Snowbird Jeter May Owe New York Millions

Nov. 16, 2007 — -- The phrase "home is where the heart is" has never meant more to New York Yankee Derek Jeter, who is going to have to prove whether his home in Florida or his apartment in Manhattan is his primary residence.

If it's the Tampa, Fla., home then Jeter is in the clear, and doesn't owe the likely hundreds of thousands of dollars -- maybe even millions -- in back taxes that the New York State Division of Tax Appeals is demanding.

According to documents obtained by ABCNEWS.com, the state of New York and New York City want Jeter to pony up income taxes, with interest, for the years 2001 to 2003.

The state is disputing Jeter's claims that his primary residence is -- and always has been -- in Florida, where there is no personal income tax and even a homestead exemption, which decreases homeowners' property taxes.

New York argues that Jeter keeps "items near and dear in his New York apartment" and has become "immersed in the New York community," which, under state law, could be enough to prove that Jeter's primary residence is actually in Manhattan.

For the time being, Jeter is paying taxes as a nonresident, which means he's paying taxes on approximately half his annual income. Should New York succeed in proving that Jeter actually is a permanent resident of New York, the Yankee will have to pay more state taxes as well as the additional New York City taxes.

Calls made to Jeter's representatives were not immediately returned.

The lifestyles of snowbirds is not uncommon, said several certified public accountants, who told ABCNEWS.com that many clients own a home in the northeast and another in a warmer climates like Florida. They also say New York is notorious for being tough on people who try to slip away tax-free.

Snowbirds Often Flock to Tax-Free States

"It's reasonably common [for people to escape to Florida]," said Daniel A. Weiss, a principle at the law firm of Tannebaum Weiss in Miami. "There's no personal income tax in Florida, and what that means is that we get a lot of people who retire here."

Every state has certain laws and statutes that determine what qualifies someone to be considered a primary resident, explained Weiss.

"A permanent residence in Florida is the place to which no matter where else you travel or how much you spend elsewhere you have the intent to return to," said Weiss. "For example, as far as Florida is required, even though you may work during the week in New York or spend more than half of the year in New York you still have the possibility of maintaining your permanent residency in Florida."

At least to Florida officials, it's fairly simple to make the home your state.

"You must in good faith declare that your residence in Florida is your permanent residence to the exclusion of all others," explained Weiss. "Then the country property appraiser will look at whether you've made that declaration as well as other components -- like where you file your federal income taxes, where you have your driver's license and where you are registered to vote."

Because Florida has no personal income tax they have less to lose than New York, which has a high income tax and stands to benefit from having someone has wealthy as Jeter paying 7 or 8 percent of a multimillion dollar salary in taxes.

"New York has two different ways to determine whether or not you're taxed as a resident," said Ron Hegt, a partner at New York-based Hayes and Company. "First is to [figure out] whether the person has a place to live in the state and if they have been there 183 days (or more than half) the year. If the answer is yes, then you're a resident."

"Second is the issue of domicile," Hegt continued. "Your domicile is the place where your heart and home is. In [Jeter's] case, the domicile is the one where he has the numerous awards and rings and really is where he ultimately intends to return to."

Jeter's Treatment as a Celebrity

With so many Americans qualifying as snowbirds is Jeter being singled out because he's rich and famous?

"New York is very aggressive in pursuing this because there are high-earners in the state and quite often these folks retire to low or no tax jurisdictions like Florida," said Bob Lass, a tax partner at Perelson Weiner LLP. "In the case of a Derek Jeter or other people who spend time in and out of New York the state has been very diligent and quite successful in pursuing [these claims]."

"New York is very aggressive because the stakes are so high -- they have a very sophisticated program and even monitors people's credit card usage and utilities. [Jeter] isn't getting treated differently," said Lass.

A New York City administrative judge this week ordered the Division of Tax Appeals to present more evidence to back its claims that Jeter is a permanent New York resident, The Associated Press reported.

Often, dual-residence taxpayers are unable to account for their whereabouts on every single day of the year, said Hegt, who has represented several clients who were just unable to prove they were in one state of another, ultimately losing cases against the state.

"I don't know that they're being too tough on him, only because that's usually how the state operates," said Hegt. "And New York must know something because there are all sorts of hazards of this kind of litigation."

"If they lose this case and a court case is on file with Jeter's facts and circumstances of having a home in New York and one in Florida and a business presence in New York, it's going to be horrible from the New York perspective," said Hegt. "It will open all kinds of doors for the ordinary business man, and I would imagine they've considered that and are not looking to publicly lose a court case that could have ramifications well beyond Derek Jeter not paying his taxes."