Revenue Legal Counsel ( Department s Representative ). The Tax Auditor. appeared at the hearing on behalf of the Department. Taxpayer MR appeared at

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2 Revenue Legal Counsel ( Department s Representative ). The Tax Auditor appeared at the hearing on behalf of the Department. Taxpayer MR appeared at the hearing and represented the Taxpayers. The Letter ID Numbers are. ISSUES 1. Whether the Taxpayers were entitled to claim the deduction for the border city exemption as residents of Texarkana, Arkansas? No. 2. Whether the individual income tax assessments issued by the Department against the Taxpayers should be sustained? Yes. FINDINGS OF FACT/ CONTENTIONS OF THE PARTIES The Taxpayers filed Arkansas income tax returns, Married Filing Joint, for Tax Years 2010, 2011, 2012, 2013, 2014, 2015, and 2016 ( Audit Period ) 2 which reflected an address of, Texarkana, AR. ( house in Texarkana ). The Taxpayers claims of the border city exemption were disallowed for all years in the Audit Period. The Department issued proposed assessments against the Taxpayers for Individual Income Tax for the Tax Years in the Audit Period. 3 The Department s Answers to Information Request provided, in pertinent part, as follows: The issue in this case is whether and ("Taxpayers") remained legal residents of, Arkansas for tax years ending December 31, 2010 through December 31, The Arkansas Department of Finance and Administration, Individual Income Tax, (the "Department") reviewed the Taxpayers' records for tax years and determined that the 2 See Department s Exhibit 5. 3 See Department s Exhibit 19. 2

3 Taxpayers were residents of, Arkansas during those tax years. As such, Taxpayers were not entitled to take the border city exemption as they were not residents of Texarkana, Arkansas. The border city exemption was disallowed, resulting in assessment of tax due. The Department sent an Explanation of Tax Adjustment to the Taxpayers for those tax years ending December 31, 2010, 2011, 2012, 2013, 2014, and 2015 by letters dated April 14, 2017, copies of which are attached hereto collectively as Exhibit 1. Each Explanation of Tax Adjustment advised the Taxpayers that the Texarkana exemption claimed by the Taxpayers has been disallowed, resulting in an assessment of income tax due. The Taxpayers' 2016 return was later reviewed and the Texarkana exemption was again disallowed, resulting in the same assessment of income tax due. The Taxpayers bought a house in, Arkansas in March A true and correct copy of the Warranty Deed is attached hereto as Exhibit 2. A copy of the County Assessor's Property Report is attached hereto as Exhibit 3. The dwelling on the property is approximately sq. feet. The property has an estimated market value of $. Exhibit 3. The Taxpayers applied for and received the homestead property tax credit on their home in, Arkansas, certifying to the County Assessor's Office that the,, Arkansas address was their principal place of residence as of The Taxpayers continued to claim the residence as their principal place of residence each year from and received the homestead property tax credit on their home. See Exhibit 4. During the tax years at issue, Taxpayer served as a the tax years at issue, Taxpayer Arkansas. During served as an. According to the protest, she also served as an coordinator for County in, Arkansas. Although the Taxpayers' home is located in County, Arkansas, and the Taxpayers are employed in Counties, the 3

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5 uses her, Arkansas address on her driver's license. Exhibit 13. renews the tags for her 2009 at the Revenue Office in, Arkansas. Exhibit 14. The renewal notices for her vehicles have been and continue to be mailed to her home in, Arkansas. Exhibit 15. recently purchased a 2013 and provided her, Arkansas address as her address on the Application for Title. Exhibit 16. The Taxpayers provided the Department with a copy of their December 2016 bank statement with. The statement provides the address of the Taxpayers as in, Arkansas. The statement reflects that the Taxpayers made ATM withdrawals from their bank in, Arkansas. The statement reflects that the Taxpayers purchased gasoline in both, Arkansas and Texarkana, Arkansas. The statement reflects charges for cable and internet service, which the Taxpayers indicated are for service at the home in, Arkansas. Exhibit 17. The Taxpayers filed for relief under Chapter 13 of the United States Bankruptcy Code on or about, The Taxpayers provided their address as, Arkansas in County. They signed the petition and declared "under penalty of perjury that the information provided in this petition is true and correct." Exhibit The Taxpayers protested the proposed assessments for tax years by letter received June 1, Exhibit In their Protest, asserts that he considers, Texarkana, Arkansas to be his residence from 2007 through the present. He states that he is only home 5 to 6 days a month. states that they live at the Texarkana address in order to assist with care for his mother and disabled brother. He states that they assist in paying utilities only for the Texarkana property. The Taxpayers did not include any documents for consideration. The Taxpayers filed their Answers to Information Request on March 7, The Taxpayers did not include any documents for consideration. The Taxpayers stated: 5

