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Multi-state residency due to the pandemic

Under ordinary circumstances you may become a statutory resident of a state if you are physically present in that state for 183 days or more. Meanwhile, your state of permanent domicile may not change, thereby creating a situation where you may be treated as a resident in multiple states. Unfortunately, this can result in double state taxation or overall state taxation at higher effective rates.

As you know, these are not ordinary circumstances. Due to the pandemic, this scenario may occur more frequently as people choose to temporarily move out of their domiciliary state to another state.

The state residency laws did not contemplate the disruption caused by the pandemic. Congress has drafted legislation that would provide relief to those who have temporarily moved out of state due to the pandemic, but Congress has not yet acted. Further, some states have taken action to provide relief while the majority have not. The consensus is that the federal government will act to deal with this once in-a-hundred year event, providing relief to those impacted. CPA societies are advocating for this relief as well.

Please reach out to your Tax Adviser to discuss your specific situation as the rules vary by state.

Posted In: Alerts & Advisories