Ohio Creates New Bright-Line Residency Test for Ohio Income Tax Purposes

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On June 14, 2018, Ohio’s Governor signed Substitute House Bill 292 amending Ohio’s statute for determining residency for Ohio income tax.[i] The new law is effective for tax years beginning on or after January 1, 2018. The purpose of the new law is to overturn recent court decisions regarding determination of domicile for Ohio income tax and to establish a bright-line test for Ohio income tax purposes.

Specifically, the new law provides that a taxpayer is presumed to not be domiciled in Ohio for the entire taxable year if the taxpayer files a statement with his or her tax return on or before October 15 of the year following the close of the taxable year and meets all of the following requirements:

  1. The taxpayer has no more than 212 contact periods with Ohio during the taxable year (generally, overnight stays);
  2. The taxpayer has an abode outside of Ohio during the entire taxable year for which the individual did not claim a depreciation deduction on his or her federal income tax return;
  3. The taxpayer did not hold a valid Ohio driver’s license or identification card at any time during the taxable year;
  4. The taxpayer did not claim a homestead exemption for an Ohio residence during the taxable year; and
  5. If the taxpayer attended or was enrolled in a state institution for higher education, then the taxpayer did not pay in-state tuition based upon a place of residence in Ohio.

The presumption is “irrebuttable,” unless the statement is false with respect to any of the five requirements set forth above. In other words, the Ohio Department of Taxation can only challenge the truthfulness of the statement as to the five requirements set forth above.

If a taxpayer does not satisfy one or more of the five requirements, they may still be able to claim non-Ohio domicile by relying on the common law principles of domicile.  However, it is unknown how receptive the Ohio Department of Taxation to considering common law when determining tax domicile after enactment of this new statute. So, from a planning standpoint, it is best to satisfy all five requirements in order to secure the irrebuttable presumption provided by the new law.

[i] ORC Section 5747.24