Did registering to vote in Texas and making trips to Texas rental properties change Paul and Lo Ree Bunch's domicile from New Mexico for 1999 income-tax purposes?
Apply this to your situation
This page answers the general question as of 2003. Ezel answers yours, under current New Mexico tax law, with citations.
Plain-English summary
Paul and Lo Ree Bunch remained New Mexico residents for 1999 because they never abandoned their Los Alamos domicile or established a permanent Texas home. Paul Bunch's Texas voter registration and trips to maintain rental houses did not outweigh the couple's continuing home, family, address, telephone, vehicles, and daily life in New Mexico.
The Department did agree to reduce the assessment for specific out-of-state income and credits. After removing $41,420 of out-of-state rental income and $1,653 of Washington partnership gain, allowing the $1,000 capital gain deduction, and crediting an $86.40 payment, the adjusted balance was $3,403.60 tax, $349 penalty, and $1,772.89 interest through September 9, 2003.
The original New Mexico domicile continued
The Bunches moved to New Mexico in 1983 and built a Los Alamos home in 1988. They continued to own and live in that house. Their vehicles were registered in New Mexico, and their mailing address and telephone number always remained there.
Beginning in 1988, they acquired Texas rental houses. Paul Bunch registered to vote in Texas in 1996 using one rental property's address, but he never established a Texas mailing address or telephone number, never held a Texas driver's license, and never registered a vehicle there.
Physical presence and intent were both required
Section 7-2-2 defined a resident through domicile. Regulation 3.3.1.9 described domicile as a true, fixed home to which a person intends to return.
Changing domicile required both actual residence in the new place and intent to abandon the old domicile and remain in the new one permanently or indefinitely. A declared tax-driven intent without corresponding conduct was not enough.
Lo Ree Bunch never intended to relocate
Lo Ree Bunch remained employed and living in Los Alamos when Paul registered to vote in Texas. She did not register to vote in Texas or obtain a Texas driver's license and resisted moving away from their children in Santa Fe.
Paul acknowledged that his wife's unwillingness to move kept them in New Mexico. She also did not join his written protest or appear at the hearing.
Texas trips were temporary property-management stays
The Bunches made several Texas trips in 1999, each lasting one to three weeks, to work on rental properties. They brought only the tools, clothing, bedding, and furniture needed for those stays and returned the items to New Mexico afterward.
One Texas address used for voter registration belonged to a rental house Paul did not intend to make his permanent residence and later rented to another tenant. His 1999 federal return used the New Mexico address even though the state return used a Texas rental-property address.
These facts showed travel and investment activity, not a new Texas domicile.
The income calculation still required adjustments
As residents, the Bunches could not report only Lo Ree's $1,268 of Los Alamos wages as New Mexico income. Their resident status required applying New Mexico's allocation rules to the rest of their income.
During the open-record period, however, the Department accepted several calculation corrections. It removed the out-of-state rental income and Washington partnership gain, allowed the statutory capital gain deduction, and credited the February 2003 payment.
Result: protest DENIED as to residency, with the assessment adjusted by the Department. The final stated balance was $5,525.49 through September 9, 2003, and interest continued at 0.041% per day.
What this means for you
Taxpayers trying to change domicile
Coordinate intent with concrete action: establish a real permanent home, move household and family life, update addresses and licenses, and actually abandon the former domicile.
Owners of out-of-state rental property
Owning property and spending weeks there for maintenance does not necessarily establish domicile. Keep separate records supporting the proper tax allocation of the property's income.
Married couples evaluating residency
One spouse's voter registration may not change the couple's domicile when the other spouse and the family home remain in the original state.
Taxpayers disputing both residency and calculations
Preserve alternative arguments and documentation. Even though Bunch lost the residency issue, he obtained substantial adjustments for specific income and credits.
Common questions
Q: What was Paul Bunch's strongest Texas-residency fact?
A: He registered to vote in Texas in 1996 and frequently traveled there to manage rental properties.
Q: Why was that insufficient?
A: He lacked a permanent Texas home and kept his fixed home, address, telephone, vehicles, and family life in New Mexico.
Q: Did Lo Ree Bunch intend to move to Texas?
A: No. The decision found that she wanted to remain in Los Alamos near their children.
Q: Which income was removed from the assessment?
A: $41,420 of out-of-state rental income and $1,653 of capital gain from a Washington partnership.
Q: What balance remained after adjustments?
