Benjamin v. Tax Commission

This opinion is subject to revision before final
publication in the Pacific Reporter
2011 UT 14
IN THE
SUPREME COURT OF THE STATE OF U TAH
____________
ARTHUR BENJAMIN AND
G AIL BENJAMIN (DECEASED),
Petitioners and Appellants,
v.
UTAH STATE T AX COMMISSION ,
Respondent and Appellee.
____________
No. 20090126
Filed March 4, 2011
Original Proceeding in this Court
____________
Attorneys:
Roger O. Tew, Centerville, Michael C. Walch,
Salt Lake City, for petitioner
Mark L. Shurtleff, Att’y Gen., Timothy A. Bodily, Asst. Att’y Gen.,
Salt Lake City, for respondent
____________
CHIEF JUSTICE DURHAM, opinion of the Court:
INTRODUCTION
¶1 	Appellants, Arthur Benjamin and Gail Benjamin (deceased),
have challenged the determination that they were resident indi-
viduals for Utah income tax purposes in 2003 and 2004 (the audit
period). The Utah State Tax Commission (the Commission) found
that the Benjamins were subject to Utah income tax under either test
for resident individual laid out in Utah Code section 59-10-103
(1)(q)(i). The Commission also upheld a 10 percent negligence pe-
nalty on the unpaid taxes pursuant to Utah Code section 59-1-401
(7)(a)(i).
¶2 The Benjamins have now appealed the Commission’s decision

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
to this court. We hold that the Commission properly determined that
the Benjamins qualify as resident individuals. We also uphold the
negligence penalty because the Benjamins lacked a good faith basis
for nonpayment.
BACKGROUND
¶3 	The Benjamins originally established domicile in Utah around
1995 after moving from California and purchasing a home in Sandy,
Utah. At that time, Mr. Benjamin worked as President of Datamark,
Inc. In 2003, Mr. Benjamin and other shareholders entered into
negotiations to sell Datamark to eCollege, Inc. Also in 2003, the
Benjamins began looking to purchase a home in a warmer climate,
citing concerns that Utah’s cold winters adversely affected Mrs.
Benjamin’s health. On September 8, 2003, the Benjamins signed an
agreement to purchase a Nevada residence. On September 15, 2003,
Mr. Benjamin signed a Stock Purchase Agreement to sell Datamark’s
stock to eCollege. Mr. Benjamin sold his Datamark stock for
$9,250,277 and recognized a taxable gain of $6,417,302 from the sale.
On November 25, 2003, the Benjamins closed on the purchase of the
Nevada residence. Subsequently, the Benjamins filed a Utah part-
year resident return for 2003 and did not file an income tax return
for 2004, claiming they were no longer Utah residents for income tax
purposes.
¶4 	Prior to the stock sale, Mr. Benjamin received advice from
several individuals outlining the procedures he should follow to
change his tax domicile from Utah to Nevada. On August 29, 2003,
Mr. Benjamin received detailed advice from Mr. Bassett, a Utah
attorney representing Datamark, regarding a change of domicile.
The attorney specifically discussed whether Mr. Benjamin would
“incur Utah capital gains on a possible near-term sale” of the Data-
mark stock if the Benjamins immediately moved to Nevada, where
the stock sale would not be taxed. The attorney offered Mr. Benjamin
a number of suggestions on how to establish a Nevada domicile that
would provide a “good-faith basis in defending against a challenge
by the Utah State Tax Commission.” The attorney, noting the short
period between the time to establish Nevada domicile and the time
of the stock sale, concluded that there was less than a 50 percent
chance of prevailing against a Commission audit if the Benjamins
2