6 I'm protesting the address. I consider as my address. I own a house in, Arkansas but only use it as an office currently, the residence has been rented out over the years periodically. I work 264 hr shifts and only home 5 to 6 days a month. The property commonly known as, Texarkana, Arkansas was conveyed to by Warranty Deed recorded on, Exhibit 21. A copy of the Miller County Assessor's Property Report reflecting the owners of the property as is attached hereto as Exhibit 22. The dwelling on the property is approximately sq. feet. The property has an estimated market value of $. Exhibit 22. In an online forum dated October 3, 2011, based on an article on a local news site, indicated that in Texarkana, Arkansas, and would plan to pay, which is inconsistent with assertion that he pays the utilities at his mother's house. Exhibit A review of the Taxpayers' social media accounts provides more evidence. On his LinkedIn account, lists his location as, Arkansas. Exhibit 24. On her Facebook account, expresses concern for storms headed towards them in County, and posts a picture of hail at their home in, Arkansas. Exhibit 25. Recently, on October 16, 2017, posted about the burn ban in County, and noted in the comments that she was "on her way home on." Exhibit 26. Finally, on December 30, 2016, shared a post about the printing of W-2s, and commented to another individual who was concerned about getting at least a refund: Exhibit 27. [Footnote omitted, P. 2-5]. The Tax Auditor presented testimony consistent with the contentions in the Department s Answers to Information Request and he authenticated the Department s Exhibits The Tax Auditor also testified that: (1) he conducted a desk audit of the Taxpayers returns for the years in the Audit Period; (2) the audit came about because of an anonymous tip regarding the 6

7 Taxpayers living in but claiming the Texarkana exemption; (3) after reviewing documentation relating to the Taxpayers, he determined that the Taxpayers were not residents of Texarkana and he adjusted the Taxpayers returns for the years in the Audit Period; 4 (4) the Taxpayers filed jointly for the years in the Audit Period; (5) the Taxpayers jointly purchased a house in ( house in ) in 2008 and claimed the Homestead Tax Credit for the years in the Audit Period; 5 (6) Taxpayer MS is registered to vote in County and did vote there during the Audit Period; 6 (7) in 2008, Taxpayer MS updated her voter registration application and changed her address from a location in to the address of the house in ; 7 (8) Taxpayer MR assessed personal property in personal property in County from 2011 to 2016; (9) Taxpayer MS assessed County from 2010 to 2016; (10) Taxpayer MR s driver s license reflects a Texarkana address and the same address is on a vehicle account registration history; 8 (11) Department s Exhibit 12 contains vehicle registration renewal notices mailed to Taxpayer MR at the address of the house in ; (12) Taxpayer MS s driver s license reflects the address of the house in and the same address is on a Taxpayer MS s vehicle account registration 4 Page 1 of Department s Exhibit 1 is an Explanation of Tax Adjustment for Tax Year 2010 which stated in part, Per county you both jointly own your home at in, and since purchasing it in March 2008, you have claimed the homestead credit on your personal property taxes. Also per county, has assessed personal property since 2011 and your daughter was added and has assessed is registered to vote, and does vote in county and also uses the address on her Drivers license. If you disagree with this assessment, I will need at a minimum, the following proof; copies of your lease and copies of bank statements to show where you paid rent each month. Copies of water and electric bills in your name at a Texarkana address. Copies of form AR-TX as provided by your employer for the years in question along with a contact name and phone number for the employers issuing those forms. 5 See Department s Exhibits 2, 3, and 4. 6 See Department s Exhibit 6. 7 See Department s Exhibit 7. 8 See Department s Exhibits 10 and 11. 7

