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STATE OF ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION

OFFICE OF HEARINGS & APPEALS

ADMINISTRATIVE DECISION

IN THE MATTER OF INDIVIDUAL INCOME TAX ASSESSMENTS

ACCT. NO.: DOCKET NOS.: 16-277 (2011) 16-278 (2012) 16-279 (2013) 16-280 (2014)

TODD EVANS, ADMINISTRATIVE LAW JUDGE

APPEARANCES

This case is before the Office of Hearings and Appeals upon a written

protest dated December 1, 2015, submitted by , Attorney at

Law, on behalf of , the Taxpayers. The Taxpayers

protested assessments of Individual Income Tax made by the Department of

Finance and Administration (“Department”).

A hearing was held on April 22, 2016, at 2:00 p.m., in Little Rock,

Arkansas. The Department was represented by Gina Dougherty, Attorney at Law,

Office of Revenue Legal Counsel (“Department’s Representative”). Present for

the Department was Ben Johns, Tax Auditor – Individual Income Tax Section.

The Taxpayers were represented by , Attorney at Law

(“Taxpayer’s Representative”). The Taxpayers and , Certified Public

Accountant, appeared at the hearing.

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ISSUE

Whether was a resident of the State of Arkansas for

income tax purposes during the relevant tax years? Yes, in part.

FINDINGS OF FACT/CONTENTIONS OF THE PARTIES

The Department’s Representative provides the following relevant facts in

her Answers to Information Request, in part:

moved to Arkansas in 2006 when he and his wife purchased a home in , Arkansas. See Exhibits A, B, C, and D.

claimed the homestead exemption available to Arkansas homeowners. See Exhibit E. . . . Based on documents obtained from the Arkansas Game & Fish Commission, obtained an Arkansas resident fishing license during each of the assessed years in the audit period. See Exhibit F. He has a fishing boat and trailer, registered in Arkansas, which are parked on a parking pad next to the home's garage. See Exhibit H. assessed these items of personal property in person at the local office for tax years 2012, 2013, and 2014. See Exhibit I. admits that his wife intended to live in Arkansas when she obtained a job with the

in , Arkansas. By contrast, the property address given for the taxpayer's "residence" in

is an apartment he allegedly shares with his daughter. submitted a rental insurance policy for the belongings in the

apartment. He contends that the policy covers only his belongings, however, the policy declaration shows no exclusions. The renter's policy submitted covers the period from 05/29/15 through 05/29/16, which is two years after the audit period. The Department's position is that the Arkansas home is the permanent place of abode, rather than the apartment in his daughter's name. While may occasionally reside in , his absence from Arkansas does not interrupt his domicile here.

returns to Arkansas to his home with his wife and family. The Arkansas home carries more weight to support the necessary degree of permanence. The nature of the contacts discussed above, along with the other factors below, provide the preponderance of the evidence required to support the assessment. The Department's evidence is that which has the most convincing force and is of superior evidentiary weight. If it is not sufficient

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to free the mind wholly from all reasonable doubt, it is sufficient to incline a fair and impartial mind to one side of the issue rather than the other.

During the administrative hearing, provided extensive

(though somewhat disorganized) testimony on a variety of relevant topics to this

proceeding. The following summary of his testimony attempts to organize that

testimony according to topic.

Regarding his substance abuse and past history in Arkansas,

testified that: (1) he originally lived in Arkansas but moved to

in ; (2) he is a recovering alcoholic and substance abuser that was

in and out of rehab centers for years in Arkansas; (3) while in Arkansas, he

repeatedly relapsed and his counselors told that he needed a

change of environment and reached an agreement with him that he would leave

the state; (4) he injured many people in Arkansas through

; (5) he moved to northern

to get himself together and his wife eventually joined him to “try it

again;” (6) his wife requires that she receive all of the bills and financial

statements because, if he relapses, the first indication would be heavy spending

and she ; (7) he will never move back to Arkansas

because he fears that he would relapse with his old friends that still practice

substance abuse; (8) his sobriety is his greatest asset because he is gone without

it; (9) since , he has been clean; and (10) when in Arkansas, he

stays with his spouse and spends all of that time with her and helping around the

house and avoids old acquaintances.

