California Residency:
Are You A Resident?

Am I a California Resident?

A California Resident is any individual who is:

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• In California for other than a temporary or transitory purpose, or
• Domiciled in California and outside the state for a temporary or transitory purpose

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This definition is intended to tax any individual enjoying the benefits and protection of California laws and government as a resident

Domicile

The place where you have a fixed presence or residence without any present intention of permanently leaving.

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• You can only have one domicile at a time.
• Once you have established domicile in California, that domicile continues until it is established somewhere else. A change of domicile requires all of the following:
  - Abandonment of your prior domicile
  - Physically moving to and residing in the new location
  - Intent to remain in the new location permanently or indefinitely, demonstrated by your actions

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An individual who is domiciled in California and who leaves the State retains California domicile as long as they have a definite intention of returning; regardless of the length of time or the reasons for leaving.

Key Takeaway: Residency is not the same as domicile

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An individual can be considered a resident without being domiciled in California, and An individual can be domiciled in California without being considered
a resident

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Whether an individuals purpose inside or outside of California is "temporary or transitory" heavily depends on the facts and circumstances of each case.

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Temporary or Transitory:

• On vacation
• To complete a transaction
• To perform a contract, or
• Simply passing through

Other than Temporary or Transitory:

• Health reasons related to an illness requiring long and indefinite care
• Business purposes that require a long and indefinite period to accomplish
• Employed in a position that may last permanently

Examples → Previous rulings

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Residence Not Established By Facts

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A wife who was living with her husband in Mexico and who visited their California home occasionally did not become a California resident.

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• The California home was maintained as a convenience for her two sons in the armed forces and was used merely as a mailing address.
• The California location of the wife's checking account and safe deposit box was not sufficient to establish residency.

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Place of Residence

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Taxpayer became a California resident when he:

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1. Opened a bank account
2. Filed a credit application with a California store, and
3. Claimed California residence on his federal tax returns

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The facts suggested that the purpose of the taxpayer’s periodic returns to Ohio were to wind up his affairs, and the burden of proof belonged to the taxpayer to prove otherwise.

Guidelines for Determining Residency

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”You are a resident of the place where you have the closest connections” - CA FTB

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When contemplating your residency status, it’s important both to compare your ties to California with your ties elsewhere. Both the strength of your ties, and number of ties, will be relevant factors in determining your state residency.

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The type and amount of proof required to establish an individual as a nonresident is not specified by regulation and is highly dependent on your particular facts and circumstances.

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Some factors that may be considered include:

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• Time spent inside (and outside) of California
• Origin of your financial activity
• Where any professional licenses are maintained
• Location of banks where you maintain accounts
• Permanence of your work assignments inside (and outside) California
• Affidavits or testimony from employers or business associates that you were in California to complete a transaction or for a limited period of time
• Location of your:
  • Spouse and/or children
  • Principal residence
  • Driver’s license
  • Vehicle registration
  • Voter’s registration
  • Medical professionals and healthcare providers
  • Real estate and investments
  • Social ties
    • Places of Worship
    • Professional Associations
    • Club memberships

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This is only a partial list of factors to consider. No one factor is determinative, and all facts of your particular situation should be used to determine your status.

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Leaving California

Any resident of California continues to be a resident if they are absent from the state for a temporary or transitionary purpose

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Safe Harbor: Absence due to employment-related contracts

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If you are domiciled in California and living outside the state under an employment-related contract for at least 546 consecutive* days (~ 1.5 years), you will be considered a nonresident, unless:

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1. You have intangible income > $200,000 in any taxable year that the employment-relate contract is in effect
2. The primary reason you’re not living in California is to avoid personal income tax

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*Visits to California that do not exceed a total of 45 days during any tax year covered by the employment contract are considered temporary.

If you do not meet the criteria to be covered under this safe harbor, your residency will be determined based on the facts and circumstances of your case

Examples

Example 1

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In March 2021, you declared yourself to be a resident of Nevada, where you have a summer home.

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• You continue to spend six or seven months each year at your home in California, which you have retained.
• You spend only three to four months in Nevada and the rest of the time traveling in other states or countries.
• You transferred your bank accounts to Nevada. However, you continue to maintain your social club and business connections in California.

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Your declaration of residency in another state does not establish residency in that state. Your closest connections are to California and your absence from California is for temporary or transitory purposes. You are, therefore, a resident of California and are taxed on your income from all sources.

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Example 2

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‍You accept a contract to work in Europe for 16 months.

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• You lease an apartment near the job site.
• Your contract states that your employer will arrange your return back to California when your contract expires.
• Your spouse and children will remain in California residing in the home you own.

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You maintain strong ties with California because your spouse and children remain in your California home during your absence. Your intent is to return to California, and your absence is temporary and transitory. You remain a California resident during your absence. You are taxed on income from all sources, including income earned in Europe.

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Example 3

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‍You accept a three-year assignment in Japan. Your assignment in Japan covers the period January 1, 2018, through December 31, 2021.

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• You rented out your home and put your belongings in storage in California.
• You maintained your California bank accounts, driver's license, and voter registration.
• You have less than $200,000 of intangible income during each year.
• Upon completion of your assignment, you intend to return to California.
• You returned to California to visit family no longer than a total of 45 days during 2015 or 2016.

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You meet the safe harbor rule. You are a nonresident during your absence from the state.

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Income Taxable by California

Residents of California are taxed on all income, regardless of source Nonresidents of California are taxed on income from California sources Part-year residents are taxed on all income received while a resident, plus any income from California sources whole a nonresident

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Salaries and Wages are sourced where the services are performed. Neither the location of the employer, where the payment is issued, nor your location when you receive payment affect the source of this income.

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• Residents are taxed on all salaries and wages, regardless of source
• Nonresidents are taxed on any earnings from services performed in California

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Real Estate Sales are sourced where the property is located, regardless of residency status.

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• Residents are taxed on any gains from real estate sold regardless of source
• Nonresidents are taxed on any gains from real estate sold in California

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Income tax withholding may be required on income with a California source. Examples include:

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• Salaries and wages
• Sales of California real estate
• Income or distributions from pass-through entities

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Resources

Cal. Code Regs. Tit. 18, § 17014 - Who Are Residents and Nonresidents

Whittell v. Franchise Tax Board (1964)

200-094, Appeal of Lyon- Personal Income- Residence Not Established by Facts

201-859, Appeal of Schermer- Personal Income- Place of Residence