8 history; 9 (13) Department s Exhibit 15 contains a vehicle registration renewal notice mailed to Taxpayer MS at the address of the house in ; (14) Department s Exhibit 17 is a copy of the Taxpayers bank statement reflecting the mailing address of the house in and purchases in Texarkana and including a purchase of Directv service for the house in in 2016; (15) Taxpayer MR told him that the Directv service was purchased for the Taxpayers daughter who was renting the house in ; (16) the Taxpayers filed a petition for Bankruptcy in 2014 which listed County as the County of Residence of the Taxpayers and the address of the house in as the Street Address of the Taxpayers; 10 (17) Department s Exhibit 20 is a handwritten letter from Taxpayer MR which stated, [t]he house was vacant until My daughter lived in it off and on until 2012, and then leased the home. She moved out in June She moved back in the home in January 2015 and signed a lease for month to month. ; 11 (18) Taxpayer MR s mother and stepfather were the owners of the house in Texarkana; 12 (19) Taxpayer MR told him that the utility services for the house in Texarkana are in the name of Taxpayer MR s mother; (20) Taxpayer MS s Facebook posts indicated that the house in is where she lived; 13 and (21) Department s Exhibit 30 is the driver s license record for Taxpayer MS which reflects that she renewed her driver s license in September of 2017 and used the address of the house in then in February of 9 See Department s Exhibits 13 and 14. The vehicle registration was renewed in Texarkana in 2009 then in from 2010 through See Department s Exhibit During a telephone conversation with the Tax Auditor, Taxpayer MR stated that the Taxpayers had not lived in the house in because it was in a state of needing repair and there were issues with safety but the house was being rented to his daughter. 12 See Department s Exhibits 21, 22, and See Department s Exhibits 25 and 26. 8

9 2018 the Revenue Office issued her a duplicate credential and changed the address to the house in Texarkana. The Taxpayers Answers to Information Request was completed by Taxpayer MR and provided that, I m protesting the address. I consider as my address. I own a house in Arkansas but only use it as an office currently. The residence has been rented out over the years periodically. I work 264 hour shifts and only home 5 to 6 days a month. [P. 1]. Taxpayer MR testified that: (1) he purchased the Directv service for his daughter at the house in because he was the homeowner and, since a dish had to be mounted on the property, a renter could not authorize it; (2) the Directv service was purchased at the end of 2016 and that is the only utility he has ever purchased for the house in ; (3) his step-father died in the early 1980 s and his mother has been widowed since; (4) he assists his mother with paying the utility bills for the house in Texarkana; (5) the Taxpayers have to provide assisted living services, including transportation, for Taxpayer MR s mother and brother from the house in Texarkana since neither Taxpayer MR s mother nor brother can drive; (6) with respect to Department s Exhibit 4, he was not aware of the homestead tax credit, the Taxpayers taxes were done by a professional service and the Taxpayers were not advised that the homestead tax credit was claimed; (7) with respect to Department s Exhibits 6 and 7, Taxpayer MS had to register to vote and change her address to the house in because of employment requirements, she has separated from that employer and no longer uses that address; (8) with respect to Department s Exhibit 24, his employer established the LinkedIn account, he has never been on the account or 9

10 used the account and he separated from that employer in 2014; (9) he works numerous shifts in, Arkansas, so he just registered motor vehicles there as a convenience and did not realize that they used the address of the house in on that stuff; (10) because of his employment requirements, he does not go home for several days (eleven 24 hour shifts) so he lives in Texarkana,, and that is the reason his bank statements show transactions in those locations; (11) with respect to Department s Exhibit 13, Taxpayer MS had to use the address of the house in on her driver s license because of employment requirements, she had to use that address or be terminated and she eventually was terminated because we did not live there; (12) he considers the address of the house in Texarkana as his primary residence and he gets all of his important mail delivered to the address of the house in Texarkana; (13) he slept at the house in Texarkana last night and drove to the hearing this morning; (14) after he had lost a job, Taxpayer MS lost her job because the Taxpayers did not live at the house in so the loss of her income resulted in the Taxpayers needing to file for bankruptcy protection; (15) with respect to Department s Exhibit 22, it is a document for my mom and deceased step-dad s taxes for the house in Texarkana (even though it is still in her name, he will inherit the property); (16) also, the house in Texarkana is still in my mom s name is because she is a disabled vet and she does not have to pay real estate taxes; (17) Taxpayer MS created her Facebook account for employment purposes and she operated the account until she was terminated; 14 (18) the white Tahoe 14 See Department s Exhibits 25, 26, and

