Worked/lived in Washington 7 months, then lived (but did not work) in Oregon 5 months

[Oobernabber]

In 2023 I had residences in Seattle, WA and Portland, OR.  My wife and high-school age child live in Portland and my college age son lives in Seattle.  I took a role with a large Seattle based employer in October 2022 that required I be onsite in Seattle (despite their having Portland offices) - we could not immediately move, so I leased a condo through the end of July with the intent of moving the remaining two family members to Seattle in the summer of 2023.  Plans changed and I left the employer in mid-August, moved back to Portland, and retired.  My employer only withheld Federal and WA leave/LT-care program taxes.  My wife is a self-employed consultant incorporated in Oregon and is paid by 1099.  So we will owe OR state income tax on all of her earnings for the year.  

I met the criteria to be considered a WA resident for the first 7 months of the year, and exceeded the 200 days worked outside of Oregon as stipulated in the OR code.  However, there is enough vague language in the OR code to have me concerned about an audit if I fail to do this correctly.  Naturally the fact that WA does not have income tax makes this tricky.

My question for the experts out there is, will Oregon:

1. Consider the move temporary (this ambiguous word appears in the code frequently) and expect income tax to be paid on all WA based earnings? 

2. Or...expect me to file as a part-time resident and pay income tax on ~40% of my earnings, despite the fact that $0 of those earnings were Oregon based or earned when I lived in Oregon?

3. Or...not care?

I've talked with a few CPAs already and have not arrived at any meaningful consensus, so I'm broadening my search radius for further advice/insights.  Thank you!

[TomD8]

If you moved to Seattle in 2022 with the intent of making WA your new permanent home, then for 2022 you would be considered a part-year resident of each state.  The income you earned as an OR resident, plus any OR-source income you might have had after the move, would by taxable by OR for 2022.

For 2023, you are also a part-year resident of both states.  You were a resident of WA until you moved back to Portland.  During your period of WA residency, you would only be subject to OR income tax if you had any OR-source income during that time.  Any income after your move back to OR would of course be taxable by OR.

[Oobernabber]

Thanks for the quick response!  Intent is a hard thing to prove - perhaps the (taxable) moving allowance I accepted from the employer in 2022, which I then had to partially pay back on exit, would suffice?  

For 2022 I indeed filed as a FT Oregon resident, despite having moved/worked in WA for ~11 weeks, based on the "200 days in Oregon" published guidance.  

[TomD8 · Accepted solution]

Intent is indeed hard to prove, but it is a crucial concept under the law.  From your original post it sounded like you and your family really did intend to move to WA (i.e. to change your domicile).  My previous answer assumes that this was the case.  The best proof (if you were challenged) would be things like a Washington drivers license, car registration, voter registration, etc. - if you happened to have obtained any of these.

But if your move to Washington was temporary, with your intent being to return to your home in Oregon, then OR would have remained your domicile state all along, which would make all your income during your time away still taxable by OR.    

Here's a link to the Oregon law defining the concept of "domicile":

https://oregon.public.law/statutes/ors_15.420

Note particularly that your domicile does not change until it is superseded by the acquisition of a new domicile.  And note the law's use of the word "intent".

(Note also that Oregon's 200-day rule applies to individuals who are not domiciled in OR, but who spend more than 200 days of the tax year in OR.)

Bottom line: it all comes down to whether or not your move to WA constituted a change in domicile.  If it did not, then all your 2023 income be taxable By Oregon, and you would file a 2023 Oregon tax return as a resident.