California Residences

Main Amundson and Associates has many clients that have residences and offices in other states. We would like to address some of the laws that might affect our “out of state” clients. Right now we are going to focus on California Residency Laws. (check back with our page as we update additional state laws or call us if you have questions that you need immediate answers to).

Here are some items for you to look out for if you reside in California:

 

Residency is a question of facts and circumstances in California:

 

Who is a California Resident?

  1. If you are present in California for other than a temporary or transitory purpose.
    1. You are presumed to be a California resident if you spend more than 9 months in the state.
    2. You are presumed to be a California resident if your stay in California is for other than a temporary or transitory purpose.
  2. If your domicile is California but you are outside the state for a temporary or transitory purpose. Whether your activity is defined as a temporary or transitory purpose depends on the purpose and length of your stay.
    1. Do you have the intent to return to California?

 

Who is presumed not to be a California Resident

  1. If your domicile is outside of California, you maintain a personal residence outside of California, you are physically present in California for less than six months, and you do not engage in any activity or conduct within California other than that of a seasonable tourist or guest, you are presumed not to be a California resident. This presumption is rebuttable.
  2. If your domicile is California but you are outside of California under an employment contract for an uninterrupted period of 546 consecutive days and the following are met:
    1. The principal purpose of your absence from California is not to avoid personal income tax.
    2. Your return visits to California are 45 days or less during any taxable year while under the employment contract.
    3. You do not have intangible income of more than $200,000 in any taxable year.

 

Guidelines for Determing Residency/Domicile

  1. You are a resident of the place where you have the closest connections. Below is a partial list of factors to consider when determining California residency. A comparison of your ties to California versus elsewhere should be completed to see if you are a California resident. Both the strength and number of ties you have to a place should be considered.
    1. Amount of time you spend in California versus the amount of time you spend outside of California.
    2. Location of your spouse and children.
    3. Location of your principal residence.
    4. State that issued your driver’s license.
    5. State where your vehicles are registered.
    6. State in which you maintain your professional licenses.
    7. State in which you are registered to vote.
    8. Location of the banks where you maintain accounts.
    9. The origination point of your financial transactions.
    10. Location of your medical professionals and other healthcare providers (doctors, dentists, etc.), accountants, and attorneys.
    11. Location of your social ties, such as your place of worship, professional associations, or social and country clubs of which you are a member.
    12. Location of your real property and investments.
    13. Permanence of your work assignments in California.

 

Classification of Individuals:

  1. Permanence of your work assignments in California.
  2. Part-Year California Residents: are taxed on all income received while a resident and only on income from California sources while a non-resident.
  3. Non-Resident: are taxed only on income from California sources while a non-resident.

 

Types of Income:

  1. Wages and Salaries: have a source where the services are performed.
  2. Interest and Dividends: generally have a source where you are a resident.
    1. Exception: Interest and Dividends are sourced to California if the account or security is used in a trade or business or pledges as security for a loan, and the proceeds of which are used in a trade or business in California.
  3. Business Income: income from a business, trade, or profession carried on in California is sourced to California regardless of the owner’s residency.
  4. Pensions, Profit Sharing Plans, and other Deferred Compensation Arrangements: taxed based on your residency at the time of the distribution.
  5. Sales of Real Estate: has a source where the property is located. Still, if you are a resident of California all your income is sourced to California.
  6. Partnership, S-Corporation, LLC: all income of a business that is sourced to California is taxed by California regardless of the residency of the owner.
  7. Installment Sales: Gains/Losses on installment sales received by a non-resident from the sale of tangible property is based on the source for a non-resident. Gains/Losses on installment sales of real property are taxed based on where the property is located.