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Regarding his employment background, testified that: (1)

he was an for seven (7) years and worked as an accountant for six

(6) months after discharge from the ; (2) he also worked with the

from 1980 until 1994; (3) when he moved to

, he continued to work for the as an

from 1994 to 2002; and (4) in , he worked for

as an until May 2006,

when he retired.

Regarding his wife’s health issues, testified that: (1) in

, his wife moved into a apartment to care for her mother that

had two strokes, had no other relatives, and lived in a nursing home;

(2) during the time in the apartment, worked for a state agency

in and he did not visit her; (3) he and his wife decided that it was

financially illogical for her to continue to rent an apartment in that

was so far from her mother’s nursing home and very expensive and jointly

purchased a home; (4) after her mother died, decided to

continue to reside in Arkansas because she received a federal government job

with the with a significant pay increase and generous

retirement benefits that vested after five (5) years; (5) in late ,

discovered that she had and needed an

immediate transplant; (6) he brought her to and tried to convince

her to move back to to be near him and their daughter, but she

preferred the doctors, medical staff, and facilities in , Arkansas; (7)

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her health condition in 2013 required that he transport her back and forth to

work in the early months of 2013; (8) in , the doctor said that she would

need to be hospitalized and ; (9) in late

September 2013, retired from the after working five years;

(10) he was in Arkansas for “most of the time” during the 2013 health issues; (11)

in late 2013, received a transplant; (12) after the

transplant, she had serious issues with her antirejection medications and almost

died of a in the hospital; and (13) the doctor would not allow her

to go home unless stayed with her to provide twenty-four hour

healthcare with home health nurses.

Regarding his life in , testified that: (1) in ,

he sold his home in southwest because he has severe back and knee

problems, had surgeries (including the insertion of a ), and

could no longer maintain that property (which had a steep hill shown in a

photograph at the hearing) due to his health issues; (2) he moved in with his

daughter who had a first floor apartment that was easier for him since no

climbing or maintenance was required; (3) after he moved in, he noticed that her

apartment was in a dangerous area and made her move to their new apartment’s

location in ; (4) he has maintained a driver’s license and

automobile registration since ; (5) he has maintained renter’s insurance on

his apartment since moving in with his daughter which was documented at the

hearing; (6) he has maintained his voter registration in but only votes

in presidential general elections (not the local elections) so his last time voting

was 2012; (7) before retirement from government, he voted in

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local elections as well because his boss was an elected official and friend; (8) the

apartment in has two bedrooms and roughly 800 to 900 sq. ft. of living

area; and (9) his voting location is actually about a mile away from his apartment

in .

Regarding the time spent in Arkansas, testified: (1) after

the home was purchased, he began visiting his wife and initially stayed

for two months because he was constantly hauling furniture from ; (2)

in 2013, he spent roughly fifty percent (50%) of his time in Arkansas; (3) in 2014,

he spent roughly sixty percent (60%) of his time in Arkansas; (4) in 2011 and

2012 (before his wife’s health issues), he only spent two to three months in

Arkansas for each year, definitely less than forty percent (40%) of the time; (5)

he cannot give the precise number of days that he was in Arkansas in a particular

year but knows for certain that he was not in Arkansas for six months in 2011

and 2012; (6) over entire time period of 2011 through 2014, he did not spend

more than the fifty percent (50%) of his time in Arkansas and, thus, filed

Arkansas tax returns as a nonresident; (7) he has not been in Arkansas for the

entire past three months but has been here occasionally; (8) his truck in the

driveway is not indicative of whether he is in town since he takes his wife’s car to

as well to save on gas prices; (9) he joined the homeowner’s association

(which only requires property ownership, not domicile) to use the nearby lake

and its facilities; (10) he owns a much nicer fishing boat that he keeps in

for use on the rather than the simple twelve (12) foot

aluminum boat that he keeps in Arkansas to provide rides for nieces and

nephews; (11) he has not used the twelve (12) foot aluminum boat since 2012;

