We live in Portland. I am retiring at the end of the month.

ANSWER:
     From a legal standpoint, the issue is not “residency.” Rather, the issue is “domicile.” Specifically, which state is (or is claimed to be) your state of “domicile”? Let me try to explain (as it is a bit confusing, even for lawyers):

     Distinction needs to be made between “domicile” and “residency.” While domicile requires residency in order to be established, residency does not require domicile. A person may be a “resident” of a state yet not be “domiciled” in that state. However, a person cannot be a “domiciliary” of a particular state without ever, at some point, having been a resident of that state.

     “Domicile” is a matter of individual choice and intent. A person becomes “domiciled in a state by residing in that state, however briefly, with the concurrent intent to remain in Oregon permanently and with no intent to permanently live elsewhere. Thus, for example, to claim California as your state of domicile, you must establish a RESIDENCE (a fixed place of habitation) coupled concurrently with the INTENT to remain in California permanently, to the exclusion of permanent residency in some other state. This does NOT mean that you have to actually and physically reside in California at all times, nor does it mean that you cannot maintain a residence in Oregon at the same time as you maintain a residence in California.

     “Domicile” is a matter of individual choice and intent. “Domicile” consists of residence and intention. Neither, standing alone, is sufficient for the purpose. In essence, the equation is as follows: Residence + Intent = Domicile.

     A person can have only one domicile at any one time, and until a new domicile is established, the previous domicile continues. Consequently, if a person who is presently domiciled in Oregon (as it appears that you now are, given the facts you are presenting), departs Oregon and takes up residency in California, Oregon would remain as your state of domicile so long as the absence from Oregon is not coupled with an INTENT to establish California as your new domicile. In essence, for a change of domicile to occur, there must be (1) a change of residence from one place to another; (2) an intention to acquire a new domicile, and (3) an intention to abandon the old domicile.

     The controversial question that often arises focuses on the issue of “intent.” Intent is, of course, simply a “state of mind.” But the law “infers” intent through various actions and conduct on the part of the individual involved. Each case is determined on its own unquire facts. For example, here’s a summary of a recent decision from the Oregon Tax Court in the case of Eads v. Department of Revenue, No. TC-MD 050687C (May 11, 2006):

     Taxpayers who became Oregon residents in 2001 were unable to establish that they had subsequently changed their domicile to Alaska for all or part of 2003. Thus, the taxpayers remained Oregon residents liable for Oregon personal income taxes for 2003. Under Oregon law, a person does not legally abandon an existing domicile until he or she acquires a new one. An individual must meet three requirements to establish a new domicile: (1) establishment of a residence in another place, (2) intent to abandon the old domicile, and (3) intent to acquire a new domicile.
     Taxpayers and their children had moved to Alaska in March 2003 after the husband was laid off from an Oregon worksite and transferred to an Alaska worksite. The wife and children returned to their former Oregon home in late June or early July of 2003. The husband remained in Alaska and worked there until he was transferred back to the Oregon worksite in April or May of 2004. The taxpayers’ efforts to establish domicile in Alaska included the following: (i) taxpayers put their Oregon home up for sale, sold two of their three cars and moved the remaining car along with their household furniture and belongings to a rented house in Alaska; (ii) the husband worked in Alaska and the wife quit her employment in Oregon; (iii) the husband surrendered his Oregon driver license and obtained an Alaska driver license; and (iv) the husband registered to vote in Alaska.
     The Oregon Tax Court held that the taxpayers’ efforts were insufficient to establish that they were no longer domiciled in Oregon under ORS 316.027(1)(a). Specifically, the Court found that although the taxpayers had taken some steps consistent with the intent to abandon Oregon as their domicile, there was insufficient evidence of their intent to acquire a domicile in Alaska. The Court noted that the wife and the children returned to the taxpayers’ unsold Oregon home after only a few months of living in the rented residence in Alaska and the household furniture and belongings were moved back shortly thereafter. The wife did not obtain an Alaska driver license or register to vote in Alaska, and the taxpayers did not register the car in Alaska or open a local bank account. There was also testimonial and related evidence that the taxpayers never intended to stay in Alaska, all of which supported the Court’s determination that the taxpayers moved to Alaska on an interim basis out of practical necessity and never intended to make Alaska their new domicile.