A: $3,403.60 tax, $349 penalty, and $1,772.89 interest through September 9, 2003.
Citations and references
Statutes and regulations:
- NMSA 1978, §§ 7-2-1 et seq. — New Mexico Income Tax Act
- NMSA 1978, § 7-2-2 — resident defined by domicile
- NMSA 1978, § 7-2-11 — allocation and apportionment of income
- NMSA 1978, § 7-2-34 — $1,000 capital gain deduction
- NMSA 1978, § 7-1-67 — interest on unpaid tax
- Regulation 3.3.1.9 NMAC — domicile definition
- Regulations 3.3.11.11 through 3.3.11.14 NMAC — income-allocation rules
Cases cited:
- 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)
- Texas v. Florida, 306 U.S. 398 (1939)
- Pecos & N.T. Railway 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: Paul Bunch
- Decision PDF: D&O 03-18
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 C. BUNCH, ID NO. No. 03-18
NOTICE OF ASSESSMENT OF TAXES
ISSUED UNDER LETTER ID L0357793792
DECISION AND ORDER
A formal hearing on the above-referenced protest was held September 3, 2003, before
Margaret B. Alcock, Hearing Officer. The Taxation and Revenue Department ("Department") was
represented by Bridget A. Jacober, Special Assistant Attorney General. Paul Bunch represented
himself. Following the hearing, the record was held open until September 10, 2003 to give the
parties time to submit additional information. Based on the evidence and arguments presented, IT IS
DECIDED AND ORDERED AS FOLLOWS:
FINDINGS OF FACT
- Paul and Lo Ree Bunch moved to New Mexico in 1983 and purchased a house in Los
Alamos, New Mexico.
- The Bunches registered to vote in New Mexico, registered their vehicles in New
Mexico, and acquired New Mexico drivers’ licenses.
- In 1988, the Bunches moved to a house they built at 5 Karen Circle in Los Alamos,
New Mexico, which they still own and live in today.
-
Paul Bunch worked in Los Alamos until he retired in 1992.
-
Lo Ree Bunch worked in Los Alamos until she retired in 1997, after which she
continued to work part-time through 1999.
- Beginning in 1988, the Bunches acquired several single family houses in Texas,
which they maintained as rental property.
- The Bunches also had business interests in the states of Kansas, California, and
Washington.
- During 1993 and 1994, Mr. Bunch spent several months at his brother’s home in
Houston, Texas. Mrs. Bunch, who was still employed full time, remained at the couple’s home in
Los Alamos.
- In 1996, Mr. Bunch spent three months living in one of his rental houses, located at
11515 Loyola Drive in Cypress, Texas, during which he worked on getting the house ready for a new
tenant.
- In September 1996, Mr. Bunch registered to vote in Texas, using the address of his
rental property on Loyola Drive. The alternate address shown on his Texas voter registration is 5
Karen Circle, Los Alamos, New Mexico.
- From 1988 to the present, Mr. Bunch has maintained his mailing address and
telephone number at 5 Karen Circle in Los Alamos, New Mexico.
-
Mr. Bunch never established a Texas mailing address or telephone number.
-
Mr. Bunch held a New Mexico driver’s license until 2000, when he obtained a
driver’s license from the state of Kansas. Mr. Bunch has never held a Texas driver’s license and has
never registered any of his vehicles in Texas.
- Although Mr. Bunch made frequent trips to Texas to check on his rental properties,
the rest of the year he continued to reside with his wife at their home in Los Alamos, New Mexico.
- After Lo Ree Bunch retired from full-time work in 1997, the Bunches took regular
trips in their RV. After each of these trips, they returned to their home in Los Alamos.
- During 1999, the Bunches made several trips to Texas to work on their rental
properties. Each trip was between one and three weeks in duration.
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- The Bunches took a minimal amount of tools, clothing, bedding, and furniture to use
while staying at their rental properties. At the end of their stay, the Bunches brought these items
back with them to New Mexico.
- Mrs. Bunch never registered to vote in Texas, nor did she obtain a Texas driver’s
license.
- Mrs. Bunch resisted Mr. Bunch’s suggestion that they move to Texas, indicating that
she wished to remain in Los Alamos, which is close to their children, who live in Santa Fe, New
Mexico.
- Due to his wife’s unwillingness to relocate, Mr. Bunch acknowledges that he is
currently a resident of New Mexico.
- The Bunches did not file a timely New Mexico personal income tax return (Form
PIT-1) for tax year 1999.
