Tax Law Insights

Residents of South Carolina are required to file an income tax return, even if they do not earn income in the state. A resident is an individual who is "domiciled" in South Carolina. South Carolina law does not define domicile. The South Carolina Administrative Law Court (ALC) in a recent decision, however, has analyzed whether a taxpayer was domiciled in South Carolina for purposes of our state income tax. Floyd v. S.C. Dept. of Rev., Admin. Law Ct., Dkt. No. 15-ALJ-17-0458-CC (February 11, 2016).

The taxpayer was a native of Spartanburg, South Carolina. She lived in Oxford, Mississippi while attending the University of Mississippi. She graduated in December 2007 and then moved to Jackson Hole, Wyoming. The taxpayer testified she didn't want to return to South Carolina after graduating. In 2009, however, the taxpayer moved from Jackson Hole, Wyoming to Charleston, South Carolina.

The South Carolina Department of Revenue (DOR) argued the taxpayer was a resident of South Carolina for 2008. DOR examined the taxpayer's 2008 federal tax return, which listed a South Carolina address and a Wyoming address (the South Carolina address was her father's address). DOR also pointed to the fact that the taxpayer continued to have a South Carolina driver's license and did not register her vehicle in Wyoming.

The ALC defined domicile as the "the place where a person has his true, fixed and permanent home and principal establishment, to which he has, whenever he is absent, an intention of returning." The ALC, citing a prior South Carolina Supreme Court decision, found that intent is a most important element in determining the domicile of any individual and that intent should be evaluated in light of a taxpayer's conduct. The ALC found the taxpayer's testimony concerning her intent to be credible, and determined that she was domiciled in Wyoming and not required to file a South Carolina tax return or pay South Carolina tax in 2008.

This is an important decision in South Carolina. DOR may likely appeal. If the decision holds up on appeal, the decision may mean that merely listing your address on a tax return, holding an SC driver's license, and other factors do not determine South Carolina domicile (requiring a taxpayer to file tax returns and pay tax here), and the intent of the taxpayer is the most factor, which can be shown by credible testimony before the court.