Cite as: 2011 UT 14
Opinion of the Court
attempted to establish domicile in Nevada. Mr. Benjamin was dis-
satisfied with the advice, describing it as “by the book” and “very
uncreative to boot.”
¶5 	On September 2, 2003, Mr. Benjamin received guidance from
an investment advisor summarizing certain factors that could be
important in demonstrating a change of domicile to Nevada, includ-
ing the need to “actually set up residence” in Nevada. On September
24, 2003, Mr. Benjamin received additional advice from a Utah
accountant discussing the actions a taxpayer can undertake to sup-
port a domicile claim. This advice included the sale of the Utah prin-
cipal residence, not spending more than 183 days per year in Utah,
and maintaining more contacts in Nevada than with any other state.
¶6 	Also in September of 2003, the Benjamins each obtained
Nevada driver’s licenses, registered to vote in Nevada, and estab-
lished Nevada bank accounts. They purchased several vehicles in
Utah, which they registered and insured in Nevada, to be kept at the
Nevada residence. The Benjamins changed their mailing address to
the Nevada residence for certain periodicals, bills, and utility
invoices. The Benjamins still used their Utah residence throughout
the audit period for some mailing purposes.1 Because the Nevada
residence was furnished at the time of purchase, the Benjamins did
not move much furniture from their Utah residence. The Benjamins
did move some personal belongings to the Nevada residence,
including some medical equipment, dishes, linens, and towels.
¶7 	The Benjamins did not join any organizations or clubs in
Nevada, with the exception of their casino memberships. Nor did
they participate in or contribute to charitable organizations in
Nevada during the audit period. The Benjamins did, however,
remain on the board of directors for several charitable organizations
and companies, many of which were located in Utah. During the
1 Appellants note that Mr. Benjamin’s personal assistant, who
handled all personal correspondence, banking, and bill paying res-
ponsibilities, remained in Utah. Mrs. Benjamin’s personal assistant
also remained in Salt Lake City throughout the audit period. Thus,
Appellants saw no need to change all of their mailing addresses or
to relocate all banking services to Nevada.
3

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
audit period, Mr. Benjamin established a charitable foundation that
supported an aquarium in Utah.
¶8 The Benjamins continued to own and occupy their Sandy home
throughout the audit period. They maintained their art collection
(worth two million dollars) and most of their personal belongings at
the Utah residence, including items obtained before they established
Utah as their domicile. The Benjamins continued to benefit from a
residential exemption for property tax purposes by claiming their
Sandy home as their primary residence. Mr. Benjamin testified at the
Commission hearing that he and his wife had attempted to sell their
Utah home after purchasing the Nevada residence. However, Mr.
Benjamin could not recall the name of the agent who was listing the
home or the price at which it was listed. Furthermore, the Benjamins’
opening brief to this court concedes that the Benjamins were not
“seriously interested in selling” the Utah residence.
¶9 Credit card and bank statements from the audit period indicate
that most of the Benjamins’ basic necessities, such as food, fuel, and
clothing, were purchased in Utah. Mr. Benjamin maintained Utah-
based health insurance and used Utah doctors for his medical care.
The Benjamins also continued to use a Utah veterinary clinic for their
pets.
¶10 	Mr. Benjamin continued to work for Datamark’s successor,
eCollege, based out of Salt Lake City. Although Mr. Benjamin’s job
required extensive traveling, his main office was located in Salt Lake
City. In September of 2004, Mr. and Mrs. Benjamin each signed a
Last Will and Testament in Salt Lake City, Utah, which was wit-
nessed and notarized by a Utah attorney. These documents declared
Florida as their state of domicile, not Nevada or Utah. During the
Commission’s formal hearing, Mr. Benjamin testified that when he
and his wife purchased the Nevada residence it was Florida, not
Nevada, where they intended to retire. Mr.Benjamin further testified
that on or before March 27, 2004, they had purchased a home in
Florida and had a car shipped to the Florida residence.
¶11 	In March of 2004, Mrs. Benjamin filed a lawsuit in Utah
District Court for unpaid child support against her former spouse,
stating that “she currently reside(s) in Utah.” There was no evidence
4