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(12) he stopped fishing in 2008 because his knee and back problems do not allow

him to spend enough time in a boat for fishing; (13) he maintains an Arkansas

fishing license in Arkansas because he was told, if he was caught on a lake

without a fishing license, the lake rangers could confiscate your boat, motor, and

contents; (14) the Arkansas Game and Fish website only requires that you to

reside in Arkansas for sixty (60) days to qualify for a resident fishing license not

domicile (this fact was confirmed by this Office); (15) each year, he spends a

consecutive sixty (60) days in the state during early spring to maintain the yard,

do repairs to their house, etc.; (16) he also comes to Arkansas for relatives’

funerals and weddings, to assist his wife when needed, and, at times, just to visit;

(17) he claimed the homestead credit in November because his wife was too

busy at the time and he wanted to help her complete the task; (18) when he

attempted to correct the homestead exemption claim after this audit, he was told

by the assessor that the house qualified for the credit through his wife and he did

not need to change it but he insisted; and (18) he prepared and filed the income

tax returns for himself and his wife using TurboTax.

testified that: (1) the testimony provided by

was accurate; (2) made it apparent to her that he

would never move to Arkansas before she came back to care for her mother; (3)

she will eventually return to and her family once her health issues are

resolved; (4) her transplant, medications, and other health issues still create

serious health problems that must be resolved before she can return to ;

(5) she still requires that the family bills come to her because it is better to have

everything in one place; (6) she is an Arkansas resident; and (7) the Taxpayers

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are honest, always pay their taxes, and are being unfairly judged without any

evidence that she can see and it is causing unneeded stress in her life.

The Tax Auditor testified that: (1) he performed a desk audit of the

Taxpayers’ returns; (2) he researched with the Assessor and the

Arkansas and Game and Fish Commission; (3) he concluded that

was a resident of Arkansas based on his research; (4)

owns a home with his wife in , Arkansas; (5) the Taxpayers’

home has a mortgage and the Taxpayer was present in at the

mortgage signing according to the acknowledgement; (6) claimed

the homestead credit (first claimed in ) on the home, stating the

property was his principal residence; (7) the Taxpayer has a boat, trailer, and

utility trailer assessed and registered in , Arkansas and the

assessors comments state that these items were first assessed in person; (8) the

Taxpayer’s truck is registered in but appears on the

Assessor’s photo of the home; (9) has possessed an

Arkansas Driver’s License since , assesses her car in , and is

registered to vote in Arkansas; (10) appears to enjoy fishing

based on his numerous fishing licenses and his Arkansas fishing boat; (11) the

home is near a lake; (12) in 2008 through 2015, the Taxpayer had a

resident Arkansas fishing license and/or trout permit; (13) in 2015, the Taxpayer

converted his original 2015 Arkansas fishing license to a nonresident license after

the audit began; (14) purchased a resident fishing

license in 2004, 2005, 2006, 2007, and 2015; (15) was a member

of the property owner’s association in his Arkansas neighborhood for 2011 and

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2013; (16) tax documents, social security statements, checking

accounts, and auto insurance policies use the home as the mailing

address; (17) the Taxpayer has a drivers’ license; (18) the Taxpayer has

a renter’s insurance policy for the apartment; (19) the Taxpayer’s voting

history from demonstrates that he last voted in in 2012,

though the voting place is near his apartment; (20) a taxpayer can own real and

personal property in Arkansas and have their signature notarized in Arkansas

and not be a resident; (21) he spent several days over the months of February,

March, April of 2016 driving past the Taxpayers’ home and taking photos of

truck in the driveway, and, a few times, he actually saw

driving the truck; and (22) truck was present most

of those times.

