I came back to the U.S. between jobs and would have moved anywhere for work — was I really a New Mexico resident for tax purposes that year?

Plain-English summary

Hannibal Madden, a PhD physicist, worked at Sandia Laboratories in Albuquerque from 1974 to 1987 and, with his wife Jean, paid New Mexico income tax as a resident. In 1987 he took a one-year position in Germany; the couple sold their Albuquerque home and moved. They ended up staying in Germany until early 1991, when Madden's funding ran out and he became unemployed. In July 1991 they returned to the United States, and Madden began an intensive job search — applying for positions in New Mexico, Washington D.C., California, Washington state, and Europe, and even exploring a small business in Mississippi. In January 1992 they finally rented a New Mexico apartment; Madden later took a job in Brazil.

During 1991 the couple earned interest income. An IRS tape-match led the Department to assess 1991 New Mexico personal income tax (Assessment No. 632793 — $2,463.74 tax, plus penalty and interest). They protested, arguing they were not domiciled anywhere in 1991 because they were unsettled and would have moved anywhere for work — so they weren't New Mexico residents.

Hearing Officer Gerald Richardson found the couple entirely credible but denied the protest:

• New Mexico taxes residents' income. Section 7-2-3 taxes the net income of every resident individual, and Section 7-2-2(S) defines a "resident" as someone domiciled in the state during any part of the year (unless they moved out with a bona fide intent to remain permanently outside).
• Everyone must be domiciled somewhere. A fundamental rule of domicile — reflected in 25 Am. Jur. 2d and in Regulation IT 2:1(A) — is that a person always has exactly one domicile and can never be domiciled nowhere. So the question wasn't whether the Maddens had a domicile in 1991, but where.
• The connections pointed to New Mexico. The strongest evidence: in the fall of 1991 they registered a car with the New Mexico Motor Vehicle Division and got New Mexico driver's licenses — steps the law allows only for New Mexico residents and that require a "bona fide New Mexico residence address" (Sections 66-3-4(A)(1) and 66-5-9(A)). By doing so, they declared themselves New Mexico residents. They also kept a New Mexico mailing address (Mrs. Madden's parents' home in Peralta), stored their possessions in New Mexico, had significant family there, and spent substantial time there in 1991.

The couple were therefore domiciled in and residents of New Mexico at the end of 1991, and their income was subject to New Mexico tax.

What this means for you

People between homes, jobs, or countries

You can feel unsettled — genuinely willing to move anywhere — and still be a resident somewhere for tax purposes. New Mexico (like every state) applies the rule that you always have one domicile. If you leave one and haven't clearly established a new one elsewhere with the intent to stay, your prior or strongest connections can keep you domiciled where those ties are.

How your everyday paperwork can decide residency

Registering a vehicle and getting a driver's license are not just errands — New Mexico limits them to residents and requires a bona fide New Mexico residence address, so doing them is treated as declaring yourself a resident. If you intend to be a resident of another state, align these documents (license, registration, voter registration, mailing address) with that state; mismatched paperwork is powerful evidence of where you are domiciled.

To claim you left New Mexico for good

Section 7-2-2(S)'s exception protects someone who changed their abode out of state with a bona fide intention to remain permanently outside. That is about a settled intent to make a new place home — not merely being open to moving. Keep evidence of a concrete new domicile (a home, updated licenses and registrations, voter registration) if you want to show you are no longer a New Mexico resident.

Common questions

Q: I was between jobs and would have moved anywhere. Can I be a resident of no state?
A: No. The law says everyone has exactly one domicile at all times. Being unsettled doesn't make you domiciled nowhere; it just means the state looks at your connections to decide where your one domicile is.

Q: I kept my New Mexico driver's license and registered a car here. Does that matter?
A: Yes, a great deal. New Mexico limits vehicle registration and driver's licenses to residents and requires a bona fide New Mexico residence address. Obtaining them is treated as declaring yourself a New Mexico resident.

Q: How do I show I truly left New Mexico?
A: Establish a domicile elsewhere with the intent to stay — a home, and matching driver's license, vehicle registration, voter registration, and mailing address in the new state. Section 7-2-2(S) requires a bona fide intent to remain permanently outside New Mexico, backed by real facts.

