…..That’s not so easy
As state tax burdens continue to increase, many taxpayers are considering establishing residency in states, like Wyoming, that do not impose an income tax. Wyoming has defined residency requirements for the purposes of obtaining a resident hunting or fishing license, eligibility for resident tuition, registering to vote, and registering vehicles. However, the Wyoming Department of Revenue does not have a definition of residency because Wyoming does not impose a state income tax. The burden of proving residency in Wyoming is not meeting certain Wyoming requirements; rather, the challenge is terminating residency, or the ability to impose state income tax, in the state in which a taxpayer presently resides or has connections.
Each state has different laws regarding the connections necessary to impose state income tax and therefore the laws of the state from which a taxpayer wants to avoid the imposition of state income tax need to be analyzed carefully. Unfortunately there are very few states with bright line tests for imposing state income tax. It is also possible to be taxed by more than one state. Although
The state income tax rules for the state from which you want to avoid state income tax imposition need to be analyzed, the general theme that must be demonstrated is the intent to terminate residency in the old state and establish residency in Wyoming. Demonstrating the intent to terminate residency in the old state and establish residency in Wyoming is a fact based analysis and should generally involve the following actions:
• Maintaining a domicile (preferably one you own) in Wyoming;
• Selling your residence in the former state (or at least downsizing); • Spending more time in Wyoming than anywhere else;
• Registering to vote (and voting) in Wyoming;
• Registering vehicles in Wyoming;
• Obtaining a Wyoming driver’s license;
• Renewing your passport to reflect Wyoming;
• Amending estate planning documents to reflect Wyoming residency;
• Moving financial accounts to Wyoming;
• Moving situs of trusts to Wyoming;
• Engaging in social, civic, and religious organizations in Wyoming;
• Preparing and signing an affidavit of domicile;
• Making charitable donations in Wyoming (consider reducing the charitable donations in the old state);
• Establishing relationships with a doctor, dentist, accountant, and attorney in Wyoming; and
• Changing mailing address to Wyoming: financial institutions, magazines, memberships, clubs, and insurance.
Wyoming does not have a single statistical definition of residence. Rather, it has several administrative definitions. For voting purposes, residence is defined as the place where a person has a current habitation and to which, whenever absent, has the intention of returning. The State of Wyoming adds the concept of domicile to further clarify who is considered a legal resident of the State. A domicile refers to that place where a person has a true, fixed, and permanent home to which, whenever absent, the person has the intention of returning. A person may have more than one residence, but only one domicile. To be considered a legal resident of Wyoming, a person must have domiciled within Wyoming for a period of not less than one year and not claimed residency elsewhere for any purpose during the one year period.
The University of Wyoming uses a similar administrative definition. It defines a Wyoming resident as an individual with a permanent home in Wyoming who has resided in the State for at least one full year. Determination of whether or not a permanent residence has been established is based on factors such as full-time employment in Wyoming for one continuous year, ownership of property in the State, a Wyoming vehicle registration, a Wyoming address on the most recent tax return, a valid Wyoming driver’s license, or a Wyoming voter registration.
The Wyoming Game and Fish Department also has an administrative definition of residence. To qualify for a resident game and fish license, permit, or tag, “a person shall be domiciled and shall physically reside in Wyoming for one (1) year immediately preceeding the date the person applies for the license, permit, or tag.” The place where a person’s family resides is presumed to be the place of residence, but a person who establishes or continues a place of abode with the intent of remaining at a place other than where the person’s family resides shall be presumed a resident of the place where the person actually resides. The person must physically reside in Wyoming, must intend to make a permanent home in Wyoming, and is not residing in Wyoming for a special or temporary purpose.