Tax Code §17014(d). The concept of this legislation is that if a California domiciliary leaves the state under a written employment contract with a term of over 18 months, and they don’t return to California for more than 45 days during the taxable year, and their income from stocks, bonds, interest, and other intangible income doesn’t exceed $200,000 a year, they are presumed a nonresident for tax purposes. This law applies to working anywhere outside of California, even another state, but it is really directed at expats.The employment contract has to meet the time period on its face; it can’t do so via renewals.
Otherwise, you are still considered a resident for CA purposes and all income is taxable...
“Domicile” as used in California residency law, is the location where a person has the most settled and permanent connection, and the place to which a person intends to return when absent. An individual may claim only one domicile at a time. An individual who is domiciled in California and leaves California retains his California domicile as long as there is a definite intention of returning to California, regardless of the length of time or the reasons for absence. Domicile is usually evidenced by voter registration and driver’s licenses, but also obviously by family, living accommodations and financial connections. And here’s the critical rule: if a taxpayer is domiciled in California, and he leaves for a temporary or transitory purpose, the taxpayer remains a California resident. But even if a resident sells his home or terminates his lease or otherwise gives up his accommodations in California, that might not be enough to change residency if the plan is to work in a foreign country. CA does go after folks whom have left to work overseas and there are many cases.
Appeal of Hoog, SBE, Case No. 819085, decided in 2017, demonstrates the problem. The taxpayer was a lifelong California resident who took a job in China marketing industrial lasers. He spent four years overseas, with the majority of his time in China, where he lived in an apartment paid for by his employer and had a bank account. In the particular year at issue he only spent about 30 days in California. Unfortunately, he came to China on a short-term visa (for trade and business), and kept his California bank accounts, driver’s license and home (where his wife lived), until he sold it several years after starting his employment out of the country. Despite spending the vast majority of his time in China for four years, the court ruled his move overseas was never intended to be permanent. As such he remained a California resident and his income (about $200,000 in the year at issue) was taxable.
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