and Texas, there is a presumption that the Taxpayers’ domicile in New Mexico

continued throughout 1998. In order to overcome this presumption, the Taxpayers must show

that, prior to December 31, 1998, they had an actual residence in Texas coupled with the

concurrent intent to abandon their domicile in New Mexico and make the Texas residence their

permanent home. Given these requirements, if the Taxpayers’ domicile did change during 1998,

the change must have occurred during one of their three visits to Austin in June, July and

November of that year.

June 1998 Trip. The Taxpayers made their first visit to Austin in June 1998. Over a

period of two or three days, they met with a realtor who showed them different housing

developments in the area. The Taxpayers were favorably impressed with the Marina Club

Condos and discussed building plans with an architect and builder. After these discussions, they

contracted to purchase a lot in the development for $85,000 and put down a deposit. The

Taxpayers also obtained a mail box at Mail Boxes, Etc. and opened a bank account with a $1,000

deposit. These facts indicate the Taxpayers had formed the intention of making Austin their

home at some point in the future. They clearly did not intend to make Austin their fixed and

permanent home in June 1998 because they had no residence in the city, nor did they take any

steps to establish one at that time. Instead, they left Austin after a brief stay of two or three days

and returned to their existing home in Santa Fe.

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July 1998. In late July 1998, the Taxpayers made their second trip to Austin and again

stayed for just a few days. Prior to the trip, Mr. Jacobs conducted telephone negotiations with an

Austin automobile dealer for the purchase of a Toyota SUV. The dealer met the Taxpayers at the

airport when they arrived in Austin and drove them back to the dealership to complete the

paperwork on the purchase of the vehicle, which was then registered in Texas. During this

second trip, the Taxpayers obtained Texas drivers’ licenses and registered to vote.

Registering to vote in a state is usually a strong indication of domicile, as is obtaining a

driver’s license. See, e.g., Department Regulation 3.3.1.9(C) NMAC. In this case, however, it

does not appear that the Taxpayers’ actions were in accordance with Texas law. In order to be

qualified to vote in Texas, a person must be a resident of the state. See, Texas Constitution,

Article 6 § 2; Texas Election Code § 11.002. Section 1.015(a) of the Election Code defines

“residence” as follows: “In this code, ‘residence’ means domicile, that is, one’s home and fixed

place of habitation to which one intends to return after any temporary absence.” In completing

their voter registration forms, the Taxpayers used the physical address of the unimproved lot they

had contracted to purchase at the Marina Club Condos. This lot did not qualify as the Taxpayers’

“home and fixed place of habitation” as required by the Texas Election Code. The Taxpayers

would not even close on the purchase of the lot until September 1998, more than a month in the

future.

In July 1998, the Taxpayers had no residence or fixed place of habitation in Austin, nor

did they have any present intention of making Austin their home. What they intended was to

make Austin their home upon construction of a house on the lot in Marina Club Condos. In the

meantime, they planned to return to and live in their existing home in Santa Fe, New Mexico.

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This conclusion is bolstered by the fact that after staying two or three days in Austin, the

Taxpayers drove the new Toyota SUV they had purchased and registered in Texas back to Santa

Fe, where it still remains almost three years later. The Taxpayers subsequently purchased a

second vehicle from the Austin dealer. It, too, was registered in Texas before being delivered to

the Taxpayers in New Mexico. Since its purchase, this second vehicle has been garaged and

driven in Santa Fe.1

November 1998 Trip. On November 16, 1998, Mr. Jacobs made a third trip to Austin. He

met with the architect and builder for Marina Club Condos and entered into a contract for

construction of a 3,300-square-foot house on the lot he had previously purchased. The

construction was expected to take seven to nine months. On November 18, 1998, Mr. Jacobs

signed a six-month lease on a one-bedroom, 500-square-foot unfurnished apartment in Austin.

The lease term ran from December 1, 1998 to May 31, 1999 at a rent of $570 per month. Mr.

Jacobs left Austin prior to the beginning of the lease term and returned to Santa Fe, where he and

Mrs. Jacobs spent Thanksgiving, Christmas and New Year’s Eve of 1998 with their family.

Although the Austin apartment provided the Taxpayers with a place where they could

have established residence in Texas, they did not occupy the apartment during 1998. After

signing the lease on November 18th, Mr. Jacobs returned immediately to his home in Santa Fe.

Throughout December 1998, the Austin apartment remained empty and unfurnished. The

Taxpayers’ first visit to the apartment did not occur until January 1999. At that time, they

brought bedding, a television and stereo, kitchen utensils and clothing from Santa Fe and

1
As Department counsel pointed out at the hearing, even if the Taxpayers were found to be residents of Texas, they
are in violation of New Mexico law by failing to register their vehicles in New Mexico. Section 66-3-301(A) NMSA
1978 provides that a nonresident owner of a vehicle registered outside the state may use that vehicle in New Mexico
for a period of only 180 days. Once that limit has been reached, the vehicle must be registered in New Mexico.

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purchased cleaning supplies and other necessary items in Austin. The Taxpayers did not bring

any furniture from their Santa Fe condominium. Mr. Jacobs testified that the Taxpayers intended

to furnish the house to be built at Marina Club Condos with furniture they had stored from their

former residence in Kansas City. There is no evidence, however, that the Taxpayers moved any

of this furniture into the Austin apartment, which Mr. Jacobs acknowledged was never fully

furnished. The Taxpayers stayed at the apartment for only two or three days before returning,

once more, to Santa Fe.