The Department’s Representative argued that is domiciled

in Arkansas or has a permanent place of abode in Arkansas and the relevant

factors from Comprehensive Individual Income Tax Regulations 2.26-51-

102(9)(c) (“Regulation 2.26-51-102(9)”) demonstrate that he qualifies as an

Arkansas resident.

The Taxpayer’s Representative argued that: (1) Ark. Code Ann. 26-18-

313(f)(2) requires any doubt regarding the imposition of a tax to be resolved

against the government; (2) a finding of domicile is fact intensive and must be

determined on a case by case basis; (3) the Department bears the burden of

demonstrating a change in domicile and exercising the right to vote is strong

evidence of domicile; and (4) the testimonial and documentary evidence does not

show that abandoned his domicile.

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CONCLUSIONS OF LAW

Standard of Proof

Ark. Code Ann. § 26-18-313(c) (Supp. 2015) provides, in pertinent part, as

follows:

The burden of proof applied to matters of fact and evidence, whether placed on the taxpayer or the state in controversies regarding the application of a state tax law shall be by preponderance of the evidence. A preponderance of the evidence means the greater weight of the evidence.

Chandler v. Baker, 16 Ark. App. 253, 700 S.W.2d 378 (1985). In Edmisten v. Bull

Shoals Landing, 2014 Ark. 89, at 12-13, 432 S.W.3d 25, 33, the Arkansas Supreme Court

explained:

A preponderance of the evidence is “not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other. The Department bears the burden of proving that the tax law applies to an item or

service sought to be taxed, and a taxpayer bears the burden of proving entitlement to a tax

exemption, deduction, or credit. Ark. Code Ann. § 26-18-313(d) (Supp. 2015). Statutes

imposing a tax or providing a tax exemption, deduction, or credit must be reasonably and

strictly construed in limitation of their application, giving the words their plain and

ordinary meaning. Ark. Code Ann. § 26-18-313(a), (b), and (e) (Supp. 2015). If a well-

founded doubt exists with respect to the application of a statute imposing a tax or

providing a tax exemption, deduction, or credit, the doubt must be resolved against the

application of the tax, exemption, deduction, or credit. Ark. Code Ann. § 26-18-313(f)(2)

(Supp. 2015).

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Assessments

Ark. Code Ann. § 26-51-201 (Supp. 2015) imposes the Arkansas individual

income tax upon, and with respect to, the entire income of every resident,

individual, trust, or estate. The tax is levied, collected, and paid annually upon

the entire net income of the individual. Ark. Code Ann. § 26-51-102(2) (Repl.

2012) defines the term “taxpayer” to include any individual, fiduciary, or

corporation subject to the Arkansas income tax. Ark. Code Ann. § 26-51-102(3)

(Repl. 2012) defines the term “individual” as a natural person. For the purpose of

tax imposition, the term “Resident” is defined at Ark. Code Ann. § 26-51-102

(Repl. 2012) as follows:

(14) “Resident” means natural persons and includes, for the purpose of determining liability for the tax imposed by this act upon or with reference to the income of any taxable year, any person domiciled in the State of Arkansas and any other person who maintains a permanent place of abode within this state and spends in the aggregate more than six (6) months of the taxable year within this state[.] [Emphasis added]. Regulation 2.26-51-102(9) defines a “resident” and provides, in pertinent

part, as follows:

a) any person domiciled in the state of Arkansas. Domicile is comprised of an act coupled with an intent. A domicile is acquired by (1) physical presence at a place coinciding with (2) the state of mind (that is, intent) of regarding the place as a permanent home. A domicile arises instantaneously when these two facts occur. Every person must have one domicile but can have no more than one domicile, regardless of how many residences a person may have at any given time. A domicile, once established, continues until a new domicile of choice is legally established. An established domicile does not end by lack of physical presence alone nor by mental intent alone. The old domicile must be abandoned with the intention not to return to it. If one moves to a new location but intends to stay there only for a limited period of time (no matter

