Florida Residency

Living in Florida doesn’t have to change your charitable giving in NY

By Marion Hancock Fish, Esq.

Spring is coming and Central New York snowbirds will start to return to the Empire State. While weather is certainly one reason to spend half the year in Florida, you may have headed south for another reason — to establish or maintain your non-New York residency for tax purposes.

Recent changes in the law have reduced the impact of New York estate tax, but New York’s high income tax rates remain a strong motivator to establish residency outside New York.

New York taxes its residents on income from all sources. On the other hand, nonresidents are only subject to tax on income derived from New York sources. Therefore, an individual who can establish legal residency outside New York will eliminate or at least minimize his or her exposure to New York tax.

There is a common misconception that charitable giving also needs to be adjusted during this process. Thomas Griffith, director of gift planning at the Central New York Community Foundation, reports that he often sees donors who change their tax domicile to Florida mistakenly thinking they need to cease their gifts to charities here in Central New York to avoid New York taxation.

Let’s look at this more closely.

Section 605(b) of the New York Tax Law determines your residency status. The initial question is whether you are “domiciled” in New York. Although in everyday conversation “residence” and “domicile” are used interchangeably, here they have different meanings. “Domicile” is the place you intend to make your permanent home — the place to which you return after absence. And though you may have several residences, you may only have one “domicile.”

These are the five primary factors to determine domicile under New York Law: the pattern of use of your New York residence; your New York business ties; where you spend your time; the physical location of items “near and dear” to you; and the location of your family.

Even if you are not considered “domiciled” in New York, you may still be taxed as a New Yorker if you spend more than half the year (or 183 days) in New York, and maintain a New York year-round residence.

To help snowbird clients navigate these complex rules, advisers have developed widely used checklists of “do’s and don’ts”. Often included in such lists is the recommendation that clients sever all ties with local charities. In response, clients have shifted their charitable support out of state, ceasing donations to organizations they and their families have supported for decades, and perhaps generations.

This is not the intent of New York law. In fact, you will be reassured to know the New York Tax Law and published tax audit guidelines specifically state that where you volunteer and to what charity you donate are not relevant in determining your domicile. The New York legislature amended Section 605 of the Tax Law in 1994 to clarify that charitable support and volunteer work “shall not be used in any manner to determine where an individual is domiciled”.

Surely, this is welcome news. It means one less item on your snowbird checklist and, more meaningfully, a green light to continue supporting the charities you have supported your entire life.

For more information on this topic and ways you can support Central New York, I encourage you to connect with the Community Foundation. The staff will work with you to discern your intentions and create a plan that maximizes the advantage of your estate and financial plans. Contact Tom Griffith at tgriffith@cnycf.org or 315-422-9538 for assistance.

Marion Hancock Fish, Esq. is a former board chairwoman of the Community Foundation and partner at Hancock Estabrook, LLP. She focuses her practice on estate planning, transfer-of-wealth tax issues, family business planning and succession, charitable giving, not-for-profit law and elder law and special needs administration.