Kenneth W. Welton, Sr. v. Commissioner of Revenue (October 12, 2007)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD



KENNETH W. WELTON, SR. 	   v.	 COMMISSIONER OF REVENUE


Docket No. C280705				 Promulgated:
							   October 12, 2007 


	This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 62C, § 39 from the refusal of the appellee to abate personal income taxes assessed against the appellant pursuant to G.L. c. 62 § 2, for calendar years 2001 and 2002 ( "tax years at issue").
	Commissioner Scharaffa heard the appeal.  He was joined in the decision for the appellee by Chairman Hammond and Commissioners Egan and Rose.
	These findings of fact and report are promulgated pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

	Kenneth W. Welton, Sr., pro se, for the appellant.

	John J. Connors, Jr., Esq. and Mireille T. Eastman, Esq., for the appellee.



FINDINGS OF FACT AND REPORT


On the basis of a Statement of Agreed Facts and exhibits and testimony offered at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
At all times relevant to this appeal, Kenneth W. Welton, Jr., ("appellant") was an electrician and a member of the International Brotherhood of Electrical Workers ("IBEW"), Local Union 567, of Lewiston, Maine.  The appellant testified that his union base during the relevant periods was Local Union 567 of Lewiston, Maine.  However, he also testified that he traveled to several states during the relevant periods, including Massachusetts, to perform work as a "guest" of various local unions:  "This is the way I make a living, basically, out of the labor pools of the IBEW, International Brotherhood."    
The appellant timely filed his Massachusetts Nonresident/Part-Year Resident Tax Returns ("Forms 1-NR/PY") for the tax years at issue on April 4, 2002 and March 10, 2003, respectively.  The Forms 1-NR/PY each reflected a refund due to the appellant, which the
Commissioner of Revenue ("Commissioner") paid.  The Commissioner subsequently audited the appellant's 2001 and 2002 Forms 1-NR/PY.  As a result of this audit, the Commissioner sent to the appellant a Notice of Intention to Assess, dated April 30, 2004, proposing to assess additional 2001 income taxes in the amount of $2,974.00 and additional 2002 income taxes in the amount of $2,204.00, plus interest.  The Commissioner subsequently sent to the appellant a Notice of Assessment, dated June 16, 2004, notifying the appellant of the assessment against the appellant of the additional 2001 and 2002 income taxes, in the same amounts as listed above, plus interest.  On October 19, 2004, the appellant sent to the Commissioner documentation to support the deductions claimed on his 2001 and 2002 Forms 1-NR/PY, which are the subject of this appeal.  The Commissioner accepted this documentation as a timely filed abatement application.  By Notice of Abatement Determination dated April 28, 2005, the Commissioner denied the appellant's abatement application.  On June 22, 2005, the appellant seasonably filed his Petition with the Board.  On the basis of the foregoing paragraph, the Board found that it had jurisdiction over this appeal. 
It is undisputed that the appellant's domicile was in the state of South Carolina during the tax years at issue.  When not employed by an IBEW local union or looking for employment, the appellant lived in South Carolina as a guest of his sister.  The appellant filed South Carolina income tax returns for the tax years at issue.  He also had a driver's license and registered his vehicle in that state during the tax years at issue.  However, the appellant did not own and maintain a home in South Carolina, and he testified that he had no significant expenses in South Carolina, nor did he perform any work in South Carolina, during the tax years at issue.
The appellant worked in Massachusetts for the following employers during the following time periods:
Employer					Start of 		End of 
						Employment	Employment

Washington Group Int'l LLC	11/20/2000	03/09/2001

Kelly Electric Group LLC		04/12/2001	04/30/2001

Edward G. Sawyer Co., Inc.	05/15/2001	06/11/2001

State Electric Corporation	07/17/2001	01/12/2002

Washington Group Int'l LLC	04/23/2002	06/14/2002
State Electric Corporation	08/01/2002	11/08/2002

The appellant claimed that he was present in Massachusetts during the tax years at issue merely as a temporary employee, because he was a member of the IBEW, Local Union 567, of Lewiston, Maine and that he performed work for other local unions as a guest, not a member.  However, the appellant offered no evidence that he incurred significant expenses of maintaining a place of abode during the tax years at issue.  In particular, the appellant was living as a guest of his sister in her home in South Carolina, and the appellant incurred no significant expenses, such as mortgage, home owner's insurance, or rent, in connection with his stay as his sister's guest.  Therefore, to the extent that it is a finding of fact, and as will be explained in the Opinion, the Board found that the appellant did not establish that he had a "tax home" outside of Massachusetts during the tax years at issue.  Accordingly, and for the reasons stated more fully in the following Opinion, the Board issued a decision for the appellee in this appeal.