11 pictured at the house in was Taxpayer MS s ; 15 (19) he does not understand why Taxpayer MS has got some of the stuff on her Facebook posts or why her addresses are reflected different than his but they have been married, and not divorced or separated, and they both live in the same residence in Texarkana; (20) he is very rarely at home and when he is at home it might be for one [1] day and then he is back at work for fourteen [14] more days; (21) he considers the house in Texarkana as his primary residence but he lives more at work than he lives at home; (22) his work schedule requires him to commute from and then from so he only is in Texarkana rarely (going to Texarkana would add to the commute); (23) the house in had structure damage and erosion problems when it was purchased and now has a dangerous oak tree that might fall on the house; (24) he has attempted to maintain the house in and has had problems with Code Enforcement in ; (25) Code Enforcement in has sent him a ticket for mowing the yard and he cannot work on a vehicle at his house; (26) his daughter maintained the utilities for the house in, other than the Directv service, but she has moved in and out and the house has been vacant for over a year; (27) Taxpayer MS used the house in as an office from time-to-time and he can pass through there but that is about it; (28) the house in has been cleaned up to a point where he can almost sell it if he can get rid of the big oak tree in the back and fix the chimney; (29) Taxpayer MS was probably working in County in 2008 but he is not sure when a new was elected and she worked there for over a 15 See Department s Exhibit 25 P

12 year; (30) Taxpayer MS did not change her address on anything after her employment ended in County; (31) the address on Exhibit 17 was listed at the house in because of her employment for County; (32) the lawyers told the Taxpayers to list the house in as their residence in the bankruptcy case and he does own it; (33) the definition of residence is very complicated in his book; (34) he has never slept at the house in, he sleeps at the house in Texarkana, or at the work locations; (35) mostly he lives out of a bag in his truck at his work locations of ; (36) he personally performed most of the repairs and maintenance on the house in ; (37) when the Taxpayers purchased the house in it was in a state of disrepair; (38) it would be impossible to state exactly when his daughter lived at the house in ; (39) Department s Exhibit 28 was a lease form he obtained off of the Internet for his daughter but the blanks for the terms of the contract were never filled in; (40) he has never considered the house in as his residence; (41) he has spent the night at the house in while he was working in it but he does not have a bed there or clothes there; (42) he slept on the couch at the house in when he was replacing the flooring; (43) Taxpayer MS did not stay at the house in repetitively, she would stay there 12 hours here or 5 hours there; (44) Taxpayer MS very rarely stayed overnight at the house in : (45) Department s Exhibit 29 is a Google Maps picture of the house in which was captured in July of 2013 and Taxpayer MS s, the white Tahoe, is depicted in the picture; (46) Taxpayer MS had an office at the house in and worked there sometimes; (47) the house in Texarkana is depicted on Page 3 of Department s Exhibit 29 and we live there because we have to take of my mother 12

13 and brother; (48) on Page 2 of Department s Exhibit 26 when Taxpayer MS posted the statement, [n]o it was on my way home on, that would probably have been in but she could have said residence as well; (49) if he gets to go home 2 or 3 days a month, he is fortunate, he lives at work; (50) we are changing the addresses on all of our records to the address of the house in Texarkana; and (51) my mother has been living at the house in Texarkana since the early 1980 s and as much as I moved it was convenient at that time to use that address to get my mail. follows: CONCLUSIONS OF LAW Standard of Proof Ark. Code Ann (c) (Supp. 2017) provides, in pertinent part, as The burden of proof applied to matters of fact and evidence, whether placed on the taxpayer or the state in controversies regarding the application of a state tax law shall be by preponderance of the evidence. A preponderance of the evidence means the greater weight of the evidence. Chandler v. Baker, 16 Ark. App. 253, 700 S.W.2d 378 (1985). In Edmisten v. Bull Shoals Landing, 2014 Ark. 89, at 12-13, 432 S.W.3d 25, 33, the Arkansas Supreme Court explained: A preponderance of the evidence is not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other. The Department bears the burden of proving that the tax law applies to an item or service sought to be taxed, and a taxpayer bears the burden of proving 13

