Generally, a state may tax the worldwide income of a person who is domiciled there. Although defined by statute or administrative rule in some states, domicile is a common-law term meaning a person’s fixed and permanent place of abode in which the person intends to remain indefinitely or to which the person intends to return.
Domicile differs from residency. Although a person may have multiple residences, a person can have only one domicile. A person may be considered a resident of the state in which he or she currently lives but still be considered domiciled in another state to which the person intends to return.
Once domicile is established in a particular state, it can be difficult to lose.
This reprint of an article that first appeared in The Practical Lawyer in May, 2012, begins by reviewing the key factors that courts and administrative agencies consider in determining domicile and whether the taxpayer has changed his or her domicile as well as the evidentiary standards applied.
The second section of the article examines other tests to determine residency (typically referred to as statutory residency but herein referred to as “residency”) and the definition of a permanent place of abode, residency issues that arise in particular situations, and recent residency cases.
The final section examines dual residency, tax credits available to taxpayers subject to income tax in more than one state, and state legislative efforts and multistate agreements to address double taxation.
DOR's views on domicile are found here.