Trial court erred in reversing the Department of Revenues determination that the taxpayer was domiciled in Kentucky for tax purposes: FINANCE AND ADMINISTRATION CAB. V. SLAGEL (COA 4/25/2008)

FINANCE AND ADMINISTRATION CAB. V. SLAGEL
REVENUE & TAXATION: Board of Tax Appeals, standard of review

Commonwealth Of Kentucky – 497
PUBLISHED: AFFIRMING
PANEL: LAMBERT PRESIDING: MOORE, BUCKINGHAM CONCUR
JEFFERSON COUNTY
DATE RENDERED: 4/25/2008

The Court of Appeals found the trial court erred in reversing the Department of Revenues determination that the taxpayer was domiciled in Kentucky for tax purposes.

The Department of Revenue adjusted the individual income tax returns of Peter and Linda Slagel for the tax years 1996 through 2000 to include wages earned by Peter while working in Venezuela. The total amount of the resulting assessment of additional tax, including fees, penalties, and interest, is $72,731.50. The Slagels protested the assessment, but the Department issued a final ruling upholding the adjustment. The Slagels appealed to the Board, which affirmed the Department’s adjustment. The Slagels then appealed to the Franklin Circuit Court, which reversed the Board, finding that the Department failed to show with substantial evidence that Peter established domicile in Kentucky. This appeal followed.

In reviewing the trial court decision the issue is whether the trial court was correct in determining that the Department’s decision was not supported by substantial evidence. Whether a decision or action of the Department is unreasonable, arbitrary and capricious, because it is not based upon substantial evidence, is one of law, thus our review is de novo. 

Where an administrative agency’s decision is to deny relief to the party with the burden of proof or persuasion, as was the case here, the issue on appeal is whether the evidence in that party’s favor is so compelling that no reasonable person could have failed to be persuaded by it.

The COA held the evidence was not so compellingly in favor of the Slagels that no reasonable person could have failed to be persuaded by it.  First, Peter was registered to vote in Kentucky in 1992 and exercised his right to vote in 1999 and 2000. He additionally held driver’s licenses in both Kentucky and Venezuela. He owns property in Kentucky, maintains bank accounts in Kentucky, and has an incorporated business in Kentucky. His passport lists Kentucky as his “abode,” and his last will and testament and power of attorney assert that he is “of Fayette County Kentucky.” Finally, Linda and their children live in Lexington, Kentucky. In light of this fact alone, it seems likely that Peter has “the intention of returning” to but “no present intention of moving” from Lexington as required by Kentucky’s definition of domicile.

Accordingly, the trial court erred in substituting its judgment for the judgment of the Department on this factual determination. Therefore, COA reversed the order of the Franklin Circuit Court and remanded for proceedings consistent with this opinion.

Digest by Michael Stevens

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