This Article is a partial re-write of an earlier article, published in 2011, dealing with the same subject. The OAR references in the prior article have been updated, but the law remains much the same despite more than 40 subsequent decisions of the Oregon Magistrate Court.
Oregon imposes a personal income tax on all residents of the state under the authority of ORS §316.037(1)(a) (2010). By statute, an individual is a resident of Oregon under two scenarios.
- An individual who is domiciled in Oregon, unless the individual a) does not have a permanent place of abode in Oregon, b) maintains a permanent place of abode in a place other than Oregon, and c) spends less than 31 days of a taxable year in Oregon. ORS § 316.027(A)(i)-(iii).
- If an individual is not a domiciliary, they may be a resident if the individual maintains a permanent place of abode in Oregon and spends more than 200 days of a taxable year in Oregon unless the individual can prove they are in Oregon for a temporary or transitory purpose. ORS § 316.027(B).
Oregon modeled its residency statute after Rhode Island and New York residency rules. Ramsey v. Dept. of Rev., 7 Or. Tax 478, 482 (1972). The residency requirements were changed in 1969 to grant tax relief to individuals who do not receive the benefits and protections of the state and to ensure that those who do receive those benefits and protections contribute to the support of the State. Id.
It seems that the legislature intended to apply a measure of fairness to its residency standards. If you take benefits from the state, you should pay tax to cover the cost of providing those benefits. If you receive few or no benefits from the state, you shouldn’t be required to pay Oregon tax on income earned outside the state. While this concept may be reflected in the way the statute was written, I have not seen it applied or espoused by the Department of Revenue or the Oregon Tax Court.
The Concept of Domicile
Oregon is one of several states that look to the concept of domicile in determining residency for tax purposes. Under Oregon law, a domicile is described as the place an individual considers their “true, fixed, permanent home.” ORS § 136.027(1)(a) (2000). An individual’s domicile is where they intend to return to after an absence. Id. An individual can have only one domicile at a time. Id.
In order to change domiciles, an individual must establish a new residence in a new place, and they must have the intent to abandon the old domicile. Davis v. Dept. of Revenue, 13 OTR 260, 264 (1995). Further, the individual’s intent must be a present intent. Id. An example of present intent is illustrated by Harlan v. Dept. of Revenue, 10 OTR 497 (1987). In Harlan, the court held that a taxpayer did not have a present intent to establish a new domicile where the taxpayer moving to a new residence was contingent on the selling of a home in Oregon. Id. The court determined the event was in the future and had no degree of certainty as to the time. Id.
An individual’s intent can be inferred from circumstances or activities. Dela Rosa v. Department of Revenue, 11 OTR 201 at 203 (1989). In Dela Rosa, the taxpayer worked in other states but owned property in Oregon, kept his Oregon driver’s license, filed joint Oregon tax returns with his wife, and claimed “away-from-home expenses” on his federal tax return for expenses incurred while working out of the state. Additionally, his family continued to live in the Oregon house. The taxpayer did not have a permanent home outside of Oregon. The court determined the circumstances were sufficient to establish the taxpayer was an Oregon domiciliary for personal income tax purposes.
Permanent Place of Abode
A permanent place of abode is “a dwelling place permanently maintained by the taxpayer . . . over a sufficient period of time to create a well-settled physical connection to a given locality,” regardless of ownership. OAR 150-316.025(1)(b). In determining whether an individual has a permanent place of abode, court will look to factors such as “the amount of time spent in the locality, the nature of the place of abode, activities in the locality and the taxpayer’s intentions with regard to the length and nature of the stay.” OAR 150-316.025(a)(b)(A).
Any property that “is suitable for year-round living” may constitute a permanent place of abode, even if it is only used on vacations or weekends. OAR 150-316.025(1)(a)(C). For example, a vacation home that contains all the amenities found in a primary residence would be considered a permanent place of abode. However, if the property is used for investment or rental purposes, and the taxpayer never uses the property, it is not considered a permanent place of abode. This exception is not available when “the property is used during the tax year by the taxpayer [or] used by the taxpayer’s family for a sufficient period of time to establish a well-settled connection.” OAR 150-316.025(1)(a)(B).
Temporary or Transitory Purpose
An individual who is not domiciled in Oregon but spends over 200 days in a taxable year in the state may avoid paying resident income tax if he can prove he is in the state for a temporary or transitory purpose. ORS § 316.025(B). An individual’s stay in Oregon is temporary or transitory if the reason for staying is neither permanent nor expected to last indefinitely. OAR 150-316.025(2). For example, an individual who is vacationing on the Oregon Coast for several months would be in the state for a temporary purpose. However, an individual who is contracted to work on a construction project in Oregon with an indefinite date of completion may be considered by the Department of Revenue to be in the state for reasons that are not temporary or transitory.
The regulations provide the following scenario regarding temporary or transitory purpose: A couple lived in Minnesota and was domiciled there. They owned a family home in Minnesota and spent over 200 days per year at the Oregon Coast. After a few years of renting property, the couple decided to purchase a home in Oregon. The home was rented to others during the time periods the couple resided in Minnesota. The taxpayers had no business interests in Oregon and did not work in Oregon. Additionally, the taxpayers belonged to Minnesota clubs and kept office space in Minnesota. The taxpayers’ presence in Oregon was considered temporary or transitory, and therefore, they were not taxed as Oregon residents. OAR 150- 316.027(2).
There are other examples of temporary and transitory presence in Oregon. Generally, this involves a projected time when the individual’s presence is to end. For example, an employee is domiciled in another state but is given a temporary assignment to Oregon for a fixed period with an anticipated end date. This work assignment would be temporary and transitory if it is for a time reasonably calculated to accomplish the assignment. As mentioned above, if an employee is assigned to work in Oregon for an indefinite period, it is not temporary and transitory, and the employee is likely to be considered an Oregon resident for tax purposes if present in the state for more than 200 days.
When talking about employment, it is important to keep in mind the source of income received by the employee. Even the income of an employee who is clearly a non-resident, when derived from sources within the state of Oregon, is taxed by Oregon as calculated under ORS § 316.127. The description of income that qualifies as sourced in Oregon is enumerated in that statute.