The main rationale of this blog is tax stories that I don't consider Forbes worthy. Unfortunately, that has practically turned it into all Kent Hovind, all the time as the shenanigans of Kent Hovind and his merry band are rooted in a tax story, but not really appropriate for fobes.com anymore. Well, finally here is something else. I worked on it quite a bit (for me) and ended up with something that I didn't think had enough real journalism to it. Still I thought I couldn't let it go entirely so here it is.
President Trump speaking about the Tax Cuts and Jobs bill has said "It's going to cost me a fortune this thing". People who have studied the bill and know how tax returns work, like me just for an example and Glenn Kessler of the Washington Post are a little skeptical about that claim.
It may be that the President is quite sincere. By his own account, he was mistaken about how the Tax Reform Act of 1986 would affect him personally. In the Art of The Deal, he wrote:
Jack Mitnik, my accountant, calls to discuss the tax implications of a deal we're doing. I ask him how bad he thinks the new federal tax law is going to be for real estate, since it eliminates a lot of current real estate write-offs.
To my surprise, Mitnik tells me he thinks the law is an overall plus for me, since much of my cash flow comes from casinos and condominiums and the top tax rate on earned income is being dropped from 50 to 32 percent.
There is, however, one provision that will clearly hurt President Trump - the elimination of the deduction for state and local income tax. As a New York resident, he faces very stiff state income tax on his worldwide earnings. I haven't looked at his returns yet with that in mind - Oh that's right. He hasn't released his returns. Regardless, from the fragment of the 2005 return that was leaked we can be pretty sure that his state and city income tax is in the millions, which without the AMT will mean the elimination of the state income tax deduction will really hurt.
So I have an idea for the President. He should forget about returning to Trump Tower when he is done presiding and declare that Mar-a-Lago is his new permanent home.
But What About The White House?
We know that President Trump was a New York resident in 2016, because we got to watch him vote last year.
But isn't he a resident of the District of Columbia now? Well, for tax purposes probably not. And to understand that, you need to understand domicile.
Domicile is a concept that is probably outdated at least with respect to the rich and famous, but it persists. Most states will consider anybody domiciled in that state to be a resident for purposes of income taxation (New York has a peculiar exception for people who remain domiciled in New York while abroad for extended periods, but it pretty clear that President Trump would not qualify for that exception). Webster's defines domicile as "a person's fixed, permanent, and principal home for legal purposes".
Many states also have a concept known as "statutory resident". New York is one of them, probably the first, since it is sometimes referred to as the New York rule. If you have a place of abode in one of those states and are there more than 183 days (And a day means any part of a day) you will be treated as a resident for income tax purposes.
So you can be treated as a full year resident of more than one state. I made up a scenario of a guy called Harry Hedgefund. He has a monstrous house in Alpine NJ where he spends time with his family. He also has an apartment for one of his mistresses in Brooklyn and an apartment in the South End in Boston for his other mistress. On many days he will have morning meetings in New York and evening meetings in Boston or visa versa. Harry will be taxed as a resident of New Jersey by virtue of his domicile and as a statutory resident of both New York and Massachusetts.
President Trump does not have to worry about the statutory resident thing. The District of Columbia follows the New York rule, but it excepts a variety of elected and appointed officials and only taxes them if they are domiciled in the District - i.e. they have made it their permanent home. As an example you can look at President Obama's 2012 return and see that he filed as an Illinois resident in 2012 (You need to scroll to page 27).
Could The President Change His Domicile?
There are two steps required to change your domicile. First you have to abandon your old domicile. President Trump could simply say that he is done with New York and that he will only go back to visit. "New York's home, but it ain't mine anymore" as Neil Diamond sang. That is not enough. Everybody always has to have a domicile. Even though you have abandoned your domicile, it remains your domicile until you have established a new one.
Does moving to 1600 Pennsylvania Avenue establish a new domicile? It does not. The reason is that nobody can make that their permanent home. I wrote about a foreign service officer who left Georgia and made it clear that he would never return. Georgia still managed to tax him, because his diplomatic passport did not allow him to live in the UK after his job is done. The President might demonstrate in some other way that he intends to stay on the dry land that will be there after he is done draining the swamp, but frankly DC is not a bargain when it comes to income tax so from a tax planning viewpoint it would not make any sense.
How About Florida?
Now you are talking. Florida has no income tax. I have been following state residence cases for most of my blogging career, which will be eight years old this month. New York challenging a move to Florida is one that comes up relatively frequently. President Trump has already done some of the groundwork to make the move.
According to this piece in the failing New York Times, President Trump has visited at least one Trump property 103 days this year (That is through November 26). Thirty nine days were at Bedminster NJ.
Here's the thing. I like New Jersey. I grew up in Fairview. But I went to high school in Manhattan. Nobody who has a place near Columbus circle is going to long to make New Jersey his domicile. Just not happening.
Mar-a-Lago comes in second with thirty one days, but that's not all. There were 18 days at the Trump International Golf Club in West Palm and two at the Trump National Golf Club in Jupiter. And don't forget that Mar-a-Lago has been designated the Winter White House.
How many days at Trump Tower? That would be eight. So President Trump spends more time in his Florida homes than any other home.
SALT experts will go through an elaborate checklist of things to consider to establish your domicile change. That is necessary, because in truth the concept is nearly mystical. There are some really basic things. They are are not enough to get win a domicile case, but without them you will probably lose. Near the top of the list is voter registration. Then there is the drivers license, but President Trump may not have one. He certainly doesn't need one.
And that is where this story fell apart as being forbes worthy. Voter registration records in Florida are public record and available on line. President Trump has not registered to vote in Florida.
And I found a story that the President got an absentee ballot for the New York mayoral race. If this was Forbes I would hunt down the link I failed to save, but standards are not as high here.
So when I started I thought I could make a case that Trump might be trying this, but no luck there.
How Can You Tell If He Goes For It?
One of the problems with the New York to Florida switch is that being a New Yorker is a very distinctive identity - Floridian not so much. And Trump for all his many faults in my mind is a consummate New Yorker. He can register to vote in Florida, file a Florida domicile declaration and apply for a homestead exemption on the family residence portion of Mar-a-Lago. Those are the basics, but what else can he do?
He can read A Land Remembered or at least talk about what a great book it is, even if he never reads it. He can have one of his minions read it for him. Beyond that, he can start using his twitter account to signal his change in loyalties. Here are some suggested tweets.
"Orlando Sentinel really gets it. So much better than the failing New York Times"
"I'm looking forward to the Dolphins handing it to the Jets. Jets have been losers since Broadway Joe left"
"Broadway used to be great, it is nothing compared to Collins Avenue"
"The failing New York Yankees are going to get killed, I mean killed, by the Rays this year"
It would be a start.
One More Thought
The best thing about Trump becoming a Floridian is that we could then have headlines like Florida Man Threatens World Peace.
Peter J Reilly writes on taxes for forbes.com, a prestigious platform Then there is Your Tax Matters Partner, a small blog, but there are those of us who love it.