WINSLOW – Attorney William Lee is seeing an increasing number of clients who are splitting their time between Maine and Florida.

And he offers a warning: Those doing so should be careful — especially if they plan to claim primary residency in either state — or they might unwittingly find themselves in violation of tax laws.

“It is complicated and I know members of the Florida Bar who have a hard time understanding the concept,” Lee said. “You need to document things very carefully. You should keep records.”

His comments came Wednesday night during a presentation, attended by 15 people, at the Winslow Public Library. The free event was sponsored by Lee’s Waterville law firm, O’Donnell, Lee, McCowan & Phillips LLC, and was held at a time when many Maine “snowbirds” are preparing to head south.

The issue of splitting residency between the two states garnered high-profile attention recently. Based on tax records, MaineToday Media reported last week that Ann LePage, wife of Republican gubernatorial candidate and Waterville Mayor Paul LePage, had improperly benefited from homestead tax exemptions by claiming primary residences in both Maine and Florida in 2009.

LePage’s campaign has acknowledged the discrepancy, which violates statutes in both states, but has described it as “paperwork error” that will be fixed.

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Lee, who received his law degree from the University of Florida and spends part the year in that state, told the audience that it’s easy to make residency mistakes because the laws in each state are different and depend greatly on an individual’s own circumstances, such as where they work and the kind of property they own.

Lee, who is also the municipal attorney for both the city of Waterville and town of Winslow, made only an indirect reference to the LePage media reports, saying the residency issue had recently been in the news as “a matter of public interest.”

To receive the homestead exemption in Florida, applicants must fill out paperwork each year declaring that state as their primary residence, Lee said. In Maine, applicants need not reapply each year, though they must inform the tax assessor if they move to a different community.

For income-tax purposes, someone is considered a full-time Maine resident if their permanent home is in the state and they spend 183 days there during a calendar year, Lee said.

It’s against the law in both states to claim permanent residence if also claiming it in another state. Maine statutes address the crime of false filing: “An individual who claims to be a permanent resident of this state … who also claims to be a permanent resident of another state for the tax year for which an application for a homestead exemption is made commits a Class E crime,” the statute says.

That’s why residents who intend to change their residency between Florida and Maine should be careful only to claim the tax exemption for the state where their primary home is located, and to make sure their residency is documented — driver’s license, voter registration, bank accounts — in case tax officials investigate.

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Lee outlined several advantages to obtaining residency in Florida, which “really is a tax haven,” he said. Key advantages include no state income tax and a homestead tax exemption that covers up to $50,000 of property value. In addition, Florida homesteads are off limits to creditors’ claims; and a home’s assessed value, which affects property taxes, can’t increase more than 3 percent per year.

Maine, on the other hand, has an 8.5 percent income tax, a homestead exemption that covers only up to $10,000 of property value, only partial protection of a homestead from creditor’s claims, and no limit on property assessment increases.

“That’s why so many people have changed their domicile,” Lee said. “It’s a huge advantage to be a resident of Florida and have that homestead exemption for tax purposes. But you need to be very careful. Don’t do it halfway — do the whole thing.”

 


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