Cite as: 2011 UT 14
Opinion of the Court
that the Benjamins used the Nevada court system during the audit
period. After Mrs. Benjamin’s death in December of 2004, Mr.
Benjamin listed the Sandy, Utah, home as decedents’ place of resi-
dence on the death certificate. He also listed his Utah address on the
form. Mrs. Benjamin was buried in Utah. Mr.Benjamin signed a pe-
tition for probate in Utah District Court stating his wife was domi-
ciled in Salt Lake County at the time of her death.
¶12 	In 2005, the Auditing Division conducted an audit of the
Benjamins for the period of August 22, 2003, through December 31,
2004. Using the Benjamins’ credit and debit card information, bank
statements, health care invoices and bills, expense reports, travel iti-
neraries, and calendars, the auditor concluded that Mr. Benjamin
was present in Utah for at least 213 days in 2003 and at least 234
days in 2004. Of the 51 days in 2003 that the auditor determined that
Mr. Benjamin was conclusively outside of Utah, only 15 were spent
in Nevada. Similarly for 2004, the auditor determined that Mr.
Benjamin was outside of Utah for 73 days, of which only 18 were
attributable to Nevada. Using the same methodology, the auditor
determined that Mrs. Benjamin was present in Utah for at least 248
days in 2003 and at least 185 days in 2004. On February 13, 2006, the
Auditing Division issued a Statutory Notice of Audit Change for the
2003 tax year and a Statutory Notice of Estimated Income Tax for the
2004 tax year. Subsequently, the Auditing Division found that the
underpayment of tax was due to negligence and imposed a 10 per-
cent negligence penalty under Utah Code section 59-1-401(7)(a)(i).
¶13 The Benjamins appealed the assessments and a formal hearing
was held before the Commission on June 4, 2008. The Commission
issued its findings of fact, conclusions of law, and a final decision on
December 11, 2008. The Commission determined that the Benjamins
qualified as Utah resident individuals under Utah Code section 59-
10-103(1)(q)(i)(A) (the domicile test) and, alternatively, under 59-10-
103(1)(q)(i)(B) (the statutory test). As a result, all income earned by
the Benjamins during the audit period was subject to taxation by
Utah. 2
2 The Commission did not address the Benjamins’ argument that
even if they were found to be Utah residents under the statutory test,
(continued...)
5

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
¶14 	With respect to the domicile test, the Commission found that
when the facts were examined in their entirety, the Benjamins’
actions did not demonstrate an intent to abandon their Utah domi-
cile or an intent to remain in Nevada permanently. Accordingly, the
Benjamins never lost their Utah domicile during the audit period.
The Commission additionally held in the alternative that the
Benjamins qualified as resident individuals pursuant to the statu-
tory test for having maintained a permanent place of abode in Utah
and spending at least 183 days in Utah in both 2003 and 2004.
¶15 	The Commission concluded that the Benjamins acted
negligently by ignoring advice they received from Mr. Bassett and
other professional advisors. In addition, the Commission noted that
the Benjamins affirmatively represented themselves as domiciled in
Utah, not Nevada. As a result, the Commission held that the negli-
gence penalty was properly imposed because the Benjamins did not
base their nonpayment on any legitimate, good faith interpretation
of an arguable point of law.
¶16 	The Benjamins properly filed a Petition for Review with this
court on February 11, 2009. We have jurisdiction pursuant to Utah
Code section 78A-3-102(3)(e)(ii) (Supp. 2010).
STANDARD OF REVIEW
¶17 	Our standard of review for this case is specified by statute:
When 	reviewing 	formal 	adjudicative 	proceedings
commenced 	before 	the 	commission, 	the 	Court 	of
Appeals or Supreme Court shall:
(a) grant the commission deference concerning its
written findings of fact, applying a substantial evidence
standard on review; and
2 (...continued)
the capital gains for individuals who are Utah residents—but who
are not domiciled in Utah—would qualify only as Utah “source
income” and would not be subject to Utah state income tax.
6

Cite as: 2011 UT 14
Opinion of the Court
(b) grant the commission no deference concerning its
conclusions of law, applying a correction of error
standard . . . .
U TAH C ODE A NN . § 59-1-610(1) (2008).
¶18 	The Commission’s imposition of a negligence penalty will be
upheld unless “contrary to law or otherwise erroneous.” Vermax of
Fla., Inc. v. Utah State Tax Comm’n, 906 P.2d 314, 315 (Utah Ct. App.
1995) (quoting Tummurru Trades, Inc. v. Utah State Tax Comm’n, 802
P.2d 715, 720 (Utah 1990)).
ANALYSIS
¶19 	The Benjamins challenge the Commision’s holding that they
were domiciled in Utah during the audit period. The Benjamins do
not contest the finding that they satisfy the statutory test under Utah
Code section 59-10-103, but argue that non-Utah source income
cannot be taxed if they are found to be resident individuals under
the statutory test (rather than under the domicile test). Finally, the
Benjamins maintain that the imposition of the 10 percent negligence
penalty was unsupported by law or fact. We reject each of these
arguments in turn.
I. THE BENJAMINS WERE UTAH RESIDENT INDIVIDUALS
UNDER EITHER THE DOMICILE OR STATUTORY TEST OF
UTAH CODE SECTION 59-10-103
¶20 	The Utah Code defines a “resident individual” as either
(A) an individual who is domiciled in this state for
any period of time during the taxable year, but only
for the duration of the period during which the
individual is domiciled in this state; or
(B) an individual who is not domiciled in this state
but:
(I) maintains a place of abode in this state; and
7