- After being contacted by the Department in early 2003, Mr. Bunch prepared and filed
a 1999 New Mexico PIT-1, checking the “nonresident” box for both himself and his wife.
- Although Mr. Bunch filed his 1999 federal income tax return using his New Mexico
address, he filed his 1999 New Mexico income tax return using the address of one of his rental
properties in Texas.
- Mr. Bunch filed Form PIT-B to allocate his 1999 income between New Mexico and
other states. The only income Mr. Bunch allocated to New Mexico was the $1,268 of wages Mrs.
Bunch earned from her employment in Los Alamos.
- The Department adjusted the Bunches’ 1999 PIT-1 to allocate all of their income to
New Mexico, based on the Department’s position that the Bunches were New Mexico residents
during 1999.
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- On February 13, 2003, the Department issued a Notice of Assessment of Taxes to
Paul and Lo Ree Bunch under Letter ID L0357793792, assessing them $5,547.00 of personal income
tax, $554.70 of penalty and $2,344.77 of interest for tax year 1999.
- On March 4, 2003, Mr. Bunch filed a written protest to the assessment. Lo Ree
Bunch did not sign the protest or appear at the administrative hearing held to consider the protest.
DISCUSSION
Paul Bunch challenges the Department’s assessment of New Mexico personal income tax
based on his contention that he and his wife were residents of Texas in 1999. As an alternative
argument, Mr. Bunch maintains that even if he were a New Mexico resident in 1999, he is entitled to
exclude from tax certain income from non-New Mexico sources. The Department asserts that the
Bunches have been New Mexico residents since 1983, that they were New Mexico residents in 1999,
and that tax was properly imposed on that basis. The Department acknowledges that Mr. Bunch is
entitled to a partial abatement of the assessment, as discussed in more detail in the last section of this
decision.
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. New Mexico is among the
majority of states that use the federal income tax system as the basis for calculating state income taxes.
As reflected on the Department’s 1999 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 Form PIT-ADJ. 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, NMSA
1978, § 7-2-11 allows the taxpayer to file Form PIT-B to allocate and apportion certain categories of
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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. New Mexico residents must allocate 100 percent of certain categories of income to New
Mexico, regardless of the source of that income. See, NMSA 1978, § 7-2-11 and Regulations
3.3.11.11 through 3.3.11.14, NMAC. In this case, the only 1999 income allocated to New Mexico
on the Bunches’ Form PIT-B was the $1,268.00 of wages Mrs. Bunch earned from her employment
in Los Alamos, New Mexico. If the Bunches were Texas residents during 1999, their income was
reported correctly. If they were New Mexico residents, however, they were required to allocate all
interest, dividends, retirement, and passive investment income to New Mexico, resulting in
additional tax due.
Determination of Residency Based on Domicile. NMSA 1978, § 7-2-2 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, 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 home in the new
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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).
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Application of the Law of Domicile to the Facts. Based on the laws of both New Mexico
and Texas, there is a presumption that the Bunches’ domicile in New Mexico, first established in
1983, continued through the years that they maintained their home in Los Alamos, New Mexico. In
order to overcome this presumption, Mr. Bunch must show that, sometime prior to December 31,
1999, he and his wife 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.
Domicile of Lo Ree Bunch. There is no evidence to support a finding that Lo Ree Bunch
abandoned her New Mexico domicile and become a Texas resident. To the contrary, Mr. Bunch
testified that his wife strongly resisted his suggestion that they relocate to Texas. While Mr. Bunch
maintains that he established his residence in Texas when he registered to vote there in 1996, he
acknowledged that Mrs. Bunch did not register to vote in Texas. During 1996, she was still employed
full time in Los Alamos, New Mexico, and was residing in the couple’s home at 5 Karen Circle, where
she still resides today. Mrs. Bunch did not join in her husband’s protest to the Department’s assessment
of personal income tax for 1999, nor did she attend the hearing on Mr. Bunch’s protest.
Domicile of Paul Bunch. The only evidence supporting Paul Bunch’s claim that he was a
resident of Texas in 1999 is the fact that he registered to vote in Texas in 1996 and made frequent
trips to Texas to maintain his numerous rental properties. During the administrative hearing, Mr.
Bunch testified that his change in voter registration was based on his reading of the instructions to
New Mexico’s 1995 personal income tax return and his belief that this action was sufficient to
change his residence for purposes of paying New Mexico income tax. 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
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concurrent action. As the United States Supreme Court stated in Texas v. Florida, 306 U.S. 398, 425
(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....