Citations and references

Statutes and regulation:

• § 7-2-3 NMSA 1978 — income tax on the net income of every resident individual
• § 7-2-2(S) NMSA 1978 — "resident" means an individual domiciled in the state during any part of the taxable year, unless they changed abode out of state with a bona fide intent to remain permanently outside
• § 66-3-4(A)(1) NMSA 1978 — a vehicle-registration applicant must provide a bona fide New Mexico residence address
• § 66-5-9(A) NMSA 1978 — a driver's-license applicant must provide a New Mexico residence address
• § 7-1-24 NMSA 1978 — a taxpayer's right to file a written protest (basis for jurisdiction)
• Regulation IT 2:1(A) — every individual has a domicile somewhere and only one domicile at a time

Case cited:

• Montoya v. Collier, 85 N.M. 356, 512 P.2d 684 (1973) — domicile requires physical presence plus the intention to make a place one's home

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Hannibal H. and Jean A. Madden
• Decision PDF: D&O 96-08

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 HANNIBAL H. MADDEN, JR. and
JEAN A. MADDEN,
PROTEST TO ASSESSMENT NO. 632793. NO. 96-08

DECISION AND ORDER

This matter came on for hearing on February 12, 1996 before Gerald B. Richardson,

Hearing Officer. Mr. and Mrs. Hannibal H. Madden, Jr. (hereinafter "Taxpayers") represented

themselves at the hearing. The Taxation and Revenue Department (hereinafter "Department")

was represented by Bruce J. Fort, Special Assistant Attorney General. Based upon the evidence

and the arguments presented, IT IS DECIDED AND ORDERED as follows:

FINDINGS OF FACT

1. Mr. Madden holds a PhD in physics and was employed as a physicist at Sandia

Laboratories in Albuquerque, New Mexico from 1974 to 1987. During those years, Mr. and Mrs.

Madden reported and paid New Mexico personal income taxes as New Mexico residents. 2.

In 1987, Mr. Madden voluntarily separated from his position with Sandia Laboratories to

take a one year position in Germany. Mr. and Mrs. Madden sold their home in Albuquerque at

that time and moved to Germany.

3. At the end of the one year term of Mr. Madden's position in Germany, he had two

job offers in the United States, in states other than New Mexico. Mr. Madden also had the option

to continue in his position in Germany. The Taxpayer's decided to remain in Germany and Mr.

Madden continued to work there until early in 1991.

4. When the Taxpayers moved to Germany, they did not cancel their voter

registrations or New Mexico driver's licenses.

5. The Taxpayers re-registered to vote in New Mexico in 1992.

6. The Taxpayers obtained German driver's licenses. Germany did not require that

they surrender their New Mexico driver's licenses to obtain German driver's licenses.

7. The Taxpayers did not vote by absentee ballot or otherwise in New Mexico state

or national elections during the period of time they were living in Germany.

8. Early in 1991 the funding for Mr. Madden's position in Germany ran out and Mr.

Madden became unemployed. The Taxpayers stayed in Germany for several more months

exploring the possibility of other jobs in Germany or in Europe. No work materialized for Mr.

Madden and so in early July of 1991 the Taxpayers returned to the United States where Mr.

Madden continued his search for employment. Upon their return, the Taxpayers traveled and

visited relatives in New Mexico and the Washington D.C. area in addition to pursuing job

prospects.

9. During the time that the Taxpayer's were residing in Germany and until they

obtained an apartment in early 1992, the Taxpayer's maintained a storage locker in New Mexico

where they stored household possessions which they chose not to move with them to Germany.

10. At the time of their return to the United States Mr. Madden had family in the

Washington D.C. area and a son who lived in Santa Fe. Mrs. Madden's parents lived in Peralta,

New Mexico and she had a daughter and granddaughter living in Albuquerque.

11. Upon their return to the United States the Taxpayer's traveled to New Mexico to

visit relatives. They purchased a car and registered it in New Mexico and obtained New Mexico

driver's licenses. They used the address of Mrs. Madden's parents as their permanent mailing

address and as their address on their car registration and driver's licenses.

12. After returning to the United States, Mr. Madden actively sought employment.

He applied for three different jobs in New Mexico, as well as for jobs elsewhere, including the

National Science Foundation, in Washington, D.C., the University of California, the University of

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Southern California and Batelle Northwest in Washington. Mr. Madden was still being

considered for positions in Europe as well. Additionally, Mr. and Mrs. Madden spent about one

and one-half months in Mississippi to explore setting up a small business with a man living there.

As part of those explorations, they traveled to Detroit to attend a Small Business Administration

Conference, staying in Detroit over the Thanksgiving holiday.

13. The Taxpayers returned to New Mexico to spend the Christmas holidays with

family in New Mexico.

14. The Taxpayers would have moved anywhere in the world where Mr. Madden

could have found appropriate employment in his profession.

15. The Taxpayers were sufficiently discouraged with Mr. Madden's employment

prospects that within the first ten days of January, 1992, the Taxpayers rented an apartment in

New Mexico and established their household here while Mr. Madden continued his search for

employment. His search for employment eventually led to a position in Brazil and the Taxpayers

moved to Brazil.

16. During 1991, the Taxpayers earned interest income on money which they had

invested. The Taxpayers reported and paid tax to the Internal Revenue Service on that income

and used their permanent mailing address in Peralta, New Mexico as the address on their federal

return.

17. As a result of a tape-match program with the Internal Revenue Service where a

comparison is made between taxes reported and paid to the IRS and the Department, the

Department issued Assessment No. 632793 to the Taxpayers on July 18, 1995. The Assessment

assessed personal income tax for the 1991 tax year in the amount of $2,463.74 plus penalty in the

amount of $246.37 and interest in the amount of $1,231.87.

