• Ohio: Department of Taxation Explains Residency Requirements
  • October 8, 2015 | Authors: David H. Godenswager; David M. Kall; Susan Millradt McGlone
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • The Ohio Department of Taxation (ODOT) recently issued Information Release IT 2015-02, which discusses how ODOT imposes Ohio personal income tax on resident and nonresident individuals, for taxable years ending after March 23, 2015. The release addresses who is subject to Ohio personal income tax, residency, and related details.

    Who is subject to the Ohio personal income tax?

    As a general rule, the state imposes income tax on anyone who lives in Ohio or has earned or received income (including from the lottery or as a prize) in Ohio, though there are limited exceptions. In addition, nonresidents whose federal adjusted gross income includes any income earned or received in Ohio by a pass-through entity must also pay Ohio income tax, unless the entity files a composite Ohio return on behalf of its nonresident owner.

    The definition of “resident”

    The release defines a “resident,” for the purposes of the Ohio income tax, as “an individual who is domiciled in this state.” In order to be domiciled, one must have at least 212 contact periods with the state. A contact period is different from a day; one has a contact period when he “is away overnight from his abode located outside this state, and while away overnight from [that] abode, spends at least some portion, however minimal, of two consecutive days in [Ohio].”

    One is irrebuttably presumed to be not domiciled in Ohio if the individual has fewer than 213 contact periods with Ohio and meets all of these conditions:
    1. The individual did not change domicile to or from Ohio during the taxable year.
    2. The individual files an affidavit of non-Ohio domicile by May 30 of the immediately succeeding calendar year.
    3. In the affidavit, the individual verifies that she/he was not domiciled in Ohio pursuant to generally accepted common law notions of domicile.
    4. In the affidavit, the individual verifies at least one abode outside Ohio during the entire taxable year.
    5. The affidavit does not contain any false statements.
    On the other hand, one is rebuttably presumed to be domiciled in Ohio when:
    1. The individual has fewer than 213 contact periods in Ohio during the taxable year but does not meet any one of the criteria listed above or does not file the affidavit of non-Ohio domicile.
    2. The individual had at least 213 contact periods in Ohio during the taxable year and is not a part-year resident. One may rebut the presumption of full-year Ohio domicile by proving, by clear and convincing evidence, that the individual was not domiciled in Ohio for all or part of the year.
    A taxpayer can only have one domicile at any given point in time. While the tax law does not specifically define who is domiciled in this state, there is substantial guidance in case law on the determination of “domicile” for tax and other purposes.

    One such recent case is Cunningham v. Testa, in which the Ohio Supreme Court noted that the issue of domicile is one of intent determined by the facts of the individual case. Factors include the acts and declarations of the person and the totality of accompanying circumstances, including the filing of federal income tax returns, voting, car registration, or location of one’s spouse and children.

    State law establishes certain factors that may not be considered when determining domicile, which include the location of one’s physicians, veterinarians, lawyers, accountants, burial plots, insurance companies, brokers, investment facilities, institutional lenders with which the individual has a relationship, and financial institutions in which one has checking or other accounts.

    In light of the Cunningham case, the ODOT revised a previous Information Release IT 2007-08, and incorporated the Ohio Supreme Court’s tests for domicile determination for the taxable years beginning after Dec. 31, 2006, but prior to March 23, 2015.