OPINION
At issue is whether the appellant was entitled to offset the income he earned from work performed in Massachusetts with the deduction provided in G.L. c. 62, § 2(d)(2) for expenses of travel, meals and lodging incurred while away from home.  For the tax years at issue, the relevant portion of G.L. c. 62, § 2(d)(2) provided a deduction for:
An amount equal to the deductions allowed by Part VI of the Code which (i) consist of travel, meals and lodging while away from home, or expenses of transportation paid or incurred by the taxpayer in connection with the performance by him of services as an employee; . . . provided, however, that . . . the deductions under clause (i) . . . are allowed as itemized deductions under subsection (a) of section sixty-seven of the Code.

Internal Revenue Code ("Code") § 67(a), in turn, incorporated Code § 162(a)(2) for the deduction for expense of travel, meals and lodging.  Code § 162(a)(2), in effect during the tax years at issue, provided as follows:
IN GENERAL.- There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including - . . .
(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; . . .

The appellant bears the burden of proving that he is entitled to an abatement.  Staples v. Commissioner of Corporations and Taxation, 305 Mass. 20, 26 (1940).  This burden requires the appellant to prove the facts that entitle him to an abatement.  William Rodman & Sons, Inc. v. State Tax Commission, 373 Mass. 606, 610 (1977).  
"[I]f the State income tax law has incorporated Federal income tax provisions, those provisions should be interpreted as they are interpreted for Federal income tax purposes."  Grady v. Commissioner of Revenue, 421 Mass. 374, 380 (1995) (other citation omitted).  The Supreme Court has ruled that the Code § 162(a)(2) deduction involves a three-step test to determine the deductibility of expenses of travel, meals, and lodging while away from home:  
(1) The expense must be a reasonable and necessary traveling expense, as that term is generally understood. This includes such items as transportation fares and food and lodging expenses incurred while traveling.

(2) The expense must be incurred "while away from home."

(3) The expense must be incurred in pursuit of business. . . .

