Connelly, Marjorie A.

English

DOCS@RWU

Roger Williams University Law ReviewVolume 7 | Issue 2 Article 24Spring 20022001Survey of Rhode Island Law: Cases: Tax LawMarjorie A. ConnellyRoger Williams University School of LawFollow this and additional works at: http://docs.rwu.edu/rwu_LRThis Survey of Rhode Island Law is brought to you for free and open access by the Journals at DOCS@RWU. It has been accepted for inclusion inRoger Williams University Law Review by an authorized administrator of DOCS@RWU. For more information, please contact mwu@rwu.edu.Recommended CitationConnelly, Marjorie A. (2002) "2001Survey of Rhode Island Law: Cases: Tax Law," Roger Williams University Law Review: Vol. 7: Iss. 2,Article 24.Available at: http://docs.rwu.edu/rwu_LR/vol7/iss2/24560 ROGER WILLLUMS UNIXERSITY LAW REVIEW IVol. 7:403Tax. DeBlois v. Clark, 764 A.2d 727 (R.I. 2001). The appropriateburden of proof for a determination of domicile in a state incometax case is the preponderance of the evidence test as outlined insection 8-8-25 of the Rhode Island General Laws.FACTS AND TRAVELThis is an appeal of a tax deficiency judgment at the districtcourt holding petitioner was a resident of Rhode Island and owedRhode Island income taxes.' In the district court the Departmentof Revenue initially raised two arguments: first, the petitioner is adomiciliary of Rhode Island, and second, the source of income rulesmandated the income be treated as Rhode Island income subject totax at a resident's rate.2 However, the argument regarding sourceof income was not addressed in the district court's opinion.3Petitioner was a resident of Rhode Island for many years. 4However, in 1988 he decided to relocate to Florida.5 In the decisionmaking process the petitioner contacted a tax expert to determinehow to appropriately make Florida his permanent residence. 6 Pe-titioner retained a condominium in Warren, as well as buying acondominium in Florida.7 Petitioner spent late May to early Octo-ber and late November and December in Rhode Island and the re-maining months in Florida. The parties stipulated that thepetitioner spent less than 183 days in Rhode Island.8 While hewas not using the condominium in Rhode Island, other familymembers, who were non-residents of Rhode Island, used it for a getaway location. 9 Family and business ties to Rhode Island re-mained.' 0 However, petitioner did resign from several civic andbusiness groups explaining that he moved his residence to theState of Florida." After filing non-resident income tax returns for1. DeBlois v. Clark, 764 A.2d 727, 730 (R.I. 2001).2. Id.3. Id at 731 n.1.4. Id. at 730.5. Id.6. Id. at 734.7. Id. at 730.8. Id. at 730 n.1.9. Id. at 730.10. Id. at 733.11. Id. at 736.SURVEY SECTIONthe years 1991, 1992 and 1993, petitioner received notices from thetax assessor stating that the tax was due in 10 days.12The tax division determined that the petitioner was a RhodeIsland resident, subject to the resident income taxes.13 The tax ad-ministrator affirmed the hearing officer. 14 The district court heldutilizing the clear and convincing standard that the petitioner wasunsuccessful in changing his domicile and that the deficiency no-tices were valid since any deficiencies were de minimis.' 5The main issue is whether the domicile must be established bya clear and convincing standard or by a preponderance of the evi-dence standard. 16 The procedural issue is the validity of the defi-ciency notices received. 17BACKGROUNDA resident for state income tax purposes is defined in R.I. Gen-eral Laws section 44-30-5(a) as either someone who is domiciled inthe state, or someone who is not domiciled in this state, that meetsthe following conditions: they own a permanent residence in thestate and they are actually present in the state for more than 183days.18An additional method for the state to tax at resident rates, isthe source of income theory that is set forth in R.I. General Lawssection 44-30-32.19 However, this theory was not addressed in thedistrict court's opinion.20ANALYSIS AND HOLDINGThe supreme court held that the correct burden of proof is thepreponderance of evidence standard.2 ' Applying that standard,the court found that the petitioner was successful in changing his12. Id.13. Id.14. Id. at 731.15. Id.16. Id. at 730.17. Id.18. The 183-day limit is not an issue in this case because the parties stipu-lated that the petitioner was not located in the state for more than 183 days.19. Id. at 731 n.1.20. Id.21. Id. at 730.20021562 ROGER WILLIAMS U"iVdERSITY LAW REVIEW [Vol. 7:403domicile to the state of Florida.22 The court also held that the no-tices of deficiencies received by the taxpayer were defective. 23The court stated that R.I. General Laws section 8-8-28 governsthe burden of proof in tax cases.24 That statute states that a "pre-ponderance of evidence shall suffice to sustain the burden ofproof".25 The statute goes on to say that if the issue is one of fraud,then the standard is the clear and convincing standard. 26 Thecourt held that because the Department of Revenue did not assertfraud, the petitioner needed only to show by a preponderance of theevidence the change in domicile state. 