Does an open-ended, year-to-year-renewable program that temporarily transfers a multinational bank's foreign employees to its New York City branch make those employees New York State statutory residents under Tax Law § 605(b)?

Plain-English summary

Petitioner, Banca Nazionale del Lavoro (BNL), is an Italian multinational bank with a branch in New York City. Rather than asking about one named individual, BNL asked the Department a general question about its own internal transfer program: whether employees temporarily moved from BNL's Italian branches to the New York branch are New York State statutory residents under Tax Law § 605(b) for the duration of their assignment.

Under the program, the assignment term is open-ended and is usually renewed year to year. Transferred employees bring their families and lease New York City apartments (typically 2-year-or-less leases), and BNL covers the security deposit, pays the rent (which is included in the employee's grossed-up salary), and grosses up the employee's pay for taxes. Employees keep their Italian social security coverage under the US-Italy Totalization Agreement, remain in the Italian pension and incentive-pay plans, and continue in Italian benefits programs, intending to return to Italy. Over the prior 10 years, 25 employees had been transferred to the U.S., and of the 15 who had since departed, 11 stayed less than 5 years and 4 stayed more than 5 years.

The Department first analyzed whether the New York apartment is a "permanent place of abode" under 20 NYCRR § 105.20(e)(1). A place of abode is not "permanent" if it is maintained only during a temporary stay - one reasonably expected to last three years or less - for a "particular purpose," meaning a specific assignment with readily ascertainable, specific goals and a conclusion (like installing a piece of equipment), as opposed to a general assignment with general duties (like being an executive or sales manager). Because BNL's transfer program is open-ended rather than for a fixed and limited period, and its stated objective - "to enlarge the employee's knowledge of multinational banking" - is a general goal rather than a specific, ascertainable task, the Department concluded that a transferred employee's New York apartment is a permanent place of abode.

That conclusion does not by itself make every transferred employee a statutory resident. Under Tax Law § 605(b)(1) and 20 NYCRR § 105.20(a)(2), statutory residency additionally requires that the individual maintain the permanent place of abode in New York for "substantially all of the taxable year" - which the Department's Income Tax Nonresident Audit Guidelines (July 25, 1997) define as a period exceeding 11 months - and separately spend more than 183 days in New York during that same year. An employee who meets both conditions in a given year is a statutory resident for that year; an employee who does not, such as one who arrives or leaves partway through the year, is not a statutory resident for that year and instead remains taxable only as a nonresident on income from New York sources, including salary for services performed in New York State.

The Department applied this identical legal framework the same day in a companion advisory opinion addressing one specific employee covered by this same BNL transfer program.

What this means for you

Multinational employers running expatriate assignment programs into New York

If your company's foreign-office transfer program into New York has no fixed end date - even if individual work or lease terms are periodically renewed year to year - the transferred employee's New York apartment will likely be treated as a "permanent place of abode," regardless of how the assignment is described internally or how short the underlying apartment lease is. Structuring an assignment with an ascertainable, specific task and a defined completion point (rather than general duties, however specialized) is what supports treating the New York housing as non-permanent. Because statutory residency also turns on how long the employee maintains that abode and how many days they spend in New York in each particular tax year, employers should track both figures on a year-by-year basis for payroll withholding purposes rather than assuming a single answer applies to the whole assignment.

Transferred employees on open-ended NY assignments

Keeping strong ties to your home country - continuing home-country social security, pension, and benefits coverage, and intending to return - does not prevent your New York apartment from being a permanent place of abode if your assignment itself is open-ended and involves general duties. What determines whether you are a New York statutory resident in any specific tax year is (1) whether you maintained that New York apartment for more than 11 months of the year and (2) whether you spent more than 183 days in New York that same year. If you don't meet both conditions in a given year - for example, the year you arrive or the year you leave - you are not a statutory resident for that year and are taxed only as a nonresident on your New York-source income, such as salary for services performed in New York.

Common questions

Q: Does capping the New York apartment lease at 2 years keep it from being a "permanent place of abode"?
A: No. The Department looked at whether the assignment itself - not the lease - was for a fixed and limited period accomplishing a particular purpose. Because BNL's transfer program is open-ended and renewed indefinitely, the apartment is a permanent place of abode under 20 NYCRR § 105.20(e)(1) regardless of the lease's own term.

Q: What's the difference between a "particular purpose" and "general duties" under 20 NYCRR § 105.20(e)(1)?
A: A particular purpose is a specific assignment with readily ascertainable, specific goals and a conclusion - the opinion's example is an employee sent to install a piece of equipment who returns home once it's installed. General duties - such as being an executive, sales manager, or (as here) an employee sent to "enlarge the employee's knowledge of multinational banking" - involve generalized, ongoing goals and do not qualify, even if the assignment relates to the employee's specialized skills.

Q: Does having a permanent place of abode in New York automatically make a transferred employee a statutory resident?
A: No. Under Tax Law § 605(b)(1) and 20 NYCRR § 105.20(a)(2), the employee must also maintain that permanent place of abode for substantially all of the taxable year (more than 11 months, per the Department's Nonresident Audit Guidelines) and separately spend more than 183 days in New York during that same year.

