Should I Move Out of California Due to the Proposed Wealth Tax?

Why now?

 I am currently getting a lot of questions from individuals wanting to change their state tax status to California non-resident due to ab2088. Ab2088 known as the Wealth Tax, is a bill going through the California legislation process. “This bill would impose a 0.4% annual tax rate on resident’s worldwide net worth in excess of $30,000,000, or in excess of $15,000,000 in the case of a married taxpayer filing separately.”[i]

I do not recommend taking action on ab2088 until we have more understanding on the specifics of how an individual will be impacted by the proposed wealth tax; for example, real estate is excluded from the wealth tax.

Guidelines to Change residency:

For your consideration, the following are guidelines for changing residency:

When you convert from a Resident to a Non-resident, California will closely police your move.

California uses a list of factors to determine residency for a DMV application.[ii]

However, when it comes to moving from the state, they expand the resident criteria.

FTB Publication 1031[iii] gives guideline for determining resident status:

The weightiest factors are the following:

• Amount of time you spend in California versus amount of time you spend outside California.
• Location of your spouse/registered domestic partner and children.
• Location of your principal residence.
• State that issued your driver’s license.
• State where your vehicles are registered.
• State in which you maintain professional licenses.
• State in which you are registered to vote.
• Location of the banks where you maintain accounts.
• The origination point of your financial transactions.
• Location of your social ties, such as your place of worship, professional associations, or social and country clubs of which you are a member.
• Location of your real property and investments.
• Permanence of your work assignments in California.

Finally:

In California, there is no statutory resident provision of the law, but if you spend more than nine months there in any one year, they will presume you are a resident and it’s up to you to prove otherwise.

We hope you found this article about should I move out of California due to the proposed wealth tax helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Considerately yours,

GROCO, GROCO Tax, GROCO Technology, GROCO Advisory Services, GROCO Consulting Services, GROCO Relationship Services, GROCO Consulting/Advisory Services, GROCO Family Office Wealth, and GROCO Family Office Services.

Very truly,

Alan Olsen

[i] https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2088

[ii] https://www.dmv.ca.gov/portal/uploads/2020/06/residency_docslist.pdf

[iii] https://www.ftb.ca.gov/forms/2017/17_1031.pdf