Office of Tax Appeals

OTA Rejects FTB’s Argument That Man Who Moved to Saudi Arabia Was Still a California Resident


The issue in the Appeal of A. Khan was whether the taxpayer was still a California resident for the 2013 tax year even though he moved from San Bernardino County to Saudi Arabia, where he obtained a residency permit, got a job, bought a new car, rented an apartment under a two-year lease, opened bank accounts and obtained a 10-year driver’s license (the longest term available). Before leaving California, the taxpayer ceased using a storage locker in California, sold most of his belongings, disposed of both of his cars, and closed his California bank accounts.

The Franchise Tax Board claimed that even after all of those changes, the taxpayer remained a California resident, arguing that the move to Saudi Arabia was for a “temporary and transitory purpose.”

The OTA unanimously sided with the taxpayer, writing:

“FTB notes that appellant did not affirmatively act to cancel his California voter registration, driver’s license, or license to practice medicine. But during the period appellant resided in Saudi Arabia, he did not vote in California, and neither his California driver’s license nor his California license to practice medicine came up for renewal. FTB claims that appellant ‘benefitted from and was protected by California law’ because he ‘maintain[ed] – and exercise[ed] – his privilege to practice medicine in this state.’ While it is true that appellant passively maintained his license in California, he did not, in fact, practice medicine in California after he left the state on May 25, 2013, and continuing through the end of the tax year at issue.”

The FTB’s principal argument, however, was that the taxpayer remained a California domiciliary because his children continued to reside in California with their mother, his former spouse. The tax agency cited a 1976 precedent involving a couple who remained married while the husband lived in Canada and the wife and their child remained in California.

“FTB’s assertions are unconvincing,” the OTA wrote, because the taxpayer in this case “had no choice but to leave his children in the custody of their mother,” who had initiated divorce proceedings and would not allow the children to go to Saudi Arabia.