Commissioner v. Flowers, 326 U.S. 465, 470 (1946).  The question presented in this appeal is whether the appellant was "away from home" when he incurred the expenses at issue.   
The First Circuit has declared that "[t]he purpose of the [Code] section 162(a)(2) deduction is to mitigate the burden upon a taxpayer who, because of the exigencies of business, must maintain two places of abode and thereby incur additional living expenses."  Andrews v. Commissioner of Internal Revenue, 931 F.2d 132, 135 (1st Cir. 1991) (other citations omitted).  Thus, it is necessary for the taxpayer to incur the expenses of maintaining a permanent home, known as a "tax home."  See Anderson v. Commissioner, 1991 Tax Ct. Memo LEXIS 535 at *6 (citing Flowers, 326 U.S. at 470).  "A taxpayer may have no tax home, however, if he continuously travels and thus does not duplicate substantial, continuous living expenses for a permanent home maintained for some business reason."  Henderson v. Commissioner of Internal Revenue, 143 F.3d 497, 499 (9th Cir. 1998).
The Commissioner distinguished two cases, Saunders v. Commissioner, 1977 Tax Ct. Memo LEXIS 16 and Henderson v. Commissioner of Internal Revenue, 143 F.3d 497 (9th Cir. 1998) to illustrate his position in this appeal.  The taxpayer in Saunders was a union worker from Cleveland, Ohio, who, like the appellant, traveled to job sites because he was unable to find work near his home.
Saunders, 1977 Tax Ct. Memo LEXIS 16, at *3-*4.  Unlike the appellant, however, the taxpayer in Saunders owned a home, and he "paid the usual and necessary expenses of maintaining this house for himself, his wife, and his three children."  Id. at *2.  In finding that the taxpayer met his burden of proving that his "tax home" was in Cleveland, the Tax Court relied, inter alia, upon the taxpayer's "fiscal ties to Cleveland," which included the costs of maintaining his home "upon which he paid taxes."  Id. at *12.  Therefore, "[p]etitioner incurred the type of duplicative living expenses caused by the necessity of maintaining a permanent home in one area while temporarily working and living at another area which [Code] section 162(a)(2) was designed to ameliorate."  Id. at *12-*13.  Accordingly, the Tax Court found that the taxpayer's "tax home" was Cleveland, Ohio, and he was entitled to deduct his traveling expenses, including his meals and lodging, while away from that home.  Id. at *13.
By contrast, the taxpayer in Henderson, a stage hand for a traveling ice show, did not maintain a permanent home, but instead lived in his parents' home in Boise, Idaho, between tours.  Henderson, 143 F.3d at 498-99.  The
Ninth Circuit declared that a taxpayer who travels may very well have no "tax home" for purposes of Code § 162(a)(2):  
A taxpayer may have no tax home, however, if he continuously travels and thus does not duplicate substantial, continuous living expenses for a permanent home maintained for some business reason. James v. United States, 308 F.2d 204, 207 (9th Cir. 1962); Cerny v. Commissioner, 1991 Tax Ct. Memo LEXIS 575, 62 T.C.M. (CCH) 1061, 1062, 9152 T.C. Memo 6, 1991 T.C. Memo 526 (1991), aff'd by unpublished opinion, 2 F.3d 1156 (9th Cir. 1993).  Clearly, if a taxpayer has no "home" for tax purposes, then he cannot deduct under    § 162(a)(2) for expenses incurred "away from home." . . .  Thus, a taxpayer only has a tax home - and can claim a deduction for being away from that home - when it appears that he or she incurs substantial, continuous living expenses at a permanent place of residence. James, 308 F.2d at 207-08.

Id. at 499 (footnote omitted).  In ruling that the taxpayer did not meet his burden of establishing a "tax home" in Boise, the Ninth Circuit relied, inter alia, upon the fact that "Henderson did not have substantial, continuing living expenses in Boise that were duplicated by his expenses on the road"; the taxpayer paid no rent, had no ownership interest in his parents' home, and his contributions to the home were limited to maintenance and improvements to the home and about $500 in supplies while he was in Boise.  Id. at 500.  Moreover, the taxpayer presented no evidence that he paid significant Boise-related expenses while he was away on tour.  Id. at 501.  The Ninth Circuit thus affirmed the Tax Court's ruling that the taxpayer had not met his burden of proving that he had maintained a "tax home" in Boise during the tax period at issue.  Id. 
In the instant appeal, the appellant was living in South Carolina with his sister when he was not actively employed.  He did not own and maintain a home in South Carolina, and he testified that he had no significant expenses in South Carolina.  The appellant also offered no evidence of significant expenses for maintaining a permanent home in any other locale, including Maine.  The appellant thus offered no evidence of having incurred "substantial, continuous living expenses at a permanent place of residence," which were duplicated by expenses of travel.  Henderson, 143 F.3d at 499 (citing James, 308 F.2d at 207-08).  The Board thus found and ruled that the appellant had not met his burden of proving the existence of a "tax home" for purposes of the Code § 162(a)(2) deduction.  Therefore, the Board found and ruled that the Commissioner properly denied the G.L. c. 62, § 2(d)(2)  deduction to the appellant. 


Accordingly, the Board issued a decision for the appellee in this appeal. 

					APPELLATE TAX BOARD

				  By:			   _____       	
				 Thomas W. Hammond, Jr., Chairman 





A true copy,
Attest:			__________		
       Clerk of the Board

  The 2001 Form 1-NR/PY reflected a refund due of $2,687.00, which the Commissioner paid in full.  The 2002 Form 1-NR/PY reflected a refund due of $1,544.00, but the Commissioner paid $1,543.59 to the appellant.  The parties do not address this discrepancy, but this difference is negligible.

ATB 2007-1172