Domicile is the place of someone’s true, permanent home, the place they intend to return to when absent, and a person may have several residences but may only have one domicile at a time (Cornell Law School, Legal Information Institute, domicile). It is determined by two concurrent elements: the person’s presence in the state of domicile, and the intention to stay there indefinitely (Cornell Law School, Legal Information Institute, domicile).
Neither Element Works Without the Other
The federal estate tax regulations state the same two-element test and then rule out each half on its own, which is the part worth reading closely.
A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of later removing therefrom (26 CFR 20.0-1(b)(1)). Note how little presence that requires: a brief period is enough, so long as the intention is there.
The negatives are where the work is, and there are two of them in one sentence. Residence without the requisite intention to remain indefinitely will not suffice to constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal (26 CFR 20.0-1(b)(1)).
Read as a pair, those two negatives close both escape routes. Living somewhere for years without the intention does not create a domicile there. Forming the intention to move, however firmly and however documented, does not move a domicile until the person actually goes.
Domicile Sets Estate Tax Residence
The word resident carries a different meaning in the estate tax than it does in ordinary speech, and it is defined by domicile rather than by time spent.
A resident decedent is a decedent who, at the time of his death, had his domicile in the United States, and the term United States, as used in the estate tax regulations, includes only the States and the District of Columbia, together with the Territories of Alaska and Hawaii prior to their admission as States (26 CFR 20.0-1(b)(1)). The mirror side is written to the same standard rather than to a different one: a nonresident decedent is a decedent who, at the time of his death, had his domicile outside the United States under the principles set forth in that same subparagraph (26 CFR 20.0-1(b)(2)).
The regulation flags one situation off to the side rather than resolving it in place, pointing to section 2202 with respect to missionaries in foreign service (26 CFR 20.0-1(b)(2)).
The Gift Tax Has Its Own Provision, Worded Slightly Differently
The gift tax rule is not a cross-reference to the estate tax one. It is its own regulation, saying nearly the same thing in its own words, which matters when a pin cite has to be right.
A resident is an individual who has his domicile in the United States at the time of the gift, and all other individuals are nonresidents (26 CFR 25.2501-1(b)). A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of moving therefrom, and residence without the requisite intention to remain indefinitely will not constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal (26 CFR 25.2501-1(b)).
Set the two side by side and the differences are small and real. The estate tax version says later removing therefrom where the gift tax version says moving therefrom, and it says will not suffice to constitute where the gift tax version says will not constitute. The estate tax version also says the United States includes only the States and the District of Columbia, while the gift tax version says it includes the States and the District of Columbia (26 CFR 20.0-1(b)(1) and 26 CFR 25.2501-1(b)). Cite the one that governs the transfer in front of you.
Domicile Is Not the Income Tax Residency Test
This is the confusion that costs the most, because the same word means two different things in two chapters of the same Code.
The Code says so itself, in the opening words of the income tax definition. For purposes of that title other than subtitle B, an alien individual shall be treated as a resident of the United States with respect to any calendar year if, and only if, that individual is a lawful permanent resident at any time during the year, meets the substantial presence test, or makes the first year election (26 U.S.C. 7701(b)(1)(A)).
The parenthetical carve-out at the front of it is the whole point. The estate tax is imposed in subtitle B, chapter 11 (26 U.S.C. 2001) and the gift tax in subtitle B, chapter 12 (26 U.S.C. 2501), so the three-route income tax test is expressly switched off for both, which is why their regulations reach for domicile instead (26 CFR 20.0-1(b)(1) and 26 CFR 25.2501-1(b)). None of the three income tax routes turns on where a person’s true permanent home is, and the day count in the second one is set out in nonresident alien.
Two different tests on the same person can therefore give two different answers, and both answers can be right, because they are answers to different questions.
What Is Actually Weighed
Because intention is a state of mind, it is proved by conduct. Courts determine the factors by considering the totality of the circumstances, and will often review the current residence, voting registration and practices, payment of taxes, location of real and personal property, driver’s license and vehicle registration, location of brokerage and bank accounts, place of employment, location of spouse and family, and membership in organizations (Cornell Law School, Legal Information Institute, domicile).
Two qualifications sit on that list and both cut against tidy checklists. Factors are not weighed equally, and some, such as where a person spends a majority of their time and votes in elections, may be weighed more heavily. And a formal declaration of domicile may be taken into account, but is not dispositive if the person’s conduct does not comport with the declaration (Cornell Law School, Legal Information Institute, domicile).
Adjacent Terms That Are Not This One
Domicile sits next to two determinations it is often merged with. A tax home is decided on its own authority for its own purpose, and the two can land in different places at once without either being wrong, as tax home sets out. For a business rather than a person, commercial domicile is a defined term inside state income tax allocation, and where it sends interest and dividends is covered in apportionment.
Common Questions
Residence is where someone lives; domicile adds intention and is exclusive. A person may have several residences but may only have one domicile at a time (Cornell Law School, Legal Information Institute, domicile), and residence without the requisite intention to remain indefinitely will not suffice to constitute domicile (26 CFR 20.0-1(b)(1)).
There is no minimum period in the regulation. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of later removing therefrom (26 CFR 20.0-1(b)(1)). Time is evidence of intention rather than a test in its own right.
Not on its own. A formal declaration may be taken into account but is not dispositive where conduct does not match it (Cornell Law School, Legal Information Institute, domicile), and intention to change domicile does not effect the change unless it is accompanied by actual removal (26 CFR 20.0-1(b)(1)).
The two statuses are decided by different tests, so they can diverge. The income tax test applies for purposes of that title other than subtitle B (26 U.S.C. 7701(b)(1)(A)), and the estate tax is imposed in subtitle B (26 U.S.C. 2001), so estate tax residence is decided by domicile instead (26 CFR 20.0-1(b)(1)). The day count behind the income tax side is covered in nonresident alien.
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