14 entitlement to a tax exemption, deduction, or credit. Ark. Code Ann (d) (Supp. 2017). Statutes imposing a tax or providing a tax exemption, deduction, or credit must be reasonably and strictly construed in limitation of their application, giving the words their plain and ordinary meaning. Ark. Code Ann (a), (b), and (e) (Supp. 2017). If a well-founded doubt exists with respect to the application of a statute imposing a tax or providing a tax exemption, deduction, or credit, the doubt must be resolved against the application of the tax, exemption, deduction, or credit. Ark. Code Ann (f)(2) (Supp. 2017). 1. Income Tax Assessments Ark. Code Ann (Supp. 2017) imposes the Arkansas individual income tax upon, and with respect to, the entire income of every resident, individual, trust, or estate. For the purpose of tax imposition, the term Resident is defined at Ark. Code Ann (Repl. 2012) as follows: (9) Resident means natural persons and includes, for the purpose of determining liability for the tax imposed by this act upon or with reference to the income of any taxable year, any person domiciled in the State of Arkansas and any other person who maintains a permanent place of abode within this state and spends in the aggregate more than six (6) months of the taxable year within this state[.] Arkansas Comprehensive Individual Income Tax Regulation (9) addresses the three pronged test used for residency determinations and provides, in pertinent part, as follows: A three pronged test, as set forth below, is used to determine whether or not a person is a resident of Arkansas. Satisfaction of any one prong is sufficient to establish residency. 14

15 a) any person domiciled in the state of Arkansas. Domicile is comprised of an act coupled with an intent. A domicile is acquired by (1) physical presence at a place coinciding with (2) the state of mind (that is, intent) of regarding the place as a permanent home. A domicile arises instantaneously when these two facts occur. Every person must have one domicile but can have no more than one domicile, regardless of how many residences a person may have at any given time. A domicile, once established, continues until a new domicile of choice is legally established. An established domicile does not end by lack of physical presence alone nor by mental intent alone. The old domicile must be abandoned with the intention not to return to it. If one moves to a new location but intends to stay there only for a limited period of time (no matter how long), the domicile does not become the new location but rather remains unchanged.... c) In situations where it is not clear if the requirements of either domicile (a) or place of abode (b) have been met, a residency determination can only be made after thoroughly reviewing the facts on a case by case basis. When reviewing the facts, the Supreme Court of Arkansas has held that we are not bound to accept a taxpayer's claims of intent when the circumstances point to a contrary conclusion. Furthermore, when acts are inconsistent with a taxpayer's declarations, the acts will control, and our conclusions regarding residency should be based on the facts and circumstances proved. The following factors should be reviewed in making a residency determination: Address used on federal income tax returns; Address used on telephone, utility and commercial documents; Address used on voter registration; Address used on drivers license, hunting and fishing license; Address used on motor vehicle, boat and trailer registration; Address used on real and personal property tax documents; Address used on county and other tax assessments; Address on governmental documents, such as military records. With respect to military records, the Leave and Earning Statement is a very important document; If the Taxpayer has a spouse, the spouse's address on such things as drivers license, voter registration, vehicle registration, etc. should be checked out; Employer and withholding information, nature of Taxpayer's employment (traveling salesperson, etc.); 15

16 follows: Location of Taxpayer. How often and for how long does Taxpayer reside at the location; Location of immediate family, such as spouse and children; Length of time in Arkansas of Taxpayer and immediate family; Community affiliations, such as club memberships, church, bank accounts, etc.; Absence of factors in other states. 2. Border City Exemption Ark. Code Ann (Repl. 2012) provides, in pertinent part, as (a) The term net income means the adjusted gross income of a taxpayer less the deductions allowed by the Income Tax Act of 1929, et seq. (b) Adjusted gross income means, in the case of an individual, gross income minus the following deductions: (14) The border city exemption as provided by et seq. Arkansas Comprehensive Individual Income Tax Regulation (b)(13) addresses the border city exemption and states: (b)(13) Border City Tax Exemption Texarkana Under certain circumstances, as set forth below in Income Tax Regulation , the income of residents of Texarkana, Arkansas and Texarkana, Texas, which would normally be subject to Arkansas income tax, will be exempt from Arkansas income tax due to Arkansas' "border city tax exemption" as established by ACA Resident is not a defined term in the statutory or regulatory provisions governing the border city exemption. Ark. Code Ann (Repl. 2014) provides that the purpose of the border city exemption is to attempt to equalize the tax burden for a citizen of a border city or town in this state when the city or 16

