New York court provides relief from residency rules for vacation homes

August 3, 2022 | Authored by RSM US LLP

TAX ALERT | August 03, 2022

Authored by RSM US LLP

For more information, contact Teresa M. Majors CPA at

New York has long been known to strictly interpret the state’s residency provisions, whether by challenging taxpayers moving out of state or by targeting out-of-state owners of in-state vacation homes. New York tax officials, as well as those in many other states, have placed increased emphasis on residency as individuals and businesses increasingly move outside of the state in the growing remote and hybrid work economy. In Matter of Obus v. Tax Appeals Tribunal, the New York Supreme Court, Appellate Division, issued a decision that may provide relief from residency status to taxpayers in certain circumstances, such as those owning vacation properties in the state.

New York’s statutory residence test and recent litigation

An individual that is domiciled in another state can be considered a New York resident for tax purposes if they 1) maintain a “permanent place of abode” in New York for substantially all of the tax year and 2) spend more than 183 days in New York. Both requirements must be satisfied for an individual to be considered a New York resident under this statutory test.

While the 183-day test provides a bright-line threshold, the state’s interpretation of the “permanent place of abode” language has been problematic for some taxpayers. For example, New York has historically taken the position that the mere ownership or legal access to a home that is suitable for year-round use automatically qualifies as a permanent place of abode in New York, regardless of whether the taxpayer uses the home as a place of residence. This interpretation was applied in a 2011 decision that held that a rarely used vacation home in the Hamptons created New York resident status for an investment manager domiciled in Connecticut. In the Matter of Barker, the court held that the taxpayer’s actual use of the dwelling was not determinative, and the deciding factor in whether a home meets the “permanent place of abode” definition was simply based on legal ownership and objective characteristics of the home itself.

The controversy around the state’s interpretation of the residency statute was revisited in the 2014 Matter of Gaied decision. In a ruling that contradicted the analysis in Barker, the New York Court of Appeals found that there must be some basis to conclude that the property was actually used as a place of residence in order for it to be considered a “permanent place of abode.” The court looked at the subjective use of the home and considered the intent behind the residency statute itself, which the Gaied court noted was to prevent tax evasion by actual residents of New York state.

The Obus decision

In Obus, the latest decision on the residency issue, the New York Supreme Court held that the vacation home at issue did not meet the definition of “permanent place of abode.” Accordingly, even though the taxpayer spent more than 183 days in New York, he was not considered a resident of New York for tax purposes.

The facts in the Obus case provided a clear opportunity for the court to revisit the analysis laid out in Gaied, which focused on the subjective use of the vacation home by the taxpayer. The taxpayer in Obus maintained a vacation home located in the Adirondack mountains in Northville, New York. While the taxpayer did work in New York City, he lived in New Jersey. The Northville home was used about three weeks a year for skiing or other vacation purposes and did not store the taxpayer’s personal items. Further, the Northville home was a four-hour one-way drive from New York City, making its use as a residence from which to commute to the taxpayer’s job unfeasible. As noted by the court, the taxpayers did not utilize the home in a manner which demonstrated that the taxpayers had a residential interest in the property.

Similar to the analysis in Gaied, the Obus court held that the mere fact that a dwelling could feasibly be used as a year-round, permanent place of residence was not sufficient to establish statutory residency—rather, the taxpayer must actually use the dwelling as a place of residence in order to satisfy the “permanent place of abode” component of the statutory test. Based on the facts, the Obus court held that the vacation home did not meet the legal definition of permanent place of abode. Accordingly, even though the taxpayer spent more than 183 days in New York in connection with his job, he was not considered a resident under the statutory residence test.


The impact of the court’s decision in Obus is not necessarily limited to taxpayers with vacation homes in New York State. The court’s reinforcement of the Gaied analysis and focus on the actual, subjective use of the home rather than its mere physical attributes represents an important shift in the interpretation of New York’s residency statute that may impact any taxpayer who is attempting to establish or support the existence of a domicile outside of the state. Additionally, both courts have emphasized that consideration should be given to the intent of the residency statute itself. While the state may have effectively used the statute to pull taxpayers domiciled out of state into New York residency status in the past, the true intent of the provisions is to prevent tax evasion by those who are residing within the state. Future decisions following this analysis could continue to result in more taxpayer-favorable residency determinations than have historically been offered.

It is likely that there will be future litigation on this issue in New York, and residency status remains a hot topic for state tax controversy across all states with an individual income tax. It is important for taxpayers to remember that residency analysis is generally very fact specific. A change in any one of the facts in the cases discussed here could result in a differing legal ruling and outcome. As a result, it is important for taxpayers to plan for a residency change well in advance due to the complexities involved. There are dozens of factors that taxpayers should review when considering tax minimization planning through residency changes; a few questions to consider in determining whether residency has been established:

  • Does the state maintain a statutory length of stay to qualify as a resident, i.e., 183 days?
  • Is the taxpayer registered to drive and/or vote in the state?
  • Does the taxpayer own or lease property in the state?
  • Is the taxpayer employed in the state?
  • Is the taxpayer’s family located in the state?
  • Has the taxpayer made other affirmative actions indicating intent to stay permanently?

Taxpayers should understand that no one factor is determinative. Under audit, a state will look closely at whether there is substance to a change in residency and attempt to determine the taxpayer’s true intent. Please consult your state and local tax adviser if you have questions about the Obus case, New York statutory residency or state residency in general.

This article was written by Anna Cronic, Robert Zonenshein, Harlan Kwiatek and originally appeared on 2022-08-03.
2022 RSM US LLP. All rights reserved.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

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Teresa M. Majors CPA

Teresa, the first woman at Dopkins to be named partner, works with local public and private companies providing assistance with intricate tax compliance, and tax planning. She has broad based experience including working with both public and private companies and their executives and owners. She has extensive experience with multi-state corporations, consolidated return issues, mergers and acquisitions, and tax provision issues.

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