Jumping Jurisdictions – Part II

Picking up from last blog, where a person tends to move to and/or fro from one state to another, and one consideration is that the determination of what state a person resides in, by looking a state of factors.  If it turns out of a person actually moved permanently from one to another, or a person happens to work and earn/received income in one state, and resides in another state?

One has to consider that for a state to constitutionally tax a person their needs to the following four elements, according to US Supreme Court jurisprudence:

  • A state must have substantially nexus;
  • The tax must be fairly apportioned;
  • The tax must not discriminate against interstate commerce; and
  • There is a fair relation between the tax and the services the state provides to a person

One of these four elements that a person would have to do, is to make on his state tax returns that his/her has been fairly apportioned among the states that a person either resides and/or earned/receives income from, and it depends if a person has moved permanently into a new state, or if a person simply in a state on a temporary/transitory basis.

If a person permanently moved from one state to another, then he/she is considered to be a “part-time resident”, and thereby the income tax liabilities between the two states would be apportioned based on the income earned and/or received from each of the two states.  In other words if 50% of the income was from State A, then the state’s tax liability would need to be reduced by 50%, so that the state’s income tax is fairly apportioned.

Now is a person simply is in a state for a temporary/transitory basis, e.g. working in one state, but residing in another, then in the state that a person is earning/receiving income from would be a “nonresident”, and any income tax liability that he/she incurs, would need to apply an “other state tax credit” on his resident state tax return, so he/she is not taxed twice on the same income, which also would make the income tax liabilities between the two states, fairly apportioned.

So, if you a person who moved from one state to another, or even cross state lines in order to commute to and from work to your home, then let us know at info@kayatax.com, so we can make sure that you state income tax liabilities would be fairly apportioned, pursuant to US Supreme Court jurisprudence.