17 town is divided by a state line in which the tax burden of the citizens of the city or town in the adjoining state is substantially less than the in-state tax burden. Ark. Code Ann (Repl. 2014) provides that the citizens vote to equalize the state taxes paid by citizens in the border city or town in Arkansas with the tax advantages of the citizens of the adjoining city or town in the other state.... Based upon the words used in the cited statutory provisions, it is apparent that the exemption is only intended to apply to citizens of a border city or town. The Arkansas Supreme Court has explained that the term citizen is synonymous with the term elector 16 and a person may only register to vote and become an elector in his or her domicile. 17 Arkansas Comprehensive Individual Income Tax Regulation (b)(13) provides in relevant part as follows: Texarkana, Arkansas residents are exempt from the Arkansas Income Tax on income earned while a bona fide resident of Texarkana, Arkansas, but they shall be required to file an Arkansas Income Tax return. [Emphasis added]. The Arkansas Supreme Court has explained that, in order to qualify as a bona fide resident, a person must qualify as a resident who is domiciled at the place of residence. Cassen v. Cassen, 211 Ark. 582, 201 S.W.2d 585 (1947). In Leathers v. Warmack, 41 Ark. 609, 19 S.W.3d 27 (2000), the Arkansas Supreme Court applied the border city exemption by analyzing the taxpayers status both in terms of residence and of domicile. Consequently, it is apparent that a taxpayer must be domiciled in 16 See School Dist. No. 11 v. School Dist. No. 20, 63 Ark. 543, 39 S.W. 850 (1897) and Simmons v. Terral, 145 Ark. 585, 224 S.W. 977 (1920). 17 See Ark. Code Ann (Supp. 2017). 17

18 Texarkana, Arkansas in order to qualify as a resident for the purpose of claiming the exemption under Ark. Code Ann (b)(14) (Repl. 2012). Domicile. The Taxpayers purchased the house in in During the Audit Period, the Taxpayers claimed and received the homestead tax credit in County for the house in. 19 Ark. Code Ann (Supp. 2017) defines homestead to mean the dwelling of a person that is used as his or her principal place of residence. Additionally, Taxpayer MS was registered to vote and did vote in the address of the house in County during the Audit Period. 20 The is reflected on the Voter Registration Application dated September 25, Ark. Code Ann (Supp. 2017) provides, in pertinent part: (a) To be qualified to vote, a person shall have registered at least thirty (30) calendar days immediately prior to the election and in the manner set forth by Arkansas Constitution, Amendment 51. (b) Voting residence shall be a voter's domicile and shall be governed by the following provisions: (1) The domicile of a person is that place in which his or her habitation is fixed to which he or she has the intention to return whenever he or she is absent; (2) A change of domicile is made only by the act of abandonment, joined with the intent to remain in another place. A person can have only one (1) domicile at any given time; (3) A person does not lose his or her domicile if he or she temporarily leaves his or her home and goes to another country, state, or place in this state with the intent of returning[.] As reflected in Ark. Code Ann (Supp. 2017), a person may only lawfully register to vote in the person s domicile. The Taxpayers may have more than one (1) residence but they can only have one (1) domicile. See 18 See Department s Exhibits 2 and See Department s Exhibit 4 P See Department s Exhibit See Department s Exhibit 7. 18

19 Leathers v. Warmack, 341 Ark. 609, 19 S.W.3d 27 (2000) and Ark. Code Ann (b)(2) (Supp. 2017). Arkansas Comprehensive Individual Income Tax Regulation (9)(a) provides that domicile is acquired by (1) physical presence at a place coinciding with (2) the state of mind (that is, intent) of regarding the place as a permanent home. [Emphasis added]. Taxpayer MS referred to the house in as home in social media posting in of and Taxpayer MR testified that the Taxpayers were married and living together at all relevant times. Therefore, despite the explanations offered by Taxpayer MR (regarding the Taxpayers claiming the homestead tax credit for the house in during the Audit Period and Taxpayer MS voting in every year County with the address of the house in reflected on the registration application and voting history report), the greater weight of evidence established that the Taxpayers were domiciled in, not Texarkana, prior to and during the Audit Period. Change of domicile. The burden of proving a change of domicile is on the Taxpayers. See National Wire Fabric Corporation v. Nelson, 563 F. Supp. 303 (D.C. Ark., 1983) and Steward v. Steward, 16 Ark. App. 164, 698 S.W.2d 516 (1985). In order to prove a change of domicile under the provisions of Regulation (9)(a), the Taxpayers must establish that they abandoned the domicile in with the intention not to return to it. In Warmack, supra, the Arkansas Supreme Court addressed the weight to be given to acts that conflicted with statements regarding intent to abandon a domicile and stated, in part: 22 See Department s Exhibit 26 P

