“Where do you live?” This seemingly straightforward question has been the source of major contention between taxpayers and the Franchise Tax Board for many years, resulting in time-consuming appeals, exhausting searches for documents and witnesses, significant audit resources, and, in some cases, expensive litigation. It is time for the state to end the confusion by establishing a bright-line test for determining whether a person is or isn’t a California resident for income tax purposes.

More recently, members of Indian tribes in California have been grumbling, claiming that the FTB is aggressively going after revenue by alleging that some tribal members do not live on their tribe’s reservation, and thus must pay state income tax. Some of these disputes have gone before the State Board of Equalization, and have raised issues such as whether registering a vehicle to an address on a reservation is acceptable evidence that the owner lives there.

In fact, vehicle registration often is mentioned during residency disputes, but not in a consistent manner. In many cases, the FTB asserts that registration of a vehicle in California is a strong indication that the taxpayer is a resident, and should pay California income tax. But in one of the tribal appeals in 2012 (Appeal of James J. Martin), the FTB staff testified to the BOE that registration of a vehicle to an address on a reservation was not considered evidence that the owner lived where the car was registered.

Voter registration and driver’s licenses also are used as indicators of residency, but again, without consistency. In some cases, the FTB argues that a California driver’s license and voter registration at a California address are proof of California residency, but in other cases, the agency rejects taxpayers’ arguments that licenses and registration in other states prove they don’t reside in the Golden State.