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how long), the domicile does not become the new location but rather remains unchanged. b) any person who maintains a permanent place of abode within Arkansas and spends in the aggregate more than six (6) months of the year within Arkansas. Place of abode means a place where a person has established a permanent home, even though such person may be absent therefrom for a long period of time. A temporary home or residence would not be considered a place of abode, as there must be at least some degree of permanence. In addition, a person must actually spend more than six months of the tax year in Arkansas to fall within the scope of this provision. A person who has spent either less than six months or exactly six months in Arkansas would not fall within the scope of this provision. Place of abode and residence are considered to mean roughly the same thing. However, domicile and residence are not considered to be synonymous. Residence denotes only an act (the act of residing), while domicile denotes an act (the act of residing) coupled with the intent that the residence be a permanent home. The distinction between domicile and place of abode is that although a person can have several homes (or places of abode) at one time, only one of those homes can be the person's domicile. The home that the person intends or considers to be their permanent home (as in home base) would be the domicile. c) In situations where it is not clear if the requirements of either domicile (a) or place of abode (b) have been met, a residency determination can only be made after thoroughly reviewing the facts on a case by case basis. When reviewing the facts, the Supreme Court of Arkansas has held that we are not bound to accept a taxpayer's claims of intent when the circumstances point to a contrary conclusion. Furthermore, when acts are inconsistent with a taxpayer's declarations, the acts will control, and our conclusions regarding residency should be based on the facts and circumstances proved. The following factors should be reviewed in making a residency determination:

• Address used on federal income tax returns; • Address used on telephone, utility and commercial

documents; • Address used on voter registration; • Address used on drivers license, hunting and fishing

license; • Address used on motor vehicle, boat and trailer

registration;

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• Address used on real and personal property tax documents;

• Address used on county and other tax assessments; • Address on governmental documents, such as military

records. With respect to military records, the Leave and Earning Statement is a very important document;

• If the Taxpayer has a spouse, the spouse's address on such things as drivers license, voter registration, vehicle registration, etc. should be checked out;

• Employer and withholding information, nature of Taxpayer's employment (traveling salesperson, etc.);

• Location of Taxpayer. How often and for how long does Taxpayer reside at the location;

• Location of immediate family, such as spouse and children;

• Length of time in Arkansas of Taxpayer and immediate family;

• Community affiliations, such as club memberships, church, bank accounts, etc.;

• Absence of factors in other states.

Under the above citations, the analysis of this decision turns on two issues: (1)

has the Department proven that changed his domicile to

Arkansas for any of the relevant tax years and (2) if not, has the Department

proven that established a permanent place of abode in Arkansas

and spent more than six months within this state in any of the relevant tax years.1

A. Has the Department proven that was domiciled in Arkansas for any of the relevant tax years? No.

Taxpayers may have more than one (1) residence but they can only have

one (1) domicile. Leathers v. Warmack, 341 Ark. 609, 19 S.W.3d 27 (2000) and

Ark. Code Ann. § 7-5-201(b)(2) (Supp. 2013). The burden of proving a change of

domicile is on the Department. National Wire Fabric Corporation v. Nelson,

1 During the hearing, the Taxpayer’s Representative proposed that all tax years should be analyzed together to determine whether the Taxpayer averaged six (6) months within Arkansas over all of the years. The four assessments, however, individually cover each tax year and, consequently, each year shall stand on its own for purposes of this analysis.

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563 F. Supp. 303 (D.C. Ark., 1983) and Steward v. Steward, 16 Ark. App. 164,

698 S.W.2d 516 (1985). In order to prove a change of domicile under the

provisions of Regulation 2.26-51-102(9)(a), the Department must establish that

abandoned his domicile in “with the intention not to

return to it.” In Warmack, supra, the Arkansas Supreme Court addressed the

weight to be given to acts that conflicted with statements regarding intent to

abandon a domicile and stated, in part:

The intent to abandon one's domicile and take up another must be ascertained from all the facts and circumstances of the particular case. Morris v. Garmon, 285 Ark. 259, 686 S.W.2d 396 (1985). The factfinder is not bound to accept claims of intent when the circumstances point to a contrary conclusion; they cannot prevail unless borne out by acts. Charisse v. Eldred, 252 Ark. 101, 477 S.W.2d 480 (1972). ‘When acts are inconsistent with a person's declarations, the acts will control, and declarations must yield to the conclusions to be drawn from the facts and circumstances proved.’

