Pletcher v. Montana Department of Revenue

NO. 96-398
IN THE SUPREMECOURT OF THE STATE OF MONTANA
1996
JACK G. PLETCHER,
Petitioner and Appellant,
v.
MONTANADEPARTMENT REVENUE,
OF
Respondent and Respondent.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Katherine R. Curtis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James M. Ramlow; Kaufman, Vidal & Hileman,
Kalispell, Montana
For Respondent:
Deborah Harten, Tax Counsel, Special Assistant
Attorney General, Montana Department of Revenue,
Helena, Montana
Submitted on Briefs: November 7, 1996
Decided: December 31, 1996
Filed:
Justice W. William Leaphart delivered the Opinion of the Court.
The Montana Department of Revenue (Department) assessed taxes,
interest and penalty against the appellant, Jack G. Pletcher
(Pletcher), for Montana income earned from his employment in Alaska
during the years 1982 through 1992. Pletcher appealed the
assessment to the State Tax Appeal Board (STAB), which ruled that
he was a resident of Montana for income tax purposes during that
period of time. Pursuant to the Montana Administrative Procedure
Act, Pletcher then requested judicial review of the STAB ruling in
the Eleventh Judicial District Court. He appeals from the District
Court ruling that he was a resident of Montana for income tax
purposes. We affirm the decision of the District Court.
Factual Backsround
The facts as they were developed by the Department's hearings
examiner and again by STAB are as follows:
Pletcher was employed by Udelhoven Oilfield System Services,
Inc. on the Alaska North Slope from September, 1981 to October,
1992. During that period of time, Pletcher lived and worked in
Alaska, visiting his wife and children in Columbia Falls, Montana,
during regularly scheduled leave periods.
Pletcher's Alaska work for Udelhoven was full time. Within
a few years he assumed managerial responsibilities for Udelhoven.
Udelhoven supplied general contracting services, including
construction and maintenance for ARC0 and British Petroleum
facilities on the Prudhoe Bay and Kuparuk River "reservations" on
the Alaska North Slope. Pletcher supervised as many as 100
employees at a time and took charge, from 1986 to 1989, of
Udelhoven's entire North Slope operations. From 1989 to 1992, he
acted as its senior project manager.
STAB concluded that Pletcher's presence in Alaska was not for
the purpose of taking on a series of "temporary" jobs.
He was in fact a permanent employee, for employment
purposes, working the same periods, shifts, and hours as
other employees of this company . The Board agrees
with [Pletcherl that he was not taking on some seventy to
eighty separate "temporary" jobs for the same employer at
the same location over an eleven year period.
Prior to 1982, Pletcher lived in Columbia Falls, Montana, with
his wife and children and filed Montana resident income tax
returns. During his decade of employment in Alaska, Pletcher made
regular trips to Montana to stay with his family in Columbia Falls.
These trips, with one exception, never exceeded more than two and
one-half weeks. He continued in this routine until Udelhoven's
North Slope operations terminated in 1992. In September, 1991,
while on a visit to Montana, Pletcher purchased a Montana
nonresident fishing license.
Pletcher spent the majority of his time in Alaska. He had a
permanent apartment unit for his private residence and storage on
the North Slope. Pletcher was assigned his own company vehicle and
oilfield identity cards which were required in place of an Alaska
driver's license.
During his eleven years of employment in Alaska, Pletcher
filed federal income tax returns, but did not file Montana income
tax returns on his Alaska earnings, having been advised by his
3
accountant that Montana returns were not required. Pletcher did
not pay state income tax on his Alaska earnings because Alaska does
not levy such a tax. In November of 1991, the Montana Department
of Revenue sent an inquiry letter to Pletcher requesting that he
file returns for the years 1985 through 1990 or explain why he had
not filed those returns. Pletcher responded by explaining that he
had been absent from Montana for more than half of each of those
years, had earned all of his income outside of Montana, and had
declared himself a nonresident on a Montana conservation license
earlier that year.
In January of 1992, Pletcher filed 1985 through 1990 Montana
income tax returns jointly with his wife. The returns listed
Pletcher as a part-year resident of Montana. Subsequently,
Pletcher filed amended returns for those years showing his filing
status as married, filing separately, nonresident. He filed
similar nonresident returns for the years 1983, 1984, and 1991.