The Court further noted that a person “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.” Id. at 426. In this case, Mr. Bunch’s desire to obtain a more
favorable tax climate by moving to Texas was never coupled with the actions necessary to abandon
his domicile in New Mexico and establish a new domicile in Texas. This conclusion is supported by
the following facts:
From 1988 to the present, Mr. Bunch has lived with his wife in the house they own at 5
Karen Circle in Los Alamos, New Mexico, and has always returned to this home after business and
vacation trips.
From 1988 to the present, Mr. Bunch has maintained his mailing address and telephone
number at 5 Karen Circle in Los Alamos, New Mexico. He has never used a Texas mailing address or
telephone number.
Mr. Bunch listed the address of one of his rental properties on his 1996 Texas voter
registration, even though he never intended to use this house as his permanent residence and
subsequently rented the property to a new tenant.
When Mr. Bunch registered to vote in Texas in 1996, his wife was still working and
living full time in Los Alamos, New Mexico. Mrs. Bunch never registered to vote in Texas.
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Mr. Bunch used the address of one of his Texas rental properties when he filed his
1999 New Mexico income tax return, but used his New Mexico address when he filed his 1999
federal income tax return.
Although the Bunches made frequent trips to Texas during 1999, each of these trips
was only one to three weeks in duration.
The tools, clothing, bedding, and other items the Bunches took with them on their trips
to Texas were only used in Texas for the short time they were working on their various rental
properties. These items were then brought back to New Mexico.
Mr. Bunch’s vehicles are all registered in New Mexico. He has never registered any
vehicles in Texas.
Mr. Bunch held a New Mexico driver’s license until 2000, when he obtained a driver’s
license from the state of Kansas. He has never held a Texas driver’s license.
It is clear from the evidence that Mr. Bunch never changed his domicile to the state of Texas
and has, since 1983, been a New Mexico resident. If Mr. Bunch wishes to avoid the responsibilities
that attach to the privilege of residing in this state, he must take affirmative action to abandon his home
in New Mexico and establish a permanent residence in the state of Texas.
Calculation of Tax Due. Mr. Bunch filed Form PIT-B to allocate his 1999 income between
New Mexico and other states. Except for the $1,268 of wages Mrs. Bunch earned from her
employment in Los Alamos, Mr. Bunch did not allocate any of the couple’s income to New Mexico.
The Department adjusted the Bunches’ return to allocate all of their 1999 income to New Mexico.
At the administrative hearing, Mr. Bunch argued that even if he were a New Mexico resident in
1999, he is entitled to exclude income from non-New Mexico sources from the tax base.
Specifically, Mr. Bunch argued that his rental income from out-of-state property and his capital gain
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from a Washington partnership should not be treated as New Mexico income. He also questioned
whether he had been given credit for the $1,000 capital gain deduction allowed under NMSA 1978, §
7-2-34, and the payment made when he filed his 1999 PIT-1 in February 2003.
After reviewing Mr. Bunch’s testimony and the additional information he provided during
the period the record was left open after the hearing, the Department agreed that Mr. Bunch is
entitled to a partial abatement of the assessment. On September 10, 2003, the Department submitted
a letter setting out the following adjustments: $41,420 of income from rental property located out-
of-state and $1,653 of capital gain from a Washington partnership have been removed from New
Mexico income; the taxpayers have been given credit for the $1,000 capital gain deduction and for
the $86.40 they paid in February 2003. With these adjustments, the amount of the current
assessment is as follows: $3,403.60 tax principal; $349.00 penalty; and $1,772.89 interest,
calculated through September 9, 2003. Pursuant to NMSA 1978, § 7-1-67, interest continues to
accrue at the rate of .041% per day.
CONCLUSIONS OF LAW
- Paul Bunch filed a timely, written protest to the Notice of Assessment of 1999 personal
income tax issued under Letter ID L0357793792, and jurisdiction lies over the parties and the subject
matter of this protest.
- Paul and Lo Ree Bunch were residents of New Mexico during all of 1999 and were
required to report their 1999 income to New Mexico on that basis.
- The assessment issued by the Department, as adjusted pursuant to the Department’s
letter dated September 10, 2003, correctly calculates the amount of personal income tax, penalty, and
interest the Bunches owe to New Mexico for tax year 1999.
For the foregoing reasons, the taxpayer's protest is denied.
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DATED September 11, 2003.
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