20 The intent to abandon one's domicile and take up another must be ascertained from all the facts and circumstances of the particular case. Morris v. Garmon, 285 Ark. 259, 686 S.W.2d 396 (1985). The factfinder is not bound to accept claims of intent when the circumstances point to a contrary conclusion; they cannot prevail unless borne out by acts. Charisse v. Eldred, 252 Ark. 101, 477 S.W.2d 480 (1972). When acts are inconsistent with a person's declarations, the acts will control, and declarations must yield to the conclusions to be drawn from the facts and circumstances proved. Id. at , 19 S.W.3d at 34. While some of the factors for making residency determinations in Regulation (9)(c) indicate that the Taxpayers resided in both and Texarkana during the Audit Period, 23 a majority of the factors do not support a finding that the Taxpayers abandoned or changed their domicile from (to Texarkana) during the Audit Period. Even though the address of the house in Texarkana was used on some items introduced as exhibits 24 and despite the explanations offered by Taxpayer MR regarding other factors in Regulation (9)(c), the greater weight of the evidence related to the actions taken by the Taxpayers during the Audit Period (including, but not limited to, claiming the homestead tax credit, the voter registration and voting history of Taxpayer MS, Taxpayer MS retaining and renewing an Arkansas driver s license with the address of the house in, and use of the address on the house in on bankruptcy documents and personal property tax assessments) preponderates in favor of a finding that the Taxpayers did not abandon their domicile in during the Audit Period. Consequently, the Department correctly disallowed the 23 The address of the house in Texarkana was used on tax returns (Department s Exhibit 5), on the driver s license/passport of Taxpayer MR (Department s Exhibit 10), and on a vehicle ownership record for Taxpayer MR (Department s Exhibit 11). 24 See Department s Exhibits 5, 10, and

21 tax deduction claimed by the Taxpayers because the Taxpayers were not residents of Texarkana, Arkansas, for the purpose of claiming the tax deduction for the border city exemption. Subject to the limitation in Ark. Code Ann (d)(1)(C) (Supp. 2017), interest was properly assessed upon the tax deficiency for the use of the State s tax dollars. See Ark. Code Ann (Repl. 2012). Department s Exhibit 19 reflects that a penalty in the amount of $ was assessed for Tax Years 2011, 2012, 2013, and 2014 for underpayment of estimated tax. Since the Taxpayers paid no taxes or quarterly estimates during the Audit Period, the penalties were properly assessed under Ark. Code Ann (6)(A) (Repl. 2012). DECISION AND ORDER Subject to the limitation in Ark. Code Ann (d)(1)(C) (Supp. 2017), the proposed assessments are sustained. The file is to be returned to the appropriate section of the Department for further proceedings in accordance with this Administrative Decision and applicable law. Pursuant to Ark. Code Ann (Supp. 2017), unless the Taxpayers request in writing within twenty (20) days of the mailing of this decision that the Commissioner of Revenues revise the decision of the Administrative Law Judge, this Administrative Decision shall be effective and become the action of the agency. The revision request may be mailed to the Assistant Commissioner of Revenues, P.O. Box 1272, Rm. 2440, Little Rock, Arkansas A revision request may also be faxed to the Assistant Commissioner of Revenues at (501) or ed to revision@dfa.arkansas.gov. The Commissioner of Revenues, within twenty (20) 21

22 days of the mailing of this Administrative Decision, may revise the decision regardless of whether the Taxpayers have requested a revision. Ark. Code Ann (Supp. 2017) provides for the judicial appeal of a final decision of an Administrative Law Judge or the Commissioner of Revenues on a final assessment or refund claim denial; however, the constitutionality of that code section is uncertain. 25 OFFICE OF HEARINGS & APPEALS DATED: May 10, See Board of Trustees of Univ. of Arkansas v. Andrews, 2018 Ark