Bartholomew v. D.C. Office of Tax & Revenue

• Decision Date: 24 October 2013
• Docket Number: No. 12–AA–169.,12–AA–169.
• Citation: 78 A.3d 309
• Parties: Desmond BARTHOLOMEW, Petitioner, v. DISTRICT OF COLUMBIA OFFICE OF TAX AND REVENUE, Respondent.
• Court: D.C. Court of Appeals

78 A.3d 309

Desmond BARTHOLOMEW, Petitioner,

v.DISTRICT OF COLUMBIA OFFICE OF TAX AND REVENUE, Respondent.

No. 12–AA–169.

District of Columbia Court of Appeals.

Argued Feb. 14, 2013.

Decided Oct. 24, 2013.

Desmond Bartholomew, pro se.

Bradley A. Sarnell, Assistant Attorney General, with whom Irvin B. Nathan, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and Donna M. Murasky, Deputy Solicitor General, were on brief, for respondent.

Before BECKWITH and McLEESE, Associate Judges, and RUIZ, Senior Judge.

RUIZ, Senior Judge:

Petitioner, Desmond Bartholomew, brings this appeal against the District of Columbia Office of Tax and Revenue (OTR), claiming that the OTR erroneously determined that he was a domiciliary of the District of Columbia for tax purposes and that he was not a bona fide resident of the United States Virgin Islands (USVI) during 2003 and 2004, making him subject to taxation in the District of Columbia in those years. He also claims that the amount of tax assessed is too high because OTR improperly denied his claim to head of household filing status and disallowed deductions for moving expenses and income taxes withheld from his paychecks by the USVI government. Petitioner made several strong arguments in support of his position, but ultimately, however, we must affirm the decision of the Office of Administrative Hearings affirming OTR's determinations. We conclude that substantial evidence supports the administrative decision that Bartholomew was domiciled in the District of Columbia during the relevant tax years. Even though we fault the determination that he was not a bona fide resident of the USVI, we affirm the agency's ultimate conclusion that Bartholomew was subject to D.C. tax, because he failed to comply with the tax provision available to bona fide residents of the USVI that would have exempted him from filing federal and D.C. tax returns. We see no error requiring reversal concerning the amount of the tax assessment.

I.

Desmond Bartholomew is a native of Grenada who lived in Washington, D.C. with his wife and daughter until May 2002, when he accepted a job as chief economist for the U.S. Virgin Islands Bureau of Economic Research. He moved to St. Thomas and lived there until mid–2005, while his family continued to reside in the District of Columbia.

While living and working in the USVI, Bartholomew filed federal income tax returns for tax years 2003 and 2004 with the Internal Revenue Service. In those forms, he listed his previous Washington, D.C. address on Farragut Street as his “home address.” Bartholomew did not file a tax return with the USVI or with the District of Columbia for either year. In late 2004, Bartholomew was diagnosed with a potentially serious medical disorder, and was advised by his doctor to seek treatment in the United States mainland. In early 2005, Bartholomew purchased the apartment in the District of Columbia where his wife and child had been living. In May 2005, Bartholomew resigned from his post with the USVI government and returned to live with his family.

After returning to the District of Columbia, Bartholomew filed an amendment to his 2003 federal tax return, which triggered an inquiry from the OTR. As a result of that inquiry, OTR determined that Bartholomew should have filed an income tax return—form D–40—with the District of Columbia for the years 2003 and 2004 because it determined that he was still a resident of the District. OTR sent Bartholomew a notice in August 2008, informing him that he owed the District a balance of $3,228.71 for the tax years 2003 ($3,122.47) and 2004 ($106.24). In addition, OTR garnished Bartholomew's wages and disallowed Bartholomew's itemized deductions and moving expenses for lack of substantiation for the year 2003. Bartholomew believed he did not owe the District any taxes, as he was residing in the USVI during those years, and in September 2008 he requested an audit. Richard Mack, an auditor with OTR, was the lead investigator assigned to Bartholomew's audit.