18. On August 18, 1995, the Taxpayers filed a written protest with the Department

protesting Assessment No. 632793.

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DISCUSSION

The sole issue to be determined is whether the Taxpayers were residents of New Mexico

during 1991 and are therefore liable for the payment of income tax on their income earned during

the 1991 tax year. Section 7-2-3 NMSA 1978 imposes an income tax "upon the net income of

every resident individual . . . ." "Resident" is defined at Section 7-2-2(S) NMSA 1978 to mean:
. . .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;...

Thus, the determination of residency is tied to where a person is domiciled. Generally,

physical presence within the state and the intention to make it one's home are the requirements to

establish domicile. Montoya v. Collier, 85 N.M. 356, 512 P.2d 684 (1973). The Taxpayers'

position in this case is that after returning to the United States in July of 1991, they did not have

an intention to make any place their home or domicile because they were not settled anywhere and

would have moved to any place where Mr. Madden could have found employment. The

Taxpayers argue that it was not until they admitted that Mr. Madden's employment prospects were

not materializing and they decided to stay in New Mexico, rent an apartment and continue their

employment search that they could be considered to have formed the intention to be domiciled in

New Mexico. Since this did not occur until early in January of 1992, essentially, the Taxpayers

are arguing that they were not domiciled anywhere in 1991.

While I found the Taxpayers to be entirely credible in their assertion that they would have

moved anywhere they could have located appropriate employment, their argument that they had

no domicile upon returning to the United States and for the rest of 1991 cannot stand in the face of
the well settled law of domicile. While, in general, domicile involves an element of intention to

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make a place one's home, an overarching aspect of domicile is that everyone must be domiciled

somewhere. As stated in 25 Am. Jur. 2d Domicil § 2:
It is a fundamental rule in the law that all persons have a domicil somewhere. This
relationship is imposed upon a person by the law at his birth, and while he may
change his domicil upon obtaining the requisite capacity, he is not permitted to be
without any domicil.

The Department has adopted a regulation to much the same effect. Regulation IT 2:1 (A)

provides:
This section defines a "resident" as an individual who is domiciled in this state on the last
day of the taxable year. Every individual has a domicile somewhere and each
individual has only one domicile at one time.

This regulation became effective for taxable years beginning on or after January 1, 1993.1

Although it is not specifically applicable to the tax year at issue

herein, it is a correct statement of the common law of domicile and

the concepts embodied therein will be applied to this matter.

Since the Taxpayers must be domiciled somewhere at the end of

tax year 1991, the question then becomes where they were domiciled.

The evidence heavily supports a conclusion that they were domiciled

in New Mexico since they had significant connections to New Mexico.

The strongest evidence of New Mexico residence lies in the fact

that in September or October, they registered their car with the
New Mexico Motor Vehicle Division and they obtained New Mexico

driver's licenses. By statute, these actions are limited to New
Mexico residents. In applying for a motor vehicle registration,

1
The previous version of IT 2:1, which was in effect during the 1991 tax year at issue herein tied residency to where the
individual was registered to vote. It is not helpful in this matter, however, because the Taxpayers did not re-register to vote
until 1992 and the record is unclear whether their previous registration, which the Taxpayers had not cancelled upon leaving
the country, was still in effect when they returned four years later.

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owners must provide a "bona fide New Mexico residence address."

Section 66-3-4(A)(1) NMSA 1978. Similarly, applicants for New

Mexico driver's licenses must provide on the application the "New

Mexico residence address of the applicant." Section 66-5-9(A) NMSA

1978. Thus, by applying for New Mexico driver's licenses and by

registering their vehicle here, the Taxpayers have declared

themselves to be New Mexico residents. Additionally, the Taxpayer's

maintained their permanent mailing address in New Mexico, kept their

possessions stored in New Mexico, had significant family connections

to New Mexico and spent substantial time in New Mexico in 1991 after

their return from Germany. It is thus concluded that the Taxpayers

were domiciled in and were residents of New Mexico at the end of

tax year 1991.
CONCLUSIONS OF LAW

1. The Taxpayers filed a timely, written protest to

Assessment No. 632793 pursuant to Section 7-1-24 NMSA 1978 and

jurisdiction lies over both the parties and the subject matter of

this protest.

2. Every person must have a legal domicile.
3. The Taxpayers were domiciled in New Mexico during the 1991

tax year.

4. The Taxpayers declared themselves to be New Mexico

residents by applying to register their motor vehicle in New Mexico
and by applying for New Mexico driver's licenses during 1991.

5. The Taxpayers were New Mexico residents at the end of tax

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year 1991.

6. As residents of New Mexico at the end of 1991, the

Taxpayer's income was subject to New Mexico income taxation for the

1991 tax year.

For the foregoing reasons, the Taxpayers' protest IS HEREBY

DENIED.

DONE, this 20th day of February, 1996.

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