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
(II) spends in the aggregate 183 or more days of
the taxable year in this state.
U TAH C ODE A NN . § 59-10-103(1)(q)(i) (Supp. 2010). 3 Qualifying
under either prong of this definition subjects the individual to
taxation. The Commission found that the Benjamins satisfied the
domicile test or, in the alternative, the statutory test. We examine
each of these findings in turn.
A. The Benjamins Satisfied the Domicile Test
¶21 	The Commission held that the Benjamins were domiciled in
Utah during the audit period. The determination of domicile is one
of fact. See O’Rourke v. Utah State Tax Comm’n, 830 P.2d 230, 232
(Utah 1992). For purposes of reviewing the Commission’s findings
of fact, we apply a substantial evidence standard. Salt Lake City S.
R.R. v. Utah State Tax Comm’n, 1999 UT 90, ¶ 7, 987 P.2d 594.
“Substantial evidence is that quantum and quality of relevant
evidence that is adequate to convince a reasonable mind to support
a conclusion.” Id. (internal quotation marks omitted). We “must
review the entire record before the court and consider all the
evidence that both supports and detracts from the Commission’s
findings.” Clements v. Utah State Tax Comm’n, 893 P.2d 1078, 1081
(Utah Ct. App. 1995); see also Grace Drilling Co. v. Bd. of Review, 776
P.2d 63, 68 (Utah Ct. App. 1989) (“In undertaking [a review applying
the substantial evidence standard], this court will not substitute its
judgment as between two reasonably conflicting views, even though
we may have come to a different conclusion had the case come
before us for de novo review.”). The Commission’s interpretations
of the statutory provisions of domicile, however, are questions of
law reviewed for correctness. U TAH C ODE A NN . § 59-1-610(1)(b).
¶22 	The relevant portions of domicile are outlined in the Utah
Administrative Code as follows:
(1) 	Domicile is the place where an individual has a
3 Because there have been no substantive changes to the relevant
statutes that would affect this opinion, we cite to the current
versions.
8

Cite as: 2011 UT 14
Opinion of the Court
permanent home and to which he intends to return
after being absent. 	It is the place at which an
individual has voluntarily fixed his habitation, not for
a special or temporary purpose, but with the intent of
making a permanent home.
(2) 	For 	purposes 	of 	establishing 	domicile, 	an
individual’s intent will not be determined by the
individual’s statement, or the occurrence of any one
fact or circumstance, but rather on the totality of the
facts and circumstances surrounding the situation.
(a) 	Tax Commission rule R884-24P-52,
Criteria for Determining Primary
Residence, 	provides 	a 	non-
exhaustive list of factors or objective
evidence determinative of domicile.
(b) 	Domicile 	applies 	equally 	to 	a
permanent home within and with-
out the United States.
(3) 	A domicile, once established, is not lost until there
is a concurrence of the following three elements:
(a) 	a specific intent to abandon the for-
mer domicile;
(b) 	the actual physical presence in a
new domicile; and
(c) 	the intent to remain in the new do-
micile permanently.
U TAH A DMIN. C ODE r. 865-9I-2(A) (2010). Intent will be determined
based on “the totality of the facts and circumstances surrounding the
situation,” and the taxpayer’s statement of intent is only one factor
of many to be considered. “In determining whether a party has
established a Utah domicile, the factfinder may accord the party’s
activities greater weight than his or her declaration of intent.”
9

