Although the legal and factual analysis above may seem daunting, fall back to common sense. In order to leave California, the move must be intended to be permanent/indefinite, not temporary/transitory. Look at the specific facts of the taxpayer that are relevant to that issue. An individual must establish ties to their new state that are at least comparable, and preferably stronger, than the previous ties to California. But that is only half the job. It is also critical that the individual breaks their former ties with California. Individuals leaving California are typically better at doing the former than the latter, and lingering ties to California are the cause of most difficulties at audit (e.g., retaining their California residence). The individual definitely should plan to spend more time in their new state of residence than in California—the more the better compared to time in California. Those with a low tolerance for risk must be especially diligent in building new ties and breaking former California ties using Bragg as guidance. Also keep in mind that assuming you moved, when you moved may be extremely important. A change of residence a week after a large realization event (which is not taxable as California source income to a nonresident) is not a desired result.
Finally, keep in mind that any determination made at audit by the Franchise Tax Board (FTB) involving a change of residency is presumptively correct, and the taxpayer bears the burden of showing error in that determination. Unsupported assertions by a taxpayer are insufficient to satisfy the taxpayer’s burden of proof. In the absence of credible, competent, and relevant evidence from the taxpayer showing that FTB’s determination is incorrect, it must be upheld. Be sure to thoroughly document the circumstances surrounding the move.
Eric J. Coffill is a senior counsel at Eversheds Sutherland (U.S.) LLP.