Id. at 618-619, 19 S.W.3d at 34.

Further, the Arkansas Supreme Court has explained: “The place of exercise

of one's elective franchise is not necessarily conclusive as to one's intent on the

question of domicile or residence for voting purposes, but it is certainly

important, and may be the most important evidence on the subject.” Charisse v.

Eldred, 252 Ark. 101, 105, 477 S.W.2d 480, 482 (1972). Old case law in Arkansas

establishes the common law principle that the domicile of a wife is that of her

husband. Johnston v. Turner, 29 Ark. 280 (1874); Krone v. Cooper, 43 Ark. 547

(1884). More modern cases, however, differ. In Taylor v. Milam, 89 F. Supp

880, 882-883 (WD Ark. 1950), Judge Miller sitting at Hot Springs, Arkansas, for

the Western District of Arkansas, stated:

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Plaintiff contends that being a married woman on amicable terms with her husband her domicil is thereby fixed at the same place as his. Unquestionably this was true under the old common law. [citations omitted]. However, the reason for this rule was the then prevalent but now outmoded view of the husband and wife as one legal entity. By adjudication and legislation the ‘disabilities’ of married women have been almost universally removed so that in all practical respects the husband and wife stand on equal footing as regards control over the other. . . at the present time there appears to be no sound reason for limiting the right of a married woman to acquire a separate domicil. Restatement, Conflict of Laws, Sec. 28, provides: ‘If a wife lives apart from her husband, she can have a separate domicil.’ And, Comment (a) thereunder reads: ‘The acquisition of a domicil by a person legally capable of changing his domicil depends upon his physical presence in a place with intent to make that place his home. When a married woman was under such disabilities that she was not capable of doing many acts involving legal consequences for herself, it was natural that a court should declare that she could not acquire a domicil apart from her husband. With the change in the status of the married woman so that few, if any, of her common law disabilities remain, the determination of her domicil is based upon the same tests employed to determine the domicil of any other person who may act for himself.’ (Emphasis added).

Here, has a driver’s license, his primary vehicle

is registered in , and he continues to vote in . Though

received an Arkansas resident fishing license during the relevant

periods, the Arkansas Game and Fish website only requires sixty (60) days

residence in Arkansas to qualify as a resident in a particular year. While his bills,

tax returns, and other important documents utilize his Arkansas address, this fact

was explained by and his wife based on his addiction history.

While did assess a small boat used on a local lake, a boat trailer,

and a utility trailer in Arkansas, this evidence must be weighed against the fact

that his primary vehicle is registered and assessed in . It is apparent that

should not have claimed the homestead exemption (even though

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his wife otherwise qualified) because that document specifically states that the

person signing that document is affirming that they claim the address as their

personal residence. Based on the totality of the documents, testimony, and other

evidence presented at the administrative hearing, the Department has not

demonstrated that abandoned with no intention of

returning. Since this conclusion is clearly supported by the evidence presented, a

consideration of the factors under Regulation 2.26-51-102(9)(c) is unnecessary.

Consequently, the Department has not proven that was

domiciled in Arkansas for any of the relevant tax years.

B. Has the Department Proven that Established a Permanent Place of Abode in Arkansas and that

Spent More than Six Months within this State in Any of the Relevant Tax Years? Yes, in part.

This analysis will require a discussion of both elements: (1) did the

Department establish that possessed a permanent place of abode

in Arkansas and (2) did the Department establish that spent

more than six months within the State within a particular tax year?