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
Clements, 893 P.2d at 1081 (citing Allen v. Greyhound Lines, Inc., 583
P.2d 613, 614 (Utah 1978)). Utah Administrative Code rule 884-24P-
52 contains a nonexhaustive list of objective factors helpful in
determining domicile.4
¶23 	In this case, some evidence exists to support the Benjamins’
contention that they abandoned Utah for Nevada. In addition to the
purchase of the Nevada residence, the Benjamins assert their own
intent to live in Nevada. The Benjamins opened bank accounts in
Nevada. They obtained Nevada driver’s licenses. They registered to
vote in Nevada. The Benjamins registered and insured several
vehicles in Nevada. They had a number of bills and other documents
mailed to their Nevada residence. They moved some personal
belongings to the Nevada residence. The Benjamins also declared the
Nevada residence to be their address on several documents, inclu-
ding their 2003 federal tax return.
¶24 	On the other hand, numerous indicia of domicile exist to
sustain the Commission’s decision. The Benjamins continued to own
and occupy their Sandy home, claiming it as their primary residence
and receiving a residential exemption for property tax purposes.
The Benjamins’ opening brief before this court argues that because
there was no economic necessity to sell the Sandy home and because
they would be traveling to Utah frequently for Mrs. Benjamin’s me-
dical treatment, they felt the use of the Utah residence would be
more convenient and comfortable than hotels. They frequently used
their Utah bank accounts during the audit period while they rarely
used their Nevada accounts. Most of their necessities, such as food,
fuel, and clothing, were purchased in Utah. They continued to re-
4 The Benjamins contend that the Commission’s selective reliance
on their continued ownership of the Utah residence, a factor not
enumerated under rule 884-24P-52, created a prima facie require-
ment that any taxpayer must sell their Utah residence to show intent
to change domicile. We note from the outset that the list is
nonexhaustive and was never meant to be all inclusive. For the
reasons 	discussed 	below, 	we 	find 	that 	the 	factors 	that 	the
Commission 	considered—including 	the 	Benjamins’ 	continued
ownership and use of the Utah residence—were legitimate in
reaching its determination.
10

Cite as: 2011 UT 14
Opinion of the Court
ceive nearly all their pet services at a veterinary clinic in Utah. There
is no evidence on the record that they used any such services in
Nevada. The Benjamins maintained numerous contacts in Utah, in-
cluding 	remaining 	on 	boards 	of 	businesses 	and 	nonprofit
organizations with strong connections to Utah. The Benjamins had
no such connections in Nevada, with the exception of memberships
in casinos.
¶25 	Furthermore, the Benjaims’ own statements and actions pro-
vide substantial evidence to uphold the Commission’s determination
that they never abandoned their Utah domicile. Mrs. Benjamin filed
a lawsuit in Utah during the audit period and represented that “she
currently reside(s) in Utah and previously resided in California.”
The Benjamins also created new wills and trusts during the audit
period in which they listed Florida, not Nevada, as their place of
domicile.5 After Mrs. Benjamin passed away, Mr. Benjamin listed the
Utah residence on the death certificate as their official place of resi-
dence. Mr. Benjamin also signed a petition for probate stating his
wife was domiciled in Utah at the time of her death.
¶26 	Considering the abundant evidence that the Benjamins did
not intend to abandon their Utah domicile in favor of Nevada
against the limited evidence detracting from it, we find that the
Commission’s holding is supported by substantial evidence. As resi-
dents who never lost their Utah domicile pursuant to the domicile
test, the Benjamins were subject to Utah income tax during the audit
period.
B. In the Alternative, the Benjamins Satisfied the Statutory Test
¶27 	The Commission found that the Benjamins satisfied both
prongs of the statutory test for resident individuals. See U TAH C ODE
A NN . § 59-10-103(1)(q)(i)(B). Specifically, it is undisputed that the
Benjamins maintained their Sandy residence throughout the audit
period, and an auditor found that the Benjamins spent at least 183
5 At the Commission’s hearing, Mr. Benjamin testified that they
had future plans to move to Florida or Palm Springs. On or before
March 27, 2004, the Benjamins purchased a third home in Florida
and had a vehicle shipped there.
11

