by Bradley R; Marsh and Dina B. Segal*
People have long flocked to California for its beautiful weather, rich agriculture, and immense business opportunities in a myriad of industries. In November 2012, however, California passed Proposition 30, which further increased California's already high income tax rates. The rates, now topping out at 13.3 percent on those earning more than $1 million a year, have prompted many high earners to leave the state.
 When Does a Taxpayer from Another State Become a California Resident?
Klemp v. Franchise Tax Board, 45 Cal. App. 3d 870 (Cal. App. 2d Dist. 1975)... considered whether a husband and wife from Illinois were residents of California during a six-year period when they owned a home, maintained a bank account, belonged to a country club in California, and spent more time in California than Illinois... [reasoning] that "time spent in California is only a factor to be considered as an indication of the purpose of the visit" and "the ownership of an abode, a bank account and a club membership do not subject a seasonal visitor to California income tax."
 When Does a Taxpayer Moving to Another State Give Up California Residency?
... [In] Whittell v. Franchise Tax Bd., 231 Cal. App. 2d 278 (Cal. App. 1st Dist. 1964), the court analyzed whether the Whittells' presence in California was temporary or transitory by comparing the connections the Whittells retained in California and the new connections they gained in Nevada... [concluding] that the Whittells failed to rebut the presumption of residency because their "domestic and business activities in California [were] extensive indeed and [made] it abundantly clear that presence here was neither temporary nor transitory."... [reasoning] that the extensive connections the Whittells had established in Nevada "did not render their activities in [California] any less indicative of their residence in [California]."
... [In] Noble v. Franchise Tax Bd., 118 Cal. App. 4th 560 (Cal. App. 2d Dist. 2004), [the taxpayers] were in the process of moving to Colorado, retained their California residency during a single month before their move. Despite the Nobels' clear intent to change their domicile and residence to Colorado, the court held the taxpayers remained California residents...
The court, focusing on these strong California connections, found that the fact that the Nobles intended to move to another state was not enough to establish a change in residency because there was insufficient "indicia of an actual change of such residence." That they considered themselves in 'transition' had no legal significance."
Bradley R. Marsh is a state and local tax attorney in the San Francisco office of Winston & Strawn LLP. Dina B. Segal is a corporate attorney in the Del Mar office of Sheppard Mullin Richtor & Hampton LLP with an expertise in state and local tax.
RELATED LINKS: For more information on the determination of California residency for state income tax purposes, including Proposition 30 and administrative decisions addressing this issue, see:
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