Nearly three years later, in February 2011, OTR sent a Notice of Proposed Audit Changes that increased Bartholomew's total tax deficiency to $8,719.00. Bartholomew met with the auditor on March 17, 2011, in an “Informal Conference” as part of the audit process. They discussed Bartholomew's status as a resident of the USVI, and despite Bartholomew's protests, the auditor determined that he was a resident of the District in 2003 and 2004 for tax purposes. To determine that Bartholomew was not a resident of the USVI during those years, the auditor focused on whether Bartholomew intended to abandon his domicile in D.C., or had established that he “was no longer a resident of the District of Columbia.” Despite the fact that Bartholomew could prove he worked and lived in the USVI from mid–2002 to mid–2005, the auditor relied on the following factors to determine that Bartholomew was not a bona fide resident of the USVI in 2003 and 2004: Bartholomew did not file a USVI tax return in 2003 or 2004; he listed his D.C. address as his home address on his federal tax returns for those years; his wife and child remained in D.C. at the address Bartholomew lived in both before and after his time in the USVI; and he had not registered to vote in the USVI. The auditor reported that for the years 2003 and 2004, Bartholomew paid only federal tax, but no local taxes (either to D.C. or the USVI).¹

Following the informal conference, OTR sent a letter dated May 26, 2011, to Bartholomew, notifying him that his tax deficiency and penalty increased again, this time to $10,997.00. The letter explained the reason for the tax assessment, including OTR's determination that Bartholomew was not a bona fide resident of the USVI and that he had retained his domicile in the District, quoting several statutes, including D.C.Code §§ 47–1805.02 (2001), –1801.04 (2001), and 26 U.S.C. § 932(c) (2003).² OTR reaffirmed its determination that Bartholomew was not a bona fide resident of the USVI:

No new information was presented at the informal conference, which was held on 3/17/2011, to establish your intent to abandon your residence in the District of Columbia or to establish a new domicile in the U.S. Virgin Islands. For example, while in the Virgin Islands, you were purchasing a home in the District of Columbia. Your letter of resignation from the Bureau of Economic Research, St. Thomas, V.I. was dated 4/13/2005 and you previously purchased your home in the District of Columbia with a settlement date of 1/2005. No information was presented to establish a home in the USVI. No payment of taxes to the USVI was established since you have stated no tax returns were filed for the years, 2003 and 2004, with the USVI [Bureau of Internal Revenue] to date. Your domicile with your wife and daughter is in the District of Columbia prior to your work in the USVI, and you returned to the same address and domicile, which you purchased in January, 2005. Therefore, Form D–40 Individual Income Tax Return was due for the year 2003 and 2004.

Bartholomew filed a Taxpayer's Protest of a Proposed Assessment, appealing the assessment to the Office of Administrative Hearings (OAH) on June 2, 2011. A hearing was held on September 8, 2011, with Administrative Law Judge (ALJ) Claudia Barber presiding. At the hearing, Bartholomew testified on his own behalf, claiming that he was a bona fide resident of the USVI, and not domiciled or a resident of the District of Columbia, during the years 2003 and 2004. He explained—and submitted documentary proof—that he filed a federal income tax return, even though he was not required to do so, and that he had not filed a tax return with the USVI, but that income taxes were withheld from his paychecks by the USVI while he was working there. Bartholomew stated that he still had not filed a tax return with the USVI as of the date of the hearing because he was waiting for the audit with OTR to be resolved. In support of his claim that he was a resident of the USVI during 2003 and 2004, Bartholomew testified about his ties to the local community (he made charitable contributions to organizations in the USVI and attended two local churches); stated that his trips back to Washington, D.C. were work-related; and offered into evidence a blank check with his printed name from a bank in the USVI to show that he had established an account for his financial transactions in the USVI.

The auditor testified at the hearing in support of OTR's conclusion that Bartholomew had not been a resident of the USVI but of the District of Columbia during 2003 and 2004. First, he noted that Bartholomew did not file a tax return with the USVI. Second, the auditor found it important that Bartholomew's wife and child remained in the District during the time covered by the audit, and that on his USVI employment documents, Bartholomew listed the apartment on Farragut Street in Washington, D.C., as his home address, the same apartment he later purchased in January 2005. Third, Bartholomew never registered to vote in the USVI, and left his automobile and other possessions in the District of Columbia.

After the hearing, OAH allowed both parties to submit post-hearing briefs on the legal arguments, as well as status updates on an issue regarding wage garnishments. After considering the briefs, OAH concluded that Bartholomew “was not a bona fide resident of the U.S. Virgin Islands during the tax period of 2003 and 2004.” Thus, according to OAH, he “was required to file U.S. and DC tax returns for the requisite period because [he] never relinquished his residency in the District of Columbia and never changed his domicile.” Bartholomew v. District of Columbia Office of Tax and Revenue, Case No. 2011–OTR–00015, 2011 WL 8844133, at *1 (Dec. 15, 2011). The OAH ordered Bartholomew to pay taxes owed to the District in the amount of $7,033, but did not require him to pay interest or penalty...