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
days in Utah for both tax years within the audit period. The
Benjamins therefore concede that they satisfied the statutory test.
However, they argue that the Commission failed to make the ne-
cessary finding under the statutory test that the Benjamins were not
domiciled in Utah. We disagree.
¶28 The Commission held that the Benjamins were “Utah resident
individuals regardless of whether they changed their domicile from
Utah to Nevada in August 2003.” Logically, there are only two pos-
sible conclusions from that statement: (1) the Benjamins were domi-
ciled in Utah during the audit period, and therefore satisfied the
domicile test; or (2) the Benjamins were not domiciled in Utah, in
which case it is undisputed that they satisfied the remaining criteria
under the statutory test. In either case, the Commission was correct
in holding that the Benjamins were Utah resident individuals for the
audit period.
II. THE BENJAMINS OWED TAXES ON THE PROCEEDS OF
THE STOCK SALE UNDER EITHER TEST FOR UTAH
RESIDENT INDIVIDUALS
¶29 	The Benjamins concede that if they are found to be Utah
resident individuals under the domicile test, then the proceeds from
Mr. Benjamin’s sale of Datamark stock are subject to taxation by
Utah. As explained above, we hold that the Benjamins were
domiciled in Utah during the audit period and thus owe taxes on
those proceeds. However, the Benjamins argue that if they qualify as
Utah resident individuals under the statutory test, but not under the
domicile test, their stock sale proceeds are not subject to Utah
taxation. The Benjamins argue that a Utah taxpayer “domiciled in
another state is not subject to Utah tax on non-Utah source income.”
We disagree, as this argument is based on a misreading of the Utah
Code. We take this opportunity to clarify why all Utah resident
individuals are subject to taxation on such proceeds.
¶30 	Pursuant to statute, Utah imposes taxes on all “state taxable
income.” UTAH CODE ANN. § 59-10-104(2)(a) (“resident individual”);
id. § 59-10-116(1)(a) (“nonresident individual”). The term “state
taxable income” is defined by Utah Code section 59-10-103(1)(w).
Within that definition, “resident individuals” and “nonresident indi-
12

Cite as: 2011 UT 14
Opinion of the Court
viduals” are treated differently; taxation for nonresident individuals
is limited to “the portion of the amount [assessed to resident indi-
viduals] 	that is derived from Utah sources.” Id. § 59-10-103
(1)(w)(ii)(B). Taxation for resident individuals has no such limitation.
Importantly, no distinction is made between resident individuals
who qualify under the domicile test versus the statutory test. 6
Instead, all resident individuals may receive a “tax credit . . . equal
to the amount of the tax imposed . . . by another state . . . on income
derived from sources within that other state.” Id. § 59-10-1003(1). 7
¶31 	As a result, it makes no difference whether a taxpayer
qualifies as a resident individual under either the domicile or
statutory test. All Utah resident individuals are subject to taxation
for all “state taxable income,” which would include the proceeds
from Mr. Benjamin’s stock sale. 8
6 In support of their argument that such a distinction exists, the
Benjamins cite to Utah Code section 59-10-118(5)(c), which states that
”[c]apital gains and losses from sales of intangible personal property
are allocable to this state if the taxpayer’s commercial domicile is in
this state.” However, the Benjamins fail to note that this section is in
reference to taxing nonresident individuals. See U TAH C ODE A NN .
§ 	59-10-117(1), 	(2)(f) 	(noting 	that 	”[f]or 	purposes 	of 	Section
59-10-116,” which governs taxes imposed on nonresident indi-
viduals, taxes on intangible personal property such as capital gains
”shall be determined in accordance with Section 59-10-118”).
7 In this case, the Benjamins claimed to be domiciled in Nevada,
which does not impose any income tax; thus the tax credit would be
unavailable to the Benjamins.
8 The Benjamins hint at a potential constitutional issue in taxing
non-Utah source income of individuals domiciled outside Utah who
satisfy the statutory test for resident individuals. This argument is
inadequately briefed, however, and as a result we decline to address
it. “An issue is inadequately briefed if the argument merely contains
bald citations to authority [without] development of that authority
and reasoned analysis based on that authority.” State v. Timmerman,
2009 UT 58, ¶ 25 n.5, 218 P.3d 590 (alteration in original) (internal
quotation marks omitted); see also U TAH R. A PP . P. 24(a)(9).
13

