Re: Montana and change of Domicile

Posted by Katie on November 14, 2007, 12:19 pm

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> I am confused. Here is the last email from the State

> Auditor.

> "" I am asking that you provide a copy of your visa and

> passport for the years in question. You brother might also

> want to check on this to maintain your US citizenship you

> must maintain an us state as your home of record. I presume

> because I have not been told other wise that your are a us

> citizen and carry either a us passport or a visa to

> maintained your stay in Thailand. Thank you for your time

> ""

> If i owe the tax simply because the gains were generated in

> Montana then why is he bothering with asking for copies of

> my passport? Also what is this about losing my citizenship

> and maintaining a state of record ?? I thought the only way

> you could lose your citizenship is by renouncing it at an

> embassy.

> Moderator:

> This varies from State to State. The typical scenario is

> that the State takes the position that you are a resident

> of their State unless and until you establish US residence

> in another State or Territory.

> There were three cases combined and heard before the

> Maryland Court of Appeals within the laast 15 years. The

> Court ruled that the taxpayer had to demonstrate that

> he/she had to conduct themselves in a manner consistent

> that they had no intention of returning to the State, I

> do bot hace the cite immediately available - Katie may!

> While their statment about maintaining US citizebship by

> maintaining a State of Record is mistatement of fact,

> Texas and Florids seem to be the places to go to avoid

> legal entanglements.

First, it appears that the gain you realized in 2000 was
from the sale of Montana land. That gain is subject to
Montana tax, whether or not you were a Montana resident in
2000. I gather the state has filed a lien against any
property you may own in the state, and as a result the sale
of the land you own there will result in payment of the
proceeds to the state to the extent of the amount of the
lien. The lien is valid, since it arises from a tax
liability that you definitely owed. The state presumably
will release the lien if you pay the tax, penalties and
interest, and I suggest you do that as soon as possible,
since the interest clock continues to run. Whether or not
you retained a Montana driver's license has NOTHING TO DO
with this, regardless of what the Montana tax authorities
may have suggested. It was Montana source income and you
owe the tax (plus whatever penalties and interest have
accrued).

I can only surmise that the auditor is asking for other
information (your passport, visa, etc.) in the hope of
establishing that you are (or were, in 2000 and possibly
some subsequent years) a Montana domiciliary and hence a
resident for tax purposes. In that case, all of your
worldwide income would be subject to Montana tax. I presume
you filed a part-year resident return in 1999, when you went
to Thailand, and as a result the statute of limitations on
1999 has expired. However, if you have not filed returns
for 2000 and later years, the statute on those years remains
open. If they determine that you were domiciled in Montana
in 2000 and any subsequent year, they will issue a new
assessment taxing all of your worldwide income in those
years.

You may be able to short-circuit this process by agreeing
with the auditor that you owe the tax on the 2000 land sale
gain and paying up. I'd strongly advise you to do that.
Montana law does not provide any exception to the general
rule that a person who is domiciled in the state is a
resident. In order to change domicile, you must move away
from your previous domicile, move to and reside in a new
location, and intend to remain in the new place permanently
or indefinitely. You certainly could establish a new
domicile in Thailand, and your marriage to a Thai citizen (I
presume), purchase of a home and establishment of a business
there are indications that you have done so. The effective
date of that change may, however, be subject to argument.
I'd get out of this conflict as quickly as possible, if I
were you.

As Dick says, the auditor's statement that in order to
retain your U.S. citizenship you must retain legal residence
in a U.S. state is simply false. In addition, as an
expatriate U.S. citizen you are entitled to retain your
right to vote, and you may retain your voter registration in
the last place where you were registered and vote there as
an absentee. That does not make you a resident or
domiciliary of that state if you have truly established a
domicile in a foreign country. If the auditor argues that
it does, refer him to his own legal department. They'll set
him straight.

Katie in San Diego

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