Q: What happens in the calendar year an employee arrives in or departs from New York?
A: If the employee doesn't maintain the New York apartment for more than 11 months of that particular tax year, they are not a statutory resident for that year, even if they otherwise spend more than 183 days in New York. They remain taxable only as a nonresident on their New York-source income for that year.

Q: Does keeping Italian social security, pension, and benefits coverage under the Totalization Agreement affect the residency analysis?
A: The opinion recites these facts as part of the program's structure and the employee's intent to return to Italy, but the legal test itself turns on the open-ended nature of the assignment and its general (versus particular) purpose, not on which country's social security or benefits system covers the employee.

Q: Is this the only advisory opinion the Department issued on this BNL transfer program?
A: No. The Department issued a companion advisory opinion the same day applying this same analysis to the facts of one specific employee transferred to New York under this program.

Citations and references

• Tax Law § 605(b)(1)(B) - defines a "resident individual" as including someone not domiciled in New York who maintains a permanent place of abode in New York and spends more than 183 days of the taxable year in New York
• Tax Law § 605(b)(2) - defines a "nonresident individual" as one who is not a resident or part-year resident
• 20 NYCRR § 105.20(e)(1) - a place of abode is not "permanent" if maintained only during a temporary stay (presumed temporary if reasonably expected to last three years or less) for the accomplishment of a "particular purpose" (a specific assignment with ascertainable, specific goals, as opposed to general duties)
• 20 NYCRR § 105.20(a)(2) - statutory residency requires maintaining a permanent place of abode in New York for substantially all of the taxable year in addition to spending more than 183 days in New York
• Dept. of Taxation and Finance Income Tax Nonresident Audit Guidelines, July 25, 1997, page 38 - defines "substantially all of the taxable year" as a period exceeding 11 months

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a98_10i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(10)I
Income Tax
September 10, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I980618B

On June 18, 1998, a Petition for Advisory Opinion was received from Banca
Nazionale Del Lavoro, 25 West 51 st Street, New York, New York 10019.
The issue raised by Petitioner, Banca Nazionale del Lavoro, is whether an
individual is deemed to be a resident of New York State under section 605(b) of
the Tax Law for the duration of the individual's temporary assignment to work in
New York State.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner is a multinational bank which operates a branch at the above
address.
Petitioner maintains a program whereby employees of other Italian
branches are temporarily transferred to the branch in New York City. The term
of the assignment is open ended and is usually renewed on a year to year basis.
The employee is accompanied by his/her family and they reside in an
apartment in the City of New York under a lease with a term of 2 years or less.
Petitioner provides the security deposit and pays the monthly rent which is
included in the employee's salary along with the associated taxes. The employee
is granted a net salary which is paid every month and which is grossed up for
taxes.
Every transferred employee elects to be covered by Italian social security
taxes in lieu of United States social security under the Totalization Agreement
between the United States and Italy. It is the intent of the employee to return
to Italy and not rely on United States social programs.
The transferred employees are not covered by a United States pension plan,
but under the pension plan existing in Italy. The employees also receive annual
incentive pay as determined under incentive plans existing in Italy.
Additionally, the transferred employees continue to participate in Italian
benefits programs.
Although the branch has on site management, the ultimate decision as to the
transferred employee's status and location is determined by the head office in
Italy.
It is customary for the transferred employee to maintain his home or
permanent abode in Italy during his/her United States tour of duty. This is the
main reason why the employee's United States housing cost is paid and grossed up
for taxes; otherwise, the employee would suffer duplicate housing costs.
The objective of the transferred employee's United States tour of duty is
to enlarge the employee's knowledge of multinational banking. It is customary

