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Court Of Appeals Reverses Circuit Court and Holds Individual has Domicile in Kentucky

06.05.2008

In Department of Revenue v. Slagel, No. 2007-CA-000495 (Ky. App. April 24, 2008), the Kentucky Court of Appeals held that Peter Slagel (“Slagel”) was domiciled in Kentucky and was subject to Kentucky individual income tax, reversing the circuit court’s decision to the contrary.

The Department adjusted the individual income tax returns of Peter and Linda Slagel for tax years 1996 through 2000 to include wages earned by Slagel while working in Venezuela. The Court first discussed the standard of review when an administrative agency’s action is involved. The Court noted that “[w]here an administrative agency’s decision is to deny relief to the party with the burden of proof or persuasion, as was the case here, the issue on appeal is whether the evidence in that party’s favor is so compelling that no reasonable person could have failed to be persuaded by it.” (citations omitted). The Court also reiterated the longstanding rule of law that as a finder of fact, an administrative agency is afforded great latitude in its evaluation of the evidence heard and the credibility of witnesses, including its findings and conclusions of fact. Upon review the Court determined that it could not say the evidence was so compelling in favor of Slagel that no reasonable person could have failed to be persuaded by it.

The Court reviewed the following facts that it held established domicile in Kentucky: (1) voter registration in Kentucky and exercise of that right for two years; (2) holding both Kentucky and Venezuela drivers licenses; (3) owning property in Kentucky, maintaining bank accounts in Kentucky and owning an incorporated business in Kentucky; (4) having a passport listing Kentucky as his “abode” and (5) having a will and power of attorney indicating that he was “of Fayette County Kentucky.” Finally, the Court noted that Slagel’s wife and children lived in Lexington, Kentucky, and in light of that fact it seemed likely that Slagel had the intention of returning to Kentucky with no present intention to move from Kentucky.

Accordingly, the Court held that the Department’s decision that Slagel was domiciled in Kentucky was not arbitrary or capricious. The Court concluded that the circuit court had erred in substituting its judgment for the judgment of the Department regarding its factual determinations that Slagel was domiciled in Kentucky. The Court therefore reversed the circuit court’s Order and remanded the case for proceedings consistent with its opinion.

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