To Give Or Not To Give, That Is The Question: New York State’s Rules on Charitable Giving and Domicile Determination

Recently, we’ve witnessed a mass exodus from New York State as a result of the COVID-19 pandemic. Some movers yearn for warmer weather, others for more reasonable Covid policies, and others simply seek a home-state that won’t tax their personal income. When we advise these moving individuals on their domicile change, a question we’re receiving with increasing frequency is “after I move, can I continue to make donations to my favorite local charities, or will New York State use that information against me in a determination of my domicile?” We understand why people are concerned at the possibility that their charitable contributions might be weaponized against them. After all, in a domicile audit, New York auditors are instructed to analyze the taxpayer’s lifestyle, using five primary factors: home, time, business activity, near & dear, and family.

But the law on this is clear - you can continue to donate time and money to your favorite charities, and it will NOT be used against you in a residency audit. In fact, the New York Department of Taxation and Finance has a longstanding policy in place to encourage continued charitable giving, even after someone has changed their domicile.

Under New York Tax Law § 605(c), the Department shall not use the fact that an individual made a “financial contribution, gift, bequest, donation, or any other financial instrument or pledge in any amount” to a charitable organization or not-for-profit organization in any manner to determine where an individual is domiciled. Additionally, under the same provision, any donation of an individual’s time, including volunteering, cannot be considered in the determination of their domicile. So this means that a nonresident taxpayer undergoing a change of domicile does not have to fear the Tax Department raising a history or pattern of charitable giving to a New York based charity as evidence of a continued connection to the state.

The Department’s policy on this is also explicit. They’ve articulated in TSB-M-84(17) that “the making of contributions to a New York State charity will not be taken into account in determining domicile,” and that this policy is in place to encourage nonresidents and former residents to contribute to New York State charities. This policy is reinforced in the Nonresident Audit Guidelines and on the Department’s online taxpayer answer center. In fact, for estate tax purposes, New York State amended its laws in 2016 to say that contributions to New York charities are not used to determine where an individual is domiciled at time of death. Which they explained was done to reflect longstanding Tax Department policy and align the Estate Tax Law with current personal income tax provisions.

The Department even provides guidelines for nonresidents on how to count and exclude charitable days when the issue arises in an audit. Specifically, the Guidelines recognize that only those days exclusively dedicated to charitable work are to be excluded from an analysis of the taxpayer’s “time factor.” Thus, if a taxpayer is in New York in connection with charitable work, the day is NOT to be counted in an analysis of the taxpayer’s time factor for domicile purposes.

Overall, the above-referenced provisions demonstrate a clear and consistent position from the Department - the making of charitable contributions to New York charities will not be considered in the analysis of an individual’s domicile. So, if you’re a nonresident, or former resident, of New York and you’ve been worried about whether you should give to your favorite New York not-for-profit this year, go ahead and make the donation without fear! And, if you spend a significant amount of time volunteering for charitable organizations in New York - don’t stress (but keep track of your days)!

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