27 The tax administrator ar-gued that the statute allows both the burden of proof and the bur-den of production to shift. 28 The court held that the burden ofproof lies with the party looking for affirmative relief.29 The courtwent on to explain that the burden of production shifts as the caseproceeds in the same manner as any other civil suit.30 Once thecourt decided the appropriate legal standard, it went on to resolvethe case, as all the facts were uncontroverted.3 ' To resolve thecase, the court needed to address the domicile of the petitioner andthe validity of the notices. 32The court stated a person can have only one domicile, althoughhe can have several residences. 33 The court defined the test tochange a domicile, as consisting of two prongs. 34 The first prongmandates that the person must have a physical abode in the newlocation.35 The second prong requires that the person have the in-tent to stay permanently in the new location. 36 The court held thatthe petitioner was able to demonstrate both prongs of the abovetest. The petitioner's ownership of the condominium in Florida22, Id.23. Id.24. Id. at 731.25. Id. at 732.26. Id,27. Id. at 732-33.28. Id. at 732.29. Id.30. Id. at 733.31. Id.32. Id. at 733-38.33. Id. at 734.34. Id.35. Id.36. Id.SURVEY SECTIONsatisfied the first prong. 37 The second test must be determined ona case-by-case basis.38 The district court relied heavily on the factthat petitioner decided that their final resting-place would be inRhode Island.3 9 The supreme court stated that while this is a fac-tor, it should be weighed lightly because there are many reasons aperson would choose a final resting-place. 40 Many of these reasonsdo not reflect where the person is interested in remaining whilealive.41 The supreme court looked to the fact that the petitionertold people that he was changing his domicile to the state of Flor-ida when resigning from civic and business groups.42The supreme court also looked at the location of householditems.43 The higher percentage of overall personal belongings in aresidence, the more of an indication it is of which location the peti-tioner intended to be their domicile." In this case, the petitionerhad over three-quarters of his possessions in the state of Florida,and had been granted a homestead exemption.45 Other factors thecourt considered included: voter registrations intangible taxes,driver's licenses, car registrations, churches, country club member-ships and wills, which the petitioner had changed to Florida.4The above factors caused the court to decide that the petitionerhad intended his domicile to be in the State of Florida, thus meet-ing the second test.47 It is not required that the petitioner aban-don the old location completely.48The final issue raised in the case is the validity of the defi-ciency notices.49 The petitioners received deficiency notices thatindicated "Federal Tax Liability Appears Incorrect Rhode IslandTax Computed Incorrectly."50 The deficiency notice mandated that37. Id. at 735.38. Id. at 734.39. Id.40. Id. at 735.41. Id.42. Id. at 736.43. Id. at 735.44. Id.45. Id. at 735-36.46. Id. at 736.47. Id.48. Id. at 737.49. Id. at 736.50. Id.20021 563564 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 7:403the tax was due within 10 days of the notice being mailed. 51 Thenotices contained no other information. 52 If the deficiencies in thenotice do not comply with R.I. General Laws section 44-30-81 butare de minimis, the notices can stand.53 However, if the deficien-cies are not de minimis then the court has the right to void theassessments. 54 The R.I. General Laws section 44-31-81(b) statesthat the notice of deficiency will turn into an assessment after 30days. 55 At that time the tax can be collected. 56 These notices con-tradicted that statute by demanding payment in ten days, there-fore the court held them to be invalid.57 The notices were also heldto be invalid because the reason for the deficiency was too vagueand possibly misleading. 58 From the notation on the deficiency,the petitioner could not tell that the issue was one of residency. Itappeared to be that the Department of Revenue felt that the peti-tioner had calculated his federal income tax incorrectly. 59 SinceRhode Island income tax is based on the federal income tax, thiswas a misleading comment.60 As such, this notice was held to beinvalid and the assessments were unlawful. 61CONCLUSIONThe supreme court held that the petitioner was successful inchanging his domicile, that the correct burden of proof is the pre-ponderance of evidence standard and that the notice of deficienciesreceived by the taxpayers were defective.Marjorie A. Connelly51. Id. at 737.52. Id.53. Id.54. Id.55. Id.56. Id.57. Id. at 737-38.58. Id.59. Id. at 738.60. Id.61. Id.

2001Survey of Rhode Island Law: Cases: Tax Law

HELIN Digital Commons

https://docs.rwu.edu/cgi/viewcontent.cgi?article=1244&amp;context=rwu_LR

2001Survey of Rhode Island Law: Cases: Tax Law

Abstract

Similar works

Full text

Available Versions

DOCS@RWU

HELIN Digital Commons

HELIN Digital Commons