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  • Home
  • About
    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
    • Devon J. Arabo, ESQ., LL.M.
    • Brian M. Malloy, Esq.
    • Andrea Cisneros Valdez, Esq., LL.M.
    • Sam Imandoust, ESQ., LL.M
    • Lauren Suarez, ESQ., LL.M.
    • John I. Forry, Esq.
    • Martin Schainbaum, ESQ., LL.M.
    • Kaveh Imandoust, JD, MBT, CPA
    • Joseph Cole, ESQ., LL.M.
    • Christopher Engelmann, ESQ., LL.M.
    • Remy Hogan, Esq., LL.M.
    • Steve S. Mattia, Esq.
    • Dod Ghassemkhani, ESQ.
    • Vincent Renda, Esq.
    • Pedro Bernal, Esq.
    • Sabri P. Shamoun 1938-2023
    • Melanie M. Shamoun
    • Renae Arabo
    • Hilary Dargavell
    • Sandie Portilla
    • Lupita C. Torres
    • Jewell Cornejo
    • Kesia Belford
    • Danielle N. Misleh
    • Judith G. Jeremie, JD
    • Rebecca Shuman
    • Michael Lutzky, CPA
    • Gianna Iskander
  • Practices
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS LAW for IRS Appeals
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • What are IRS Field Audits?
          • Initial IRS Compliance Center Audits
          • IRS Office Audits
          • What happens in an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • NOTICES
          • IRS Notices
          • IRS Letters
          • FTB Notices
          • Avisos en Español
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearing
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • ACS – Automated Collection System
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • RJS LAW Approach to Collections
          • IRS Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders TAO
        • IRS Payroll Tax
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • Trust Fund Recovery Penalties
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing an Offer in Compromise to the IRS
          • How does the IRS evaluate an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Choose RJS LAW?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • CDTFA – California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration – CDTFA
        • California State Tax Matters – California Franchise Tax Board | FTB | EDD
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • International Tax
    • Visa Gold Card
    • Estate Planning
    • Trust Litigation
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
      • Bankruptcy (FAQ’s)
    • Civil Litigation
    • Criminal Defense
    • Accidents & Injury
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
  • Tax Institute
    • 10th Annual USD School of Law – RJS LAW Tax Institute
    • 9th Annual USD School of Law – RJS LAW Tax Institute
    • 8th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 28th, 2023
    • 7th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 15th 2022
    • 6th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 5th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 4th Annual USD School of Law – RJS LAW Tax Controversy Institute
  • Testimonials
  • Giving
    • Giving
    • RJS LAW Donates Billboard to the Girl Scouts
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    • Awards
    • Ronson J. Shamoun at events with various dignitaries
    • SD50 Extraordinary Leadership
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California Franchise Tax Board – Can You Ever Leave the Hotel California?

California Franchise Tax Board

California Franchise Tax Board

The Eagles famously sang in their hit Hotel California, “You can check out any time you like, but you can never leave.”  The Eagles never gave an explanation as to what the cryptic lyrics of Hotel California truly meant.  Fans gave various theories ranging from the song being about the excesses of the entertainment industry or it being about a psychiatric hospital.  We would posit that perhaps the band wrote the lyrics when they saw their California Franchise Tax Board returns. 

California State Income Taxes

California is of course a beautiful state that we are proud to call home.  However, it is not a utopia. California has its fair share of problems including fires, traffic, and some of the highest taxes in the United States.  California residents must pay California income tax on all their income, regardless of whether the income came from sources within California.  Many Californians ponder leaving the state to avoid taxes.  However, avoiding the reach of the California tax laws is easier said than done. 

One way a California resident can avoid paying taxes in California is by making a “clean break.”  This would mean leaving the state forever and completely uprooting themselves from the state by disposing of any property they may have in the state and by ceasing any business activities they have in the state.  For many Californians, a clean break is not practical.  Even if such a clean break were feasible, they could still face potential California taxation for stock options they earned or exercised while a California resident.

Californians, with businesses or property in the state, who contemplate moving to another state may not wish to give up their California businesses or properties.  A person that moves out of state will nevertheless have to pay California income tax on any income earned within California.  This taxable income includes rental income from property in California, income from businesses located in California, and income derived from services performed in California.  People that decide to leave the state for tax purposes may not gain much in tax savings if much of their income comes from California. 

Californians contemplating leaving the state may wish to periodically come back to California.  Some for occasional short visit but others may wish to spend several weeks or months a year in California.  While there is no hard and fast rule as to how many weeks or months a year a person can spend in California before they are considered a California resident, there is a possibility the Franchise Tax Board may consider you a resident once again. 

In any given tax year, it is possible for a person who never sets foot in California to be considered a California resident. On the flip side, it is also possible, although highly unlikely, that someone spending nine months or more months a year inside California may not be considered a California resident.  Generally, California will classify visitors non-residents if their presence in the state is for a “temporary or transitory purpose.” 

Seasonal visitors and tourists can be in California for a “temporary and transitory purpose.”  However, if you enter  the state with no definitive plans of leaving, such as  coming to the California to recover from an illness or for a long-term business engagement, you may not be considered in the state for a “temporary and transitory” purposes and thus be classified a California resident.

Physical presence (or lack thereof) is an important factor in determining whether an individual is a California resident for tax purposes.  However, it is not the only thing the law looks to in determining whether a person is a California Resident. To be a non-resident, one must establish domicile in another state.  The law looks to where a person is registered to vote, where they register their vehicles, involvement in social clubs, and where their children attend school, and other factors to determine where a taxpayer is domiciled.  For example, a person registered to vote in Nevada, who has children attending schools in Nevada, who is a member of a country club in Nevada, and is active member of a Nevada house of worship is more likely to be considered domiciled in Nevada than someone who has not established any ties with the state of Nevada.

As the COVID-19 pandemic marches on, the State of California is more cash strapped than ever.  If you are contemplating leaving California, you should consult with a tax professional concerning your tax obligations to the state before you legally “check out” of Hotel California.   

Published by Joe Cole

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Filed Under: FTB Audits, FTB Issues Tagged With: California franchise tax board, California FTB, FTB

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