The Department adjusted all of the returns to reflect full-year
residence status and assessed Montana income taxes, interest and
penalties accordingly.
Standard of Review
The District Court was called upon to determine whether STAB's
conclusion of law that Pletcher was subject to Montana state income
tax on his earnings in Alaska was correct. Steer, Inc. v.
Department of Revenue (1990), 245 Mont. 470, 803 P.2d 601.
Likewise, we review the district court's interpretation to
determine whether it correctly applied the law. Isaak v. Smith
4
(1993) I 257 Mont. 176, 848 P.2d 1014 (overruled on other grounds).
The issue presented for our resolution is as follows:
Did the District Court err by finding that, although
Pletcher was a full-time, permanent employee in Alaska,
he was still liable for payment of Montana income taxes
on his Alaska wages because he still maintained a
domicile in the state of Montana?
Discussion
Resolution of this appeal hinges on a determination as to
whether Pletcher, during the years that he worked in Alaska, was a
resident of Montana under the provisions of § 15-30-101(16), MCA,
which states:
(16) "Resident" applies only to natural persons and
includes, for the purpose of determining liability to the
tax imposed by this chapter with reference to the income
of any taxable year, any person domiciled in the state of
Montana and any other person who maintains a permanent
place of abode within the state even though temporarily
absent from the state and who has not established a
residence elsewhere.
Pletcher contends that the finding by the Department and STAB
that he was permanently employed in Alaska on a full-time basis
inescapably leads to the conclusion that his absence from Montana
was not "temporary" and thus he does not fit within the § 15-30-
101(16), MCA, definition of a "resident" subject to tax. We reject
Pletcher's contention that permanent employment out of state
necessarily translates to permanent absence from the state.
Section 15-30-101(16), MCA, clearly provides that "resident"
includes all other persons who have a "permanent place of abode" in
the state of Montana. The Department's regulations define
"permanent place of abode" as a dwelling place permanently
5
maintained in Montana which he habitually uses as his home. ARM
42.15.104. The agency's interpretation of a statute governing its
operations is entitled to deference from this Court. Department
of Revenue v. Kaiser Cement Corp. (lPPO), 245 Mont. 502, 803 P.2d
1061.
Although Pletcher maintained permanent employment in Alaska,
the record is clear that he came to his home in Columbia Falls when
he did not have to work. Columbia Falls was the home he
established before he went to Alaska and is the home in which his
wife and family continued to reside in his absence.
Section l-1-215(1), MCA, provides that a residence is where a
person remains when not called elsewhere for labor or other special
or temporary purposes and to which he returns in seasons of repose.
Further, one's domicile is not lost until another is gained. ARM
42.15.102(l), provides as follows:
A domicile, once established, continues until abandoned
and a new one acquired. A change in domicile is
accomplished only by a union of act and intent. There
must be intent to change one's domicile, actual removal,
and acquisition of a new domicile. Domicile is not
changed by temporary absence or by absence for a special
or particular purpose.
In the present case, although Pletcher worked in Alaska, his
ties to Alaska were strictly work-related. The record does not
evidence any intent on the part of Pletcher to change his domicile
from Montana to Alaska. Pletcher and his wife continued their
ownership of the home and farm at Columbia Falls and his wife and
family remained on the farm throughout the entire period. Pletcher
kept his Montana driver's license all eleven years he was in Alaska
6
and his name remained with his wife's name on certain Montana bank
accounts.
Section 15-30-132, MCA, provides "[ilf a resident obtains
employment outside the state, income from such employment is
taxable in Montana." When this statutory provision is read in
conjunction with 5 15-30-101(16), MCA, it is clear that the
legislature meant to tax residents of this state who work outside
the state but maintain a domicile or residence in the state of
Montana. Pletcher's contention that he can maintain his domicile
within the state of Montana and hold down permanent employment
outside the state of Montana free of Montana taxation would defeat
this clear legislative intent.
The legislative intent is further buttressed by the provisions
of § l-l-215, MCA, which provide:
Residence -- rules for determining. Every person has, in
law, a residence. In determining the place of residence
the following rules are to be observed:
(1) It is the place where one remains when not
called elsewhere for labor or other special or temporary
purpose and to which he returns in seasons of repose.