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for the employee to be returned to another Italian branch or transferred to
another country's branch upon completion of his/her assignment.
For the past 10 years, 25 individuals have been transferred to the United
States. Of this amount, 15 have been transferred outside the United States. Of
the remaining 10, the date of arrival is as follows: 1998 - 1; 1997 - 3;
1996 ­
1; 1994 - 3; 1993 - 1; and 1988 - 1. Of the 15 that have departed the United
States, 11 were in the United States less than 5 years while 4 were in the United
States for more than 5 years.
Discussion
Section 605(b)(1)(B) of the Tax law provides that a "resident individual"
includes an individual who is not domiciled in New York State but maintains a
permanent place of abode in New York State and spends in the aggregate more than
183 days of the taxable year in New York State, unless the individual is in
active service in the armed forces of the United States.
Section 605(b)(2) of the Tax Law provides that a "nonresident individual"
means an individual who is not a resident or a part-year resident.
Section 105.20(e)(1) of the Personal Income Tax Regulations ("Regulations")
defines a "permanent place of abode" as a dwelling place permanently maintained
by the taxpayer, whether or not owned by the taxpayer. However, a place of
abode, whether in New York State or elsewhere, is not deemed permanent if it is
maintained only during a temporary stay for the accomplishment of a particular
purpose. For example, an individual domiciled in another state may be assigned
to the individual's employer's New York State office for a fixed and limited
period, after which the individual is to return to the individual's permanent
location. If the individual takes an apartment in New York State during this
period, the individual is not deemed a resident, even though the individual
spends more than 183 days of the taxable year in New York State, because the
individual's place of abode is not permanent. Such individual will, of course,
be taxable as a nonresident on the individual's income from New York State
sources including such individual's salary or other compensation for services
performed in New York State. However, if the individual's assignment to the
individual's employer's New York State office is not for a fixed or limited
period, the individual's New York State apartment will be deemed a permanent
place of abode and the individual will be a resident if the individual spends
more than 183 days of the year in New York State. For a place of abode to be
deemed not permanent, the stay in New York must be temporary (i.e., for a fixed
and limited period) and the stay must be for the accomplishment of a particular
purpose.
Section 105.20(e)(1) of the Regulations contemplates that the term
"temporary" means a fixed and limited period as opposed to a stay of indefinite
duration. An employee's stay in New York will be presumed to be temporary (i.e.
the presence in New York is for a fixed and limited period) if the duration of
the stay in New York is reasonably expected to last for three years or less, in
the absence of facts and circumstances that would indicate otherwise. In the
alternative, a stay is of indefinite duration if the stay is realistically

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expected to last for more than three years, even if it does not actually exceed
three years.
Section 105.20(e)(1) of the Regulations contemplates that the phrase
"particular purpose" means that the individual is present in New York State to
accomplish a specific assignment that has readily ascertainable and specific
goals and conclusions, as opposed to a general assignment with general goals and
conclusions. For example, an individual working in California is assigned to New
York to install a piece of equipment.
Once the equipment is installed, the
individual returns to California. That assignment would be for a particular
purpose.
In general, an assignment to New York for general duties, such as to be an
executive of the company, a sales manager or a production line worker, would not
constitute a particular purpose since these positions involve more generalized
goals. This would be true even if the individual's assignment to New York were
related to some specialized skill or attributes that the individual may possess.
For example, a salesman with years of experience in a particular product line of
the company is assigned to New York as the sales manager because New York sales
are weak with regard to that product. It is expected that the individual will
devote substantial efforts towards improving those sales. However, being a sales
manager still constitutes general duties as opposed to a particular purpose,
since it is the general goal of every company to sell its products.
In this case, an individual employed by Petitioner is assigned to the New
York office under a program whereby employees of other Italian branches are
temporarily transferred to the New York branch with the objective "to enlarge the
employee's knowledge of multinational banking". These duties are general in
nature with general goals and conclusions.
In addition the term of the
individual's assignment is open ended. Therefore, the individual's stay in New
York State is not for a fixed and limited period and is not for the
accomplishment of a particular purpose as contemplated by section 105.20(e)(1)
of the Personal Income Tax Regulations. Accordingly, the individual's place of
abode in New York State constitutes a permanent place of abode.
Section 105.20(a)(2) of the Personal Income Tax Regulations provides that
a resident individual includes any individual who is not domiciled in New York
State, but who maintains a permanent place of abode for substantially all of the
taxable year (generally, the entire taxable year disregarding small portions of
such year) in New York State and spends in the aggregate more than 183 days of
the taxable year in New York State.
The Department of Taxation and Finance Income Tax Nonresident Audit
Guidelines dated July 25, 1997, page 38, provides that for this purpose, the
phrase "substantially all of the taxable year" means a period exceeding 11
months. For example, an individual who acquires a permanent place of abode on
March 15th for the taxable year and spends 184 days in New York State would not
be a statutory resident since the permanent place of abode was not maintained for
substantially the entire year. Similarly, if an individual maintains a permanent
place of abode at the beginning of the year but disposes of it on October 30th
of the tax year, the individual would not be a statutory resident despite

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spending over 183 days in New York. Since the individuals in these two examples
did not maintain their permanent places of abode in New York for more than 11
months, the individuals would not be considered residents of New York State for
any part of the year.
In this case, the individual acquires a permanent place of abode in New
York State when the individual leases an apartment in New York City and maintains
a permanent place of abode in New York as long as the individual leases the
apartment. Where the individual does not maintain the permanent place of abode
in New York for substantially all of taxable year, pursuant to section 605(b)(1)
of the Tax Law and section 105.20(a)(2) of the Personal Income Tax Regulations,
the individual is not considered to be a resident individual for that taxable
year. However, where the individual does maintain a permanent place of abode in
New York State for substantially all of a taxable year and the individual spends
in the aggregate more than 183 days of the taxable year in New York, the
individual is a resident individual for that taxable year, pursuant to section
605(b)(1) of the Tax Law and section 105.20(a)(2) of the Personal Income Tax
Regulations.
For all years that the individual has New York source income and is not
treated as a resident individual, the individual is taxable as a nonresident
individual of New York.

DATED:

NOTE:

September 10, 1998

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.