Authored by Kristin Gifford and Natalia Mowery
While California offers beautiful weather year-round, with the high cost of living and often ability to work from home, our firm has witnessed a rising number of Californians moving away from the Golden State. To be sure to avoid unwanted California State tax, exiting Californians should carefully plan their move.
A Case Study
Meet Tom and Carol Johnson. The Johnsons currently live in California but recently purchased a home in Nevada where they plan to move after Tom retires and their daughter graduates. After the move, Carol will continue to work for her California employer remotely from Nevada. The Johnsons own a California corporation but plan to be exited from California by December 31, 2023. The Johnsons contacted Lobb & Plewe to assist with their migration to Nevada.
Requirements Nevada Residency and California Non-Residency
For the Johnsons to change their residency to Nevada, they must have an intent to reside in Nevada for an indefinite period of time coupled with an actual, physical presence in Nevada. Once the Johnsons have satisfied those two requirements, Nevada will recognize the Johnsons as residents. To support their change of residency to Nevada, the Johnsons can file a sworn declaration of domicile with the district court in the county where they plan to reside. The recorded declaration provides evidence of their residence in Nevada and their intent to make that location a permanent, predominant, or principal home. The list below provides documents that would further support the Johnson’s change of residency to Nevada. The more the Johnsons can support their change of residency the better!
- File a Declaration of Domicile with the District Court.
- File a Certificate of Residency with the Nevada DMV.
- Obtain a Nevada Driver’s License.
- Obtain a Nevada Voter registration card.
- Purchase and utilize a home in Nevada as your primary residence.
- Obtain a receipt for rent of a residential address in Nevada.
- Obtain motel, hotel, campground or recreational vehicle park receipts showing that you have been residing in Nevada for at least 30 consecutive days.
- Obtain Military Leave and Earnings Statement (LES) to evidence Nevada residency of applicant deployed outside of Nevada while serving on active duty.
- Spend the majority of time in Nevada including spouse and children.
- Establish medical professionals and other healthcare providers, dentists, accountants, and attorneys in Nevada.
- Engage in social ties such as church, extracurricular activities, and social clubs in Nevada.
- Obtain a record from a public utility for residential service in Nevada.
- Open a bank account in Nevada and obtain a bank or credit card statement.
- Obtain a paycheck stub in Nevada.
- Obtain a document from a state or federal court in Nevada.
- Obtain a record, receipt or bill requesting payment in Nevada.
- Obtain a document showing receipt of public assistance or benefits from a State of Nevada agency.
- Obtain a student identification card from a Nevada educational institution.
To prevent the State of California from ignoring the Johnson’s claim of being Nevada residents and requiring them to file a California state tax return, the State of California must have sufficient proof that the Johnson’s have the intent to move or have already moved to a Nevada. CFTB Form 1031 states:
“The California Tax Board begins with the underlying theory that you are a resident of the place where you have the closest connections.”
The CFTB will consider the following when determining if the Johnson’s have sufficient proof of their residency in Nevada.
- Amount of time spent in California versus amount of time outside
- Location of spouse and
- Location of principal
- State that issued driver’s
- State where vehicles are
- State where maintain professional
- State where registered to
- Location of the banks where maintain
- The origination point of financial
- Location of medical professionals and other healthcare providers (doctors, dentists etc.), accountants, and
- Location of social ties, such as your place of worship, professional associations, or social and country clubs.
- Location of real property and
- Permanence of work assignments in
How Lobb & Plewe Can Help
Lobb & Plewe is assisting the Johnsons with navigating the migration from California to Nevada including tax optimization and asset protection. Additionally, Lobb & Plewe is transferring the Johnson’s current estate planning to Nevada as well as moving their corporation to Nevada.
If you or someone you know if considering changing their residency out of California or other high-tax state, and would like to attend one of our upcoming seminars migration seminars in 2023, please contact our office for more details.