Trump Tower, New York City. Photo by Mark Guim.
His accent says Queens, but his voter registration says Palm Beach: President Trump wants to be a Floridian and New York Gov. Andrew Cuomo wishes him “Godspeed” (or words to that effect).
But New York tax collectors are likely to say “not so fast.”
In a tweet on Oct. 31, the president announced that he and his family intend to make Palm Beach, Florida their permanent residence. Cuomo, along with New York City mayor Bill de Blasio, promptly tweeted back that they were more than happy to see him go. But the state’s tax department almost certainly does not feel the same way, as more than one tax professional told the South Florida Sun Sentinel.
Along with California, New York is notorious for the aggression with which it asserts residency against expatriates who try to establish their tax home elsewhere. Anyone who has endured a residency examination (or who has tried to keep clients calm in the face of one) is well aware that the auditors in this specialty are as bashful, as thorough and as welcome as a colorectal specialist with a mean streak. Less welcome, actually; at least the colorectal specialist is trying to help you.
Because he retains his Trump Tower apartment, the president must satisfy a number of tests New York has established to determine whether someone qualifies as a nonresident for tax purposes. Those tests were devised in the same spirit of fairness and goodwill employed by Dolores Umbridge, the evil headmistress of Harry Potter’s Hogwarts.
The first part is simple enough: New York will consider Trump a resident if, in any year, he maintains a residence and spends 184 or more days in the state. What is a “day” in the state? With extremely limited exceptions, it means any part of a day – even a minute. If Air Force One touches down at LaGuardia Airport at 11:55 p.m. and Trump’s entourage whisks him to midtown for a breakfast speech before returning him to the White House in time for lunch, the president will be charged with two days in New York, even if his actual time there is less than 12 hours.
Because these rules are clear and longstanding, if unfair, expatriates can at least plan for them. There is no foolproof way to pass the state’s other residency test, the one known as “domicile,” short of disposing of any rental or ownership interest in any “permanent place of abode” in New York. New York determines domicile through a series of subjective factors that have little or nothing to do with where a person actually resides. The factors are applied and weighed subjectively, for the most part. (The five given the most weight are the relative sizes and values of the homes; the maintenance of active business connections; time spent in each location; the location of items auditors consider “near and dear,” such as valuable artwork or sentimental belongings; and family connections.) If an auditor can plausibly reach the conclusion that the individual has not proved an intent to permanently change domicile, New York will consider that person still to be a resident.
What are the implications for Trump? Either way, as Florida resident or not, he would owe tax on income derived from businesses in New York or from gains on New York property, if he sells it. But if he has income from elsewhere – say, he sells Mar-a-Lago at a profit because he decides he needs something bigger – New York can only tax his out-of-state income if he is a resident. We have not seen Trump’s tax returns, but it is a safe bet that he reports income from all over the world. So New York likely has considerably more at stake than Cuomo acknowledged when he groused that “It’s not like Mr. Trump paid taxes here anyway.”
While I would not wish a New York residency audit on anyone, some good might come out of a future examination of Trump’s situation. It would be highly constructive if some future Congress (there is no hope in this one) set a bright-line rule for when states must acknowledge that someone is a nonresident.
I would suggest that New York’s objective 184-or-more-days test should pass muster and be retained. While the rules may be tilted, at least they are clear and leave little room for gamesmanship. But under its power to regulate interstate commerce, Congress could – and should – abolish domicile as a grounds for state taxation, or at least establish a firm presumption that an individual’s domicile is the place where the individual, if a citizen, chooses to register to vote.
Such a concept has very deep roots in American history. In their litany of complaints against King George III, the signers of the Declaration of Independence included “imposing Taxes on us without our Consent.” Taxation without representation, you see.
If Gov. Cuomo prefers not to count President Trump among his constituents, Trump ought to be allowed to pay his taxes to the much friendlier administration of Gov. Ron DeSantis in Tallahassee. Florida happens not to have income or estate taxes, though we do draw three-quarters of state revenue from sales taxes. If Trump decides to merely redecorate Mar-a-Lago rather than sell it, this might generate a nice piece of coin for the Sunshine State. We will be happy to have it.