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
III. THE COMMISSION CORRECTLY IMPOSED A
NEGLIGENCE PENALTY
¶32 	The Utah Code provides the Commission with the authority
to assess a negligence penalty for nonpayment of taxes owed. See
U TAH C ODE A NN . § 59-1-401(7)(a)(i) (Supp. 2010) (“[I]f any portion
of an underpayment of a tax, fee, or charge is due to negligence, the
penalty is 10% of the portion of the underpayment that is due to
negligence”). A negligence penalty is appropriate “when the tax-
payer has failed to pay taxes and a reasonable investigation into the
applicable rules and statutes would have revealed that the taxes
were due.” Hales Sand & Gravel, Inc. v. Audit Div., 842 P.2d 887, 895
(Utah 1992). “[T]he taxpayer can escape the penalty if he or she can
show that he or she based the nonpayment of taxes on a legitimate,
good faith interpretation of an arguable point of law.” Id.
¶33 Here, the Commission noted that the Benjamins had received
professional advice from several individuals and chose not to take
the steps suggested by those advisors. Additionally, the Commission
found that the Benjamins’ affirmative representations indicating
their Utah domiciliary on court filings, probate documents, and on
Mrs. Benjamin’s death certificate all established inconsistency in
their claim that they based the nonpayment of taxes on a legitimate,
good faith interpretation of an arguable point of law. Therefore, the
Commission found that the Benjamins’ actions were negligent and
that the Auditing Division had properly imposed the additional
penalty.
¶34 	We agree that the Benjamins did not base the nonpayment of
taxes on any legitimate, good faith interpretation of an arguable
point of law. Mr. Benjamin received detailed advice on the measures
necessary to establish an intent to abandon Utah domicile. 9 Mr.
9 The Benjamins allege that because Mr. Bassett represented Mr.
Benjamin’s employer, who did not want Mr. Benjamin to move to
Nevada, it was entirely reasonable for the Benjamins to choose not
to follow the attorney’s advice. It is true that Mr. Bassett served as an
attorney 	for 	Datamark 	rather 	than 	Mr. 	Benjamin 	personally.
However, there is no dispute that Mr. Benjamin received Mr.
(continued...)
14

Cite as: 2011 UT 14
Opinion of the Court
Benjamin chose to ignore this advice, criticizing it as “by the book”
and “very uncreative to boot.” The Benjamins sought additional
advice from an investment advisor and an accountant on how to
change their domicile, which included recommendations to sell the
Utah residence, not spend more than 183 days in Utah during the
year, and maintain more contacts with Nevada than any other state.
As with the advice given by Mr. Bassett, the Benjamins did not rely
on other advisors in any manner that would create a legitimate, good
faith basis for belief that their actions were justifiable.
¶35 	Additionally, the Benjamins made affirmative statements in
court filings and public documents during the audit period indi-
cating that they were residents of Utah. They also benefited from a
residential exemption they received for listing their Sandy home as
their primary residence. Despite these representations, Mr. Benjamin
filed a Utah return in 2003 claiming that he was not a Utah resident.
¶36 Finally, the Benjamins concede that they met the statutory test
for resident individuals. As explained above, the Utah Code clearly
states that Utah resident individuals are subject to taxation for all
“state taxable income.” The Benjamins’ interpretation of a domicile
requirement for taxing the stock sale’s proceeds was incorrect as a
matter of law. A “reasonable investigation” into the Utah Code
would have revealed the requirement that all Utah resident indi-
viduals pay taxes on such proceeds. As a result, the Benjamins
lacked a good faith interpretation of the taxation requirements
governing Utah resident individuals.
¶37 	The Benjamins took affirmative legal actions to maintain a
Utah domicile for strategic reasons, precluding any justifiable
argument that they had a legitimate, good faith interpretation of an
arguable point of law to excuse them from nonpayment of taxes.
Furthermore, the Benjamins clearly satisfied the statutory test, even
if they did not meet the domicile test, and thus owed taxes on all
“state taxable income” as Utah resident individuals. We therefore
uphold the negligence penalty.
9 (...continued)
Bassett’s advice, nor did that advice differ greatly from advice Mr.
Benjamin received from his personal advisors.
15

BENJAMIN v. U TAH STATE T AX C OMMISSION
Opinion of the Court
CONCLUSION
¶38 	We hold that the Commission correctly determined that the
Benjamins were domiciled in Utah during the audit period and are
subject to Utah income tax. Moreover, we note that even had the
Benjamins established a non-Utah domicile during the audit period,
they nonetheless satisfied the statutory test and would have been
required to pay taxes on all “state taxable income.”
¶39 	While individuals can make a good faith interpretation of an
arguable point of law to excuse them from a negligence penalty, in
cases where taxpayers make legal representations of Utah residency
they may be precluded from any such claims. As a result of their
legal 	representations 	of 	Utah 	residency, 	coupled 	with 	their
concession that they satisfied the statutory test for Utah resident
individuals, the Benjamins’ failure to file Utah income tax returns
was negligent. We therefore affirm the Commission’s imposition of
a 10 percent negligence penalty.
____________
¶40 	Associate Chief Justice Durrant, Justice Parrish, Justice
Nehring, and Justice Lee concur in Chief Justice Durham’s opinion.
16