     Another recent decision on this issue is Butler v. Department of Revenue, No. TC-MD 050801D (July 18, 2006). Facts are as follows:
     Taxpayer was unable to establish that she had abandoned her long-term domicile in Oregon for domicile in Virginia from September of 2001 through September of 2002. Thus, the taxpayer remained an Oregon resident liable for Oregon personal income taxes for such year. Taxpayer moved to Virginia in September 2001 after her employer closed its Oregon manufacturing facility and offered her a transfer to its Virginia facility. Her husband remained in the Oregon home they had purchased in 1983. Taxpayer returned to Oregon in October 2002 after she was laid off in a corporate restructuring. Taxpayer’s efforts to establish domicile in Virginia included the following: (i) she rented a larger home in Virginia and purchased new household furniture and belongings; (ii) she moved her car and certain personal belongings to Virginia; (iii) she obtained a Virginia driver license, registered the car in Virginia and paid Virginia sales tax on the car; (iv) she obtained a credit card in her own name and used her Virginia address as the billing address; (v) she transferred her magazine subscriptions to Virginia and joined a Virginia gym, terminating her Oregon gym membership; and (vi) she filed Virginia resident income tax returns.
     The Oregon Tax Court found that the taxpayer did not abandon her Oregon domicile. Although the taxpayer testified that she had intended to make Virginia her home, her actions did not show a conscious decision to declare Virginia as her domicile. She frequently stayed in the Oregon residence owned with her husband and continued to look to Oregon for financial, medical, and other personal services. She left much of her personal and other household furniture and belongings in Oregon and continued her Oregon bank accounts and voter registration. Further, the fact that the taxpayer traveled extensively for work during the year in question created doubt that she had established a permanent domicile in Virginia.

     Complicating all of this is the fact that a state may impose a tax liability on a “nonresident” of that state, at least as to income earned from sources within the state. For example, as a general rule, income from an Oregon source that is received by a resident and domicile of California is subject to Oregon income taxes. But for every rule, of course, there are exceptions. For example, RETIREMENT income from an Oregon source that is received by a person who is a nonresident of Oregon and who is not domiciled in Oregon is ˆexempt from Oregon income tax liability.

     HOWEVER, if you are an Oregon nonresident who is still domiciled in Oregon, any Oregon-source retirement income is taxable by Oregon. This applies to most forms of retirement income taxed by Oregon, including public pension plans, corporate retirement plans, Keogh plans, simplified employee pensions (SEPs), and IRAs.
     Example (as provided by the Oregon Dept. of Revenue): Hiro has always resided and worked in Oregon. On January 5, 2008, he retired, sold his Oregon residence, and moved temporarily to Arizona to work. He intends to remain in Arizona for two years and then return to Oregon. He did not acquire another residence outside Oregon. He receives an Oregon-sourced pension and interest income. Hiro has not given up his Oregon driver’s license, and his vehicles are registered with the state of Oregon. He has not changed his voter registration to another state.
     Hiro has not shown an intent to give up Oregon as his home and acquire a permanent home elsewhere. Based on these facts, Hiro is domiciled in the state of Oregon. Although Hiro is taxed as a nonresident (his interest income is not taxed by Oregon), his Oregon-source retirement income is taxable by Oregon.

     Whew!!   Why can’t they make this stuff eaiser to understand??!!!

IN SUM.....
     You already own a home in California. Keep it. Obtain a California drivers license. Register to vote in California. Establish bank accounts in California. Physically reside in California for the majority of the year. Form a mental intent to view California as your one and only state of domicile (your “permanent” home state) to the exclusion of all other states. These actions will substantial your claim of being a California domicile (even though you also own a home in Oregon and spend part of the year “residing” in Oregon).

     As for your automobile, to be “completely legal,” you should visit a Cal DMV office and apply for California registration in place of existing Oregon registration. (As a practical matter, most people would defer doing this until the existing Oregon registration expired, and then obtain new registration in California rather than renewing in Oregon.)

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