(2) There can only be one residence.
(3) A residence cannot be lost until another is gained.
. .
(6) The residence can be changed only by the union
of act and intent.
The record indicates that Montana was the state in which
Pletcher remained when he was not called elsewhere for labor and to
which he returned in seasons of repose. We also note that during
tax years 1983, 1984 and 1986, Pletcher claimed money spent on
airline tickets to Alaska as away-from-home business expenses.
The Department relies on a decision from the Minnesota Supreme
court, Manthey v. Commissioner of Revenue (Minn. 1991), 468 N.W.2d
548. The Minnesota Supreme Court concluded that Manthey was a
Minnesota taxpayer because he had maintained significant ties with
Minnesota while working in Alaska. While he was employed in
Alaska, Manthey supplied financial support for his wife and two
children in Minnesota; he maintained his Minnesota driver's
license; owned, licensed and registered vehicles in the state of
Minnesota; purchased resident hunting licenses in the state of
Minnesota; purchased and maintained rental property; and kept joint
checking accounts in Minnesota. Manthev, 468 N.W.2d at 549.
Pletcher's argument is even less compelling than Manthey's in
that Manthey had established stronger ties to the state of Alaska;
he obtained an Alaska driver's license; performed jury duty in
Alaska; joined fraternal organizations, registered and licensed his
car and trailer in Alaska; purchased Alaska resident hunting and
fishing licenses and purchased Alaskan real estate. Manthev, 468
N.W.2d at 549. Pletcher, on the other hand, cannot make any of
these claims. Although he did register to vote in Alaska, he did
not do so until 1992, some nine months after the Montana Department
of Revenue questioned his residency status. Furthermore, he never
did exercise his right to vote in Alaska. Pletcher's purchase of
a non-resident conservation and fishing license in Montana in
September of 1991 was approximately two months prior to the
Department's inquiry into his tax returns.
We hold that the District Court correctly interpreted the
phrase "temporarily absent from the state" as it is used in 5 15-
a
30-101(16), MCA, as modifying persons domiciled in the state of
Montana and who maintain a permanent place of abode in Montana.
Pletcher's permanent employment in Alaska does not equate to
permanent absence from the state. The record supports the finding
that Pletcher has maintained a permanent abode in Montana to which
he has returned when he is not working in Alaska. Accordingly, the
decision of the District Court is affirmed.
Justices
9
Justice Terry N. Trieweiler dissenting.
I dissent from the majority's conclusion that Jack G. Pletcher
was a resident of Montana for purposes of income tax liability
during the years 1982 through 1992. In order to arrive at that
conclusion, the majority has necessarily had to extract a portion
of the applicable residency statute and completely ignore the
remaining language in the same statute.
The only relevant definition of "residency,n for purposes of
determining whether Pletcher was a resident during the years at
issue, is the definition found in Montana's Income Tax Code at
§ 15-30-101(16), MCA. That section provides that:
"Resident" applies only to natural persons and
includes, for the purpose of determining liability to the
tax imposed by this chapter with reference to the income
of any taxable year, any person domiciled in the state of
Montana and any other person who maintains a permanent
place of abode within the state even though temporarily
absent from the state and who has not established a
residence elsewhere.
(Emphasis added.)
The majority opinion uses "domiciled" and "person who
maintains a permanent place of abode" interchangeably. "Domicile"
is not otherwise defined in the majority opinion. Therefore, the
discussion in the dissent is limited to the conclusion on which the
majority's decision is based. That conclusion is that: "Section
15-30-101(16), MCA, clearly provides that 'resident' includes all
other persons who have a 'permanent place of abode' in the state of
Montana."
10
The majority completely ignores the remainder of the
definition which further limits residency to those who are
"temporarily absent from the state" and have "not established a
residence elsewhere." (Emphasis added.) In other words, if
Pletcher Was located in Alaska permanently, or if he had
established residency in Alaska, it makes no difference that he had
a permanent place of abode in Montana.