1. Did the Department Prove Established a Permanent Place of Abode in Arkansas? Yes.

While discussing a “place of abode,” the Arkansas Supreme Court provided

the following guidance:

This court has defined “place of abode” as “something more than a place of temporary sojourning,” implying a degree of permanence. Shinn v. Heath, 259 Ark. 577, 587, 535 S.W.2d 57, 62 (1976) (quoting Cravens v. Cook, 212 Ark. 71, 74, 204 S.W.2d 909, 910 (1947)). “[A] given place may be a ‘place of abode’ of a party, though he may be actually absent therefrom for a long period of time.” Id. No particular length of time is necessary to establish residence. See Cole v. Cole, 233 Ark. 210, 343

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S.W.2d 561 (1961); Smith v. Smith, 219 Ark. 876, 245 S.W.2d 207 (1952). Rather, the key consideration is whether the place is an “established abode, fixed permanently for a time for business or other purpose, although there may be an intent existing all the while to return at some time or other to the true domicile[.]” Krone v. Cooper, 43 Ark. 547, 551 (1884). See also Davis v. Holt, 304 Ark. 619, 804 S.W.2d 362 (1991). Each case must be decided on its own facts. Id.

Warmack, 341 Ark. at 618, 19 S.W.3d at 34. Further, Regulation 2.26-51-

102(9)(b) defines a place of abode as follows: “a place where a person has

established a permanent home, even though such person may be absent

therefrom for a long period of time. A temporary home or residence would not be

considered a place of abode, as there must be at least some degree of

permanence.”

Based on the evidence presented (including testimony

the he annually visits and maintains the home for months at a time), the

home (purchased in ) would qualify as a permanent home with

some degree of permanence for even though it does not qualify as

a domicile. Consequently, the Department has demonstrated that

possesses a permanent place of abode in Arkansas.

2. Did the Department Prove Spent More

than Six Months within this State in Any of the Relevant Tax Years? Yes, in part.

In 2011 and 2012, explained that he came to Arkansas and

resided in the home in the early spring for a few months to mow the

grass and maintain the home. He would come at additional times to attend

occasional family events and to visit. Unlike 2013 and 2014, was

certain that he spent less than forty percent (40%) of 2011 and 2012 in Arkansas.

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Absent contrary evidence, the Department has not demonstrated that

spent more than six (6) months in Arkansas during 2011 or 2012 by a

preponderance. Consequently, the Arkansas income tax assessments for those

periods is not sustained because would not qualify as a resident

for these periods.

In 2013, stated that he spent roughly fifty percent (50%)

of his time in Arkansas. This statement must be weighed in light of his admission

that he was not precisely counting the days spent within Arkansas during any

particular year but was aware of large differences in time (allowing him to

definitively state that he was not in Arkansas more than six (6) months in 2011

and 2012). Regarding 2013, further explained that he was

present in Arkansas during most of health issues in 2013. He

also stated that he drove back and forth to work in early 2013

before her September retirement and was present during her hospitalization after

her retirement, which dominated the remainder of that year. In addition to that

time in Arkansas, likely spent the early spring months in

Arkansas to mow and maintain the home which he stated that he performed

every year. Based on the evidence submitted, a preponderance of the evidence

supports a finding that spent more than six (6) months in

Arkansas during 2013. Consequently, based on the testimony and the additional

evidence submitted, the income tax assessment for 2013 is sustained because

would qualify as a resident for this period.

In 2014, admitted that he spent more than sixty percent

(60%) of his time in Arkansas. Consequently, based on the testimony and the

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additional evidence submitted, the income tax assessment for 2014 is sustained

because would qualify as a resident for this period.

C. Underestimate Penalty

An underestimate penalty was assessed for the 2013 and 2014 tax years.

Ark. Code Ann. § 26-18-208(6) (Repl. 2012) discusses the underestimate penalty

and states as follows, in relevant part:

(i) If a taxpayer fails to make a declaration of estimated tax and pay on any quarterly due date the equivalent to at least ninety percent (90%) of the amount actually due, there shall be added a penalty of ten percent (10%) per annum to the amount of the underestimate.

(ii) The ten percent (10%) per annum penalty shall be applied on a quarterly basis.

