Keyshawn Johnson Continues to Fight CA FTB Over $1M Residency Issue

Last week, a judge ruled that former National Football League wide receiver, Keyshawn Johnson, owes at least $905,000 in state income tax, penalties, and interest. Johnson tried overturning a 2017 California administrative ruling that he was a resident of California in 1996, when he graduated from the University of Southern California and was drafted by the New York Jets. In January, Johnson took his dispute to the Los Angeles County Superior Court.

Tax domicile has become a more pressing issue as states seek to generate additional revenue. The standard definition of domicile is “the place which an individual intends to be his or her permanent home and to which such individual intends to return whenever absent.” When domicile is not clear, over 28 states have created tests in order to determine if an individual is a resident, typically a days-in-and-out equation, with 183-day-presence being the most common. Most states often see domicile and residence as the same thing.

But California focuses on facts and circumstances. While an individual’s intent is considered when determining domicile, the FTB also looks at the individual’s acts and declarations.

Knowing these definitions is important in Johnson’s case. Judge Mark V. Mooney decided to back the Franchise Tax Board in last Wednesday’s ruling. This decision was based on many reasons. One of them was Johnson owning a house in the suburbs of Los Angeles, and filing a New York nonresident return in his 1996 federal return. At the time, Johnson was only able to claim a mortgage deductible by being a primary resident. This means that Johnson’s claim is inconsistent with the original filing. Mooney said that proving that Johnson rented a place in New York for four months is not enough evidence to be considered a New York residence. On the same note, Johnson previously claimed that he was a Nevada resident since he rented a room for $300 a month while also renting an apartment for his girlfriend and baby back in California. Where your spouse and children are located is one of many key factors the CA FTB considers when determining residency in California.

While fighting this battle, Johnson was also trying to abate the interest and penalties accrued. He owes about $905,000 in tax, penalties, and interest; $219,000 of which is the initial Income Tax. This was denied since Judge Mooney did not have the authority to overrule these fees. Judge Mooney also stated that he would not have felt inclined to wave these fees since Johnson could have been paying them while continuing with his dispute.

Talley’s team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

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