Colorado Residency Rules and Colorado Form 104PN

Forum|Forum|4 years ago
February 24, 2022
3 replies
36 views

Consider a retired taxpayer who owns a home both in Colorado and in another state. S/he votes, claims a homestead exemption, and registers his/her car in the second state, and maintains a driver's license in the second state. All children, now adults, live independently outside of Colorado. One is a student who was raised in the non-Colorado home and continues to list that residence as a permanent address. No homestead exemption is claimed for the Colorado home. All taxable retirement income for the year (a Roth in plan conversion from a 401k/403b/457b/traditional IRA) occurs when the taxpayer is at home in the second state. The taxpayer has elected to wait until s/he is 70 to collect Social Security, and thus has no monthly Social Security income. The taxpayer returns home to the second state frequently, typically once a month, but in aggregate s/he spends greater than 6 months in residence at his/her Colorado home. Throughout the year, the taxpayer takes non-taxable Roth distributions which are not treated as taxable on a federal return, and hence are not treated as taxable income in Colorado either. The taxpayer does not rent his/her home during the time s/he is out of state.

1) Is the taxpayer required to file a Colorado return, either as a full-year or part year resident?
2) If s/he files as a Part year resident, how does s/he complete Colorado Form 104PN question 1 which asks the start/end date of Colorado residency? TurboTax will not let a taxpayer file 104PN as a part year resident if the entire year is selected.

REFERENCES:
https://tax.colorado.gov/individual-income-tax-filing-requirements

https://tax.colorado.gov/sites/tax/files/01.2021_ITT_Part-Year_Residents_Nonresidents.pdf

https://www.sos.state.co.us/CCR/GenerateRulePdf.do?ruleVersionId=9997&fileName=1%20CCR%20201-2

MaryK4

Level 15

Based on your description and Colorado law, you would not have to file a Colorado tax return because you are a nonresident.

A Colorado resident is a person who has made a home in Colorado or a person whose intention is to be a Colorado resident. The Department will consider, among other things, Colorado voter registration, Colorado vehicle registration, Colorado driver license, school registration, property ownership and residence of spouse or children in determining intention to be a Colorado resident.

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banjo1000Author

Level 2

Dear @MaryK4 ,

Thanks for your response.

I recognize the criteria which you cite from
https://tax.colorado.gov/individual-income-tax-filing-requirements
which states verbatim:

A Colorado resident is a person who has made a home in Colorado, or a person whose intention is to be a Colorado resident. The department will consider, among other things, Colorado voter registration, Colorado vehicle registration, Colorado driver license, school registration, property ownership and residence of spouse or children in determining intention to be a Colorado resident.

Their appears to be some tension with

https://tax.colorado.gov/sites/tax/files/01.2021_ITT_Part-Year_Residents_Nonresidents.pdf

which states in part:

Residency
In general, an individual is a Colorado resident if either:
- the individual is domiciled in Colorado; or
- the individual maintains a permanent place of abode in Colorado and spends, in aggregate, more than six months of the tax year in Colorado.

I have contacted the Colorado Department of Revenue taxpayer telephone support, and the person I spoke with shared your opinion. However I cannot cite that telephone support call (nor this Intuit forum) should a Colorado Department of Revenue officer decide that >6 month physical presence and Colorado property ownership trumps.

I have consulted the actual Tax Code itself,

https://www.sos.state.co.us/CCR/GenerateRulePdf.do?ruleVersionId=9997&fileName=1%20CCR%20201-2

and I don't have clarity. Per Rule 39-22-103(8)(a) (2)(d) the out-of-state home and *perhaps* Colorado home are domiciles. There will be periodic trips from Colorado to the out-of-state home of >30 years to visit and support a widowed parent.

Rule 39-22-103(8)(a) (1) (b) refers to a six month statutory residency rule.
However, Rule 39-22-103(8)(a) (2)(c) provides an expanded list of 18 "indicia of domicile", and the indices previously discussed plus additional indices that apply are overwhelmingly favor an out-of-state interpretation, the lone exception being "Length of time in a purported domicile."

Is it common practice for the Department of Revenue to give priority to the 18 "indicia of domicile" over >50% physical presence in a second home in Colorado?

Are you aware of any case law where this issue has been adjudicated in the courts?

If not a 50% threshold for physical presence, might there be some other threshold that is used in practice?

MaryK4

Level 15

"The individual maintains a permanent place of abode in Colorado and spends, in aggregate, more than six months of the tax year in Colorado." is a statutory (as opposed to domiciliary) resident. Federal Law - 4 U.S. Code § 114 - (a)"No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State)." would be the best application of why Colorado would not be able to tax your retirement.

Just to note: If your "other" state is one that does not tax the income either, so Colorado MIGHT try to establish your domicile as a pretext to avoid taxation (but once again, this is trying to prove intent using inferences). As a practical matter, the amount of time and effort may not be worth it on the part of Colorado.

@banjo1000

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