As discussed above, the evidence shows that sometime during 1998 the Taxpayers

formed the intention of moving to Austin after completion of the house at Marina Club Condos.

The decision to move was based on a number of factors, including the desire to obtain a more

favorable tax climate than that provided by New Mexico. As more and more problems arose

with the construction project, however, the intent to relocate to Austin waned and all that

remained was a determination to create a Texas residence for purposes of avoiding payment of

New Mexico taxes. It is perfectly legitimate for a person to change his domicile in order to avoid

payment of taxes that would otherwise be due to his current state of residence. In order to effect

the change, however, intent must be coupled with concurrent action. As the United States

Supreme Court stated in Texas v. Florida, 306 U.S. 398, 425-426 (1939):

While one's statements may supply evidence of the intention requisite to
establish domicile at a given place of residence, they cannot supply the
fact of residence there; [citations omitted] and they are of slight weight
when they conflict with the fact. [citations omitted] This is the more so
where, as here, decedent's declarations are shown to have been inspired by
the desire to establish a nominal residence for tax purposes, different from
his actual residence in fact....
...

14
Whatever floating intention Green may have had after 1911 to return to
Texas and to make his home there, it is plain that it receded into the
background after his mother’s death and had completely vanished when he
began to build up his extensive estate at Round Hills in Massachu-setts....
He could not elect to make his home in one place in point of interest and
attachment and for the general purposes of life, and in another, where he in
fact had no residence, for the purpose of taxation.

In this case, the Taxpayers’ desire to obtain a more favorable tax climate by moving to Texas was

never coupled with the actions necessary to abandon their domicile in New Mexico and establish

a new domicile in Texas. This conclusion is supported by the following facts:

Since at least 1997, when they sold their Kansas condominium, the Taxpayers

have lived (i.e., have had a continuous physical presence) in Santa Fe, New Mexico, and this is

the place to which they have returned after any temporary absences.

Until June 2000, the Taxpayers lived in a 3,000-square-foot condominium at

Quail Run in Santa Fe. In June 2000, they sold their Quail Run condominium for $850,000 and

purchased a 5,600-square-foot house on North Summit Drive in Santa Fe for $1.9 million dollars.

The Taxpayers subsequently spent a substantial amount of time and money remodeling,

landscaping and decorating the new Santa Fe house.

Although Mr. Jacobs refers to his Santa Fe homes as vacation homes, and asserts

that the 500-square-foot, partially-furnished, $570-a-month rented apartment in Austin has been

his primary residence since December 1998, the Taxpayers never occupied the Austin apartment

in 1998. They spent less than a week in Austin during calendar years 1999 and 2000 and no time

there during the first three months of 2001. During this same time period, the Taxpayers spent

between 265 and 290 days a year in Santa Fe.

15
From mid-1998 through March 2001, the two vehicles the Taxpayers purchased in

Austin were garaged and driven in Santa Fe. The Taxpayers maintained a Texas registration on

both vehicles, even though New Mexico law requires vehicles that are used within this state for

more than 180 days to be registered in New Mexico. See Section 66-3-301 NMSA 1978.

From mid-1998 through March 2001, the Taxpayers used the address of the

private post office box at Mail Boxes, Etc., in Austin for tax filing purposes and other business

correspondence. Once a month, Mail Boxes, Etc. packaged up the mail received at the Austin

address and forwarded it to Mr. Jacobs in Santa Fe.

From mid-1998 through March 2001, the Taxpayers made no attempt to involve

themselves in the business or social community of Austin, and the activities of their daily life

continued to be centered in Santa Fe. When the Department’s counsel asked Mr. Jacobs why he

and his wife had not made business contacts, joined clubs or become involved in the Austin

community, he responded: “Because we weren’t there.”

All of these facts establish that the Taxpayers’ outward manifestations of a change of

domicile to Texas, i.e., registering to vote, obtaining driver’s licenses, registering their vehicles,

renting an apartment and changing their business address, were a matter of form over substance.

While the Taxpayers undoubtedly intended to move to Austin at one time, this intention never

came to fruition and has since been largely abandoned. An intent to move to another state at

some point in the future is not sufficient to effect a change of domicile. Nor is intent sufficient

without the required “bodily presence as an inhabitant”. Pecos v. N.T. Ry. Co. v. Thompson, 167

S.W. 801, 803 (Tex. 1914). This is particularly true when a person continues to live and conduct

his daily life in the state where his domicile was previously fixed.

16
On December 31, 1998, the Taxpayers were still domiciled in and residents of New

Mexico. Accordingly, they were required to allocate all of Mr. Jacobs’ compensation from

Syntroleum Corporation to this state on their 1998 PIT-1 return. Based on this conclusion, there

is no need to address the issue of how much, if any, of Mr. Jacobs’ 1998 income was earned

outside New Mexico.

CONCLUSIONS OF LAW

1. The Taxpayers filed a timely, written protest to the Department’s denial of their

claim for refund of 1998 personal income taxes, and jurisdiction lies over the parties and the subject

matter of this protest.

2. The Taxpayers were domiciled in and residents of New Mexico on December 31,

1998.

3. The Taxpayers were required to allocate all of Mr. Jacobs’ compensation from

Syntroleum Corporation to New Mexico on their 1998 PIT-1 return.

For the foregoing reasons, the Taxpayers’ protest is DENIED.

DATED April 23, 2001.

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