The Barker Decision – A Threat to New York's Tourism Industry and Workforce - UPDATED

In the Matter of the Petition of John J. and Laura Barker (the "Barker Case"), New York Tax Tribunal was presented with a Connecticut resident (a family of five living in New Canaan), Mr. Barker working full-time in New York, Mrs. Barker a homemaker in Connecticut, who happened to own a seldom used, 1,100 sf vacation property on Long Island.  The vacation property was used only a few days per year by the Barkers and was not used by Mr. Barker in connection with his employment in New York.  The Tribunal decided that the vacation property constituted a permanent place of abode in New York, which, combined with Mr. Barker's full-time employment in New York, is sufficient to establish the Barkers as New York residents.

This decision marks a significant extension of the artifice of New York residency for tax purposes.  While the Barkers, living full-time in New Canaan, Connecticut, but Mr. Barker being employed full-time in New York, could certainly reasonably be expected to be taxed on income earned in New York, the same expectation cannot objectively be extended to other income earned in Connecticut. 

By reason of this decision, the many Connecticut, New Jersey and Pennsylvania residents commuting to work in New York will find themselves taxed as New York residents solely by reason of owning or controlling vacation property in New York – even if such property cannot be used as a residence associated with the person's employment.  For example, a New Jersey couple, one spouse employed in New York City, the other spouse employed in New Jersey, owning a vacation home in the Finger Lakes or Adirondacks, would be treated as New York residents for tax purposes. 

This decision will impact the well-being of New York's tourism industry.  Many areas of the state are economically dependent upon vacation-home tourism, including many parts of Long Island, the Finger Lakes and the Adirondacks.  The additional tax burden (on top of already excessive real property taxation) will result in owners and buyers departing the market, further depressing an already challenged tourism industry.

A bill has been introduced in the New York Assembly and Senate (A6266 and S3998 - http://assembly.state.ny.us/leg/?default_fld=&bn=A06266&term=2011&Summary=Y&Memo=Y) that would exempt an abode that is more than 50 miles from the taxpayer's place of employment in New York and the taxpayers spends no more than 90 days at the abode during the taxable year.  This change is sensible and should be supported by all tourism organizations across the state.

The bill appears to be moving quickly towards passage in the Senate -- it advanced to third reading today, June 7, 2011.  It is not clear where it is heading in the Assembly.