California Residency and Source of Income Determination

Residency determinations are relevant for purposes of marital dissolutions, education, probate proceedings, property tax determinations, voter’s registration and . . . income taxes. The State of California taxes residents on their worldwide income.

The California Franchise Tax Board (FTB) conducts a residency audit to determine whether a taxpayer is a resident of California – taxed on income from all sources, including income from sources outside of California; a nonresident of California – taxed only on income from California sources; or a part-year resident – taxed on income received while a resident and only on income from California sources while a nonresident.

A California “resident” generally includes any individual who is in California for other than a “temporary or transitory purpose,” or “domiciled” in California but physically located outside California for a “temporary or transitory purpose.” The FTB will generally consider numerous factors in their efforts to determine residency, and the weight given to any particular factor often depends upon the totality of the circumstances unique to each taxpayer for each tax year.

The FTB administrative residency examination process is conducted by experienced residency auditors and involves a deeply personal, factual analysis by a highly trained examiner making after-the-fact determinations regarding an individual’s physical presence and subjective intentions that are often not taxpayer friendly. Even individuals without any significant California contacts are often subjected to a highly intrusive examination process.

Our tax controversy lawyers have successfully represented numerous individuals involved in residency examinations conducted by the FTB and in administrative appeals to the California State Board of Equalization. The degree, nature and extent of our representation depends on the unique needs of each client and their particular facts and circumstances.

If you are facing any California residency or source of income related inquiry or examination from the FTB, we can help.