1n spite of this plain language, neither the Department of
Revenue's hearing examiner, the State Tax Appeal Board, the
District Court, nor the majority, have even considered the
residency requirements for Alaska, or whether Pletcher satisfied
those requirements. An examination of Alaska's residency
requirement leads to the conclusion that Pletcher clearly was a
resident of Alaska. Alaska Stat. § 01.10.055 (1983) provides as
follows:
(a) A person establishes residency in the state by being
physically present in the state with the intent to remain
in the state indefinitely and to make a home in the
state.
(b) Aperson demonstrates the intent required under
(a) of this section
(1) by maintaining a principal place of abode in
the state for at least 30 days or for a longer period if
a longer period is required by law or regulation; and
(2) by providing other proof of intent as may be
required by law or regulation, which may include proof
that the person is not claiming residency outside the
state or obtaining benefits under a claim of residency
outside the state.
Cc) A person who establishes residency in the state
remains a resident during an absence from the state
unless during the absence the person establishes or
claims residency in another state, territory or country,
or performs other acts or is absent under circumstances
that are inconsistent with the intent required under
(a) of this section to remain a resident of this state.
11
Pletcher satisfied all the requirements for residency in the
state of Alaska. He was employed there for over ten years on a
full-time basis. He had a permanent apartment there (private homes
were not available). He spent seven to eight months per year in
Alaska during this entire time, and visited his family in Columbia
Falls during only those brief periods when he was granted leave.
His permanent return to Montana had not been planned. It occurred
because his employer's operations terminated in 1992. In the terms
of the statute, he was physically present in the state with the
intent to remain in the state indefinitely, as demonstrated by the
fact that his principal place of abode was in that state for more
than thirty days, and other than a brief period during 1983, he did
not claim residency outside of the state for purposes of obtaining
benefits
The State Tax Appeal Board (STAB) specifically found that:
It is clearly recognized that Mr. Pletcher was not in
Alaska for temporary employment purposes. He was in fact
a permanent employee, for employment purposes, working
the same periods, shifts, and hours as other employees of
this company, according to the evidence that has been
presented to the Board. The Board agrees with the
taxpayer that he was not taking on "some seventy to
eighty separate 'temporary' jobs for the same employer at
the same location over an eleven year period."
Therefore, based on the STAB's own finding, Pletcher was not
out of the state temporarily.
The majority completely ignores those parts of § 15-30-
101(16), MCA, which link residency in Montana to a "temporary
absence" from the state, and which exclude from residency those
persons who have established a residence elsewhere.
12
Instead, the majority discusses those factors set forth in
5 l-1-215(1), MCA; § 42.15.102(l), ARM, which describes how a new
domicile is acquired; and the Minnesota Supreme Court's decision in
Mantheyv. Commissionfv of Revenue (Minn. 1991), 468 N.W.2d 548.
Those factors for determination of residency which are set
forth in § l-1-215(1), MCA, are irrelevant. Residency for purposes
of income tax liability is specifically defined in Montana's Tax
Code at § 15-30-101(16), MCA.
The discussion at § 42.15.102(l), ARM, regarding the method
for changing domicile, sheds no light on the issue before the Court
because domicile is not defined, and if it is being used
interchangeably with residency, it is clear that Pletcher changed
his domicile by intending to do so and actually removing himself
from Montana and acquiring a new domicile. Furthermore, as is
apparent from the previous discussion, his absence from this state
was by no means temporary.
Finally, the Minnesota Supreme Court's decision in Manthey is
irrelevant to the discussion in this case because that decision was
not based on a statutory definition of residency similar to the
Montana Tax Code's definition, by which we are bound.
The majority also attaches some significance to the fact that
during tax years 1983, 1984, and 1986 Pletcher claimed that the
money spent on airline tickets to Alaska were "away-from-home
business expenses." That fact has no significance. Presumably,
the tickets provided round-trip transportation, and since Pletcher
13
owned a sheep ranch in Montana, the travel would have been business
related regardless of which location he considered his home.
I conclude that to recover income taxes from persons whose
sole source of income is derived outside the state of Montana, the
Department of Revenue must prove that that person is temporarily
absent from the state & has not established residency elsewhere.
In this case, it was clearly established that Pletcher was
permanently absent from the state and had established a residence
elsewhere. Therefore, I dissent from the majority opinion. I
would reverse the judgment of the District Court.
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