(iii) A taxpayer who has an uneven income may compute the ten percent (10%) penalty on an annualized basis.

In 2013 and 2014,2 the Taxpayers had a tax liability in excess of one thousand

dollars and the outstanding tax balance exceeded ten percent (10%) of the total

tax due for those periods. None of the exceptions listed in that subsection would

apply to the Taxpayers’ returns for these periods. Consequently, the

underpayment penalty is sustained for the 2013 and 2014 tax periods.

D. Failure to Pay Penalty

A failure to pay penalty was assessed in addition to the underestimate

penalty for the 2014 tax year. Ark. Code Ann. § 26-18-208(2)(B) (Repl. 2012)

provides as follows:

In case of failure to pay the amount shown as tax on any individual income tax return required to be filed, on or before the date prescribed for payment of the tax, unless it is shown that the failure to pay is due to reasonable cause and not to willful neglect, there shall be added to the

2 The penalty assessed for the 2011 and 2012 tax years shall not be addressed because the tax assessments for those periods was not sustained.

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amount shown as tax on the return one percent (1%) of the amount of the tax if the failure is for not more than one (1) month, with an additional one percent (1%) for each additional month or fraction of a month during which the failure continues, not to exceed thirty-five percent (35%) in the aggregate . . . .

Further, Lack of knowledge of publicly available statutes and rules cannot be

recognized as a defense to their enforcement. 29 Am. Jur. 2d Evidence 290; see

also Edward v. US, 334 F.2d 360 (1964) and Jellico Coal Min. Co. v.

Commonwealth, 96 Ky. 373, 29 S.W. 26 ( Ky. App. 1895). The U.S. Supreme

Court has explained the reason for this legal principle as follows:

The whole course of the jurisprudence, criminal as well as civil, of the common law, points to a different conclusion. It is a common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally; and it results from the extreme difficulty of ascertaining what is, bonâ fide, the interpretation of the party; and the extreme danger of allowing such excuses to be set up for illegal acts, to the detriment of the public.

Barlow v. US, 32 U.S. 404, 411 (1833). The Arkansas Supreme Court has also

provided that the maxim that ignorance of the law is no defense applies in equal

force “to acts committed or omitted in violation of the criminal or civil laws of the

land.” State v. Simmons, 1 Ark. 265, 266 (1839). Consequently, the lack of

knowledge of the legal requirements cannot be considered in the analysis

regarding alleged violations.

Here, admits that he owned a home in the State of

Arkansas and was present in Arkansas for more than sixty percent (60%) of the

time during the 2014 tax year. Based on this evidence, he qualified as a resident

for Arkansas income tax purposes. Arkansas case law provides that lack of

knowledge cannot be used as a defense to enforcement. Consequently, the failure

to pay penalty is sustained for the 2014 tax year.

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E. Interest

Interest must be assessed on the sustained tax delinquencies for use of the

states’ tax dollars. Ark. Code Ann. § 26-18-508 (Repl. 2012).

DECISION AND ORDER

The assessments are sustained in part. The file is to be returned to the

appropriate section of the Department for further proceedings in accordance with

this Administrative Decision and applicable law. Pursuant to Ark. Code Ann. §

26-18-405 (Supp. 2015), unless the Taxpayers request in writing within twenty

(20) days of the mailing of this decision that the Commissioner of Revenues

revise the decision of the Administrative Law Judge, this Administrative Decision

shall be effective and become the action of the agency. The revision request may

be mailed to the Assistant Commissioner of Revenues - Policy & Legal, P.O. Box

1272, Rm. 2440, Little Rock, Arkansas 72203. The Commissioner of Revenues,

within twenty (20) days of the mailing of this Administrative Decision, may revise

the decision regardless of whether the Taxpayers have requested a revision. The

Taxpayers may seek relief from the final decision of the Administrative Law

Judge or the Commissioner of Revenues on a final assessment by following the

procedure set forth in Ark. Code Ann. § 26-18-406 (Repl. 2015).

DATED: May 2, 2016