Whether a person is a California resident determines whether California taxes all of that person’s income or only income from California sources. The answer comes from California’s statutes and the Franchise Tax Board’s (FTB) published guidelines, and it usually turns on facts and documentation rather than a single test.
Why Residency Matters
FTB Publication 1031, Guidelines for Determining Resident Status, summarizes the stakes. Residents of California are taxed on all income, including income from sources outside California. Nonresidents are taxed only on income from California sources. Part-year residents are taxed on all income received while a resident and on California-source income received while a nonresident.
The Statutory Definition
Under Revenue and Taxation Code (R&TC) section 17014, a resident includes every individual who is in California for other than a temporary or transitory purpose, and every individual domiciled in California who is outside the state for a temporary or transitory purpose. A resident who is temporarily absent remains a resident.
The FTB gives examples of temporary or transitory purposes for people domiciled elsewhere: simply passing through, a brief rest or vacation, or a short stay to complete a particular job, transaction, or contract.
Domicile
Publication 1031 defines domicile as the place where a person voluntarily establishes himself or herself and family, not merely for a special or limited purpose, but with a present intention of making it a true, fixed, permanent home and principal establishment. As the IRS explains in its community property guidance, a person has only one domicile even if he or she has more than one home.
Domicile and residence are related but different. A Californian who leaves the state for a temporary purpose keeps a California domicile and remains a resident. A person domiciled elsewhere can still become a California resident by being in the state for other than a temporary or transitory purpose.
The Nine-Month Presumption
Under R&TC section 17016, an individual who spends more than nine months of the taxable year in California, in the aggregate, is presumed to be a resident. The presumption can be overcome by satisfactory evidence that the person was in California for a temporary or transitory purpose.
The presumption does not work in reverse. Spending less than nine months in California does not, by itself, make someone a nonresident, particularly if California remains the person’s domicile.
Residency is not a day count alone. Time in California matters, but it is weighed together with domicile and the person’s other connections to California and elsewhere.
The Factors the FTB Considers
Publication 1031 lists factors used to determine where a person has the closest connections, including:
The amount of time spent in California compared with time spent elsewhere; the location of the person’s spouse or registered domestic partner and children; the location of the principal residence; the state that issued the driver’s license; where vehicles are registered; where professional licenses are maintained; where the person is registered to vote; the location of bank accounts and the origination point of financial transactions; the location of doctors, dentists, accountants, and attorneys; social ties such as a place of worship, professional associations, and clubs; the location of real property and investments; and the permanence of work assignments in California.
Because the analysis considers many connections together, a single fact, such as keeping one California bank account, rarely decides the question on its own.
A Safe Harbor for Work Outside California
California has one statutory safe harbor. A California domiciliary who is outside the state under an employment-related contract for an uninterrupted period of at least 546 consecutive days is treated as outside California for other than a temporary or transitory purpose, subject to conditions on return visits, intangible income, and tax-avoidance purpose (R&TC § 17014(d)).
Documentation
Because residency depends on facts, records matter. Calendars and travel records, leases and deeds, driver’s license and vehicle registration records, voter registration, and bank and credit card statements all help show where a person lived and where his or her connections were. Records created at the time are generally more persuasive than explanations prepared later.
The Bottom Line
California residency turns on domicile, the purpose of time spent in or out of the state, and the overall pattern of a person’s connections. Understanding the statutory definition and the factors in Publication 1031, and keeping records that reflect them, is the foundation for any residency position.
Questions about California residency?
Tax attorney Cassra Minai, Esq. can review your residency facts in a confidential consultation.