How to I "break" my Illinois residency?

So my mom just got a letter saying I could renew my Illinois driver's license online (I'm living in the UK) and asked what I would want to do. I had heard from a couple people on FB that if I renew my IL license then I might still be considered a resident of the state and possibly have to pay income taxes. Then, someone went on to say that IL is notoriously difficult to "break" residency with.

Is it true that if I renew my IL license then I would possibly have to pay IL state taxes? I haven't lived in IL in over a year, and I definitely didn't earn any income while I was living there.

Also, how would I go about "breaking" my residency? I have done a Google search, but it's not really come up with anything IL specific. Can anybody help?

Generally you break residency in one state by establishing residency in another. If you are a US citizen residing abroad then you are still a resident of your last state of residence and cannot just abandon it without establishing in another state. That has implications for personal jurisdiction in lawsuits and taxes. There’s a reason people in the military tend to establish residency in a state with no income tax even while serving in other places.

I’m not entirely sure of the intricacies of Illinois law or of whatever state you might seek to establish resistance in. Nor in Illinois state tax law. You’ll have to figure all that out, but certainly there could be tax consequences for income not earned inside the state.


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http://www.revenue.state.il.us/QuestionsAndAnswers/369.htm

Generally you break residency in one state by establishing residency in another. If you are a US citizen residing abroad then you are still a resident of your last state of residence and cannot just abandon it without establishing in another state.

Not true. My last state of residence was Virginia, which is notorious for trying to hold onto you forever. I broke ties to VA - first by writing to the Tax Commissioner, and ultimately providing mounds of documentation that proved, to their satisfaction, that I had changed domicile to the UK. I assume most states have a similar process - and it can be arduous. It took over a year for me to get the final ruling, it id did happen.

Good luck with Illinois.

The Commonwealth of Virginia is not Illinois. I see no issue with Illinois for folks who move overseas. Breaking domicile in Virginia is also frequently not vital because Virginia allows the FEIE. Ceasing to be Virginia domiciled could increase the amount of UK income tax, CGT and IHT payable; so may not be suitable for everyone.

Not true. My last state of residence was Virginia, which is notorious for trying to hold onto you forever. I broke ties to VA - first by writing to the Tax Commissioner, and ultimately providing mounds of documentation that proved, to their satisfaction, that I had changed domicile to the UK. I assume most states have a similar process - and it can be arduous. It took over a year for me to get the final ruling, it id did happen.

Good luck with Illinois.

There’s a Supreme Court cases that says if you move overseas and live there decade plus even without returning that you remain a resident of the state where you had residency before you left. If you’re born overseas to US parents and never enter the US one time, you’re a resident of the state your parent were residents of - if it’s different, I’m not sure if you could pick or be liable for both. That’s true of legal jurisdiction anyway. If state decide they want to ignore you as a resident for state tax purposes, that’s on them, but you still are a resident if you like it or not. Unless you renounce your citizenship.


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The link guya sent (which for some reason doesn't come up when I google search) does say:

If you are absent from Illinois for one year or more, we will presume you are a nonresident of Illinois.

And I've literally just passed my 1 year moving back to the UK after visa mishap so I should theoretically be considered a non-resident by that logic.

So I may just write/contact my local rep to ask. Luckily, my mom lives in the state capitol so it shouldn't be too hard to pin someone down.

Your local rep likely won't have a clue, and at best, will have some drone check who may or may not ask the right questions. Reading the links provided, and dealing directly with the tax commissioner (or equivalent in your state) is the way to go.

Re Guya's comment - Virginia allowing FEIE is not an issue for me, as I am retired. Also for the first 20+ years of my life I lived in NC. I also spent a couple of years in VT, then NH, and back to NC for another 3 years. Then I was in Indiana for 7 years, then back to NC for another 13 years. Then England for 2, Portugal for 3, England for 2, then moved to VA for economic reasons. I lived in the Commonwealth of Virginia for 11 years before we returned to the UK. I was resident for those 11 years obviously, but had no other ties, and there was no advantage for me to be considered non-resident and domiciled there. Filing a non-resident tax return was not something with which I wanted to be burdened.

Your mileage may vary.

There’s a Supreme Court cases that says if you move overseas and live there decade plus even without returning that you remain a resident of the state where you had residency before you left. If you’re born overseas to US parents and never enter the US one time, you’re a resident of the state your parent were residents of - if it’s different, I’m not sure if you could pick or be liable for both. That’s true of legal jurisdiction anyway. If state decide they want to ignore you as a resident for state tax purposes, that’s on them, but you still are a resident if you like it or not. Unless you renounce your citizenship.


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I believe that's for VOTING purposes so you have a place you can vote for President/Senator/Representative. I don't think that case applies to abandoning a state residency for other purposes (but if you're no longer considered a resident for tax purposes you may get a "federal offices only" ballot and can't vote for any state/local offices or referendums).

Could you point me to a source on the case you're talking about to clarify?

I believe that's for VOTING purposes so you have a place you can vote for President/Senator/Representative. I don't think that case applies to abandoning a state residency for other purposes (but if you're no longer considered a resident for tax purposes you may get a "federal offices only" ballot and can't vote for any state/local offices or referendums).

Could you point me to a source on the case you're talking about to clarify?

That sounds about right. My overseas vote goes through Montgomery County, Texas which is where I last had a residence in the USA. Fortunately Texas has no State income tax so have never run afoul of that. However I do receive a non-standard pension from a former employer in Louisiana, reported on a W-2 which has State taxes withheld, and I have to file a Louisiana return to claim some of it back each year, even though I haven't set foot in Louisiana since 2010.

Your local rep likely won't have a clue, and at best, will have some drone check who may or may not ask the right questions. Reading the links provided, and dealing directly with the tax commissioner (or equivalent in your state) is the way to go.

I've emailed the IL department of revenue, and I'll see if I can get someone in the states to ring them. Cheers!

Case law is a bit mixed after a nutty ruling from the 3rd cir that conflicts with precedent.

Email I got from IL Dept of Rev (though if it's anything like emailing UKVI in Sheffield, I'm still not too sure how much I trust them):

To Whom it May Concern,

Just because you live in a foreign country does not mean you are not an Illinois resident. Unless you have given up your United States Citizenship and have become a permanent citizen of this country, you must still have a state of residency in the United States.  You are considered an Illinois resident until you have established residency in another state in the United States or you have given up your United States Citizenship completely. That being said, you must determine based on your circumstances your own residency. Below is the definition of Illinois resident from the IL-1040 instructions:

"You are an Illinois resident if you were domiciled in Illinois for the entire tax year. Your domicile is the place where you reside and the place where you intend to return after temporary absences. Temporary absences may include duty in the U.S. Armed Forces, residence in a foreign country, out-of-state residence as a student, or out-of-state residence during the winter or summer."

Though this kind of contradicts the IL Dept of Rev website guya linked to....

The key is always whether the 'absence' is 'temporary', and taking up citizenship or renouncing US citizenship is not considered necessary.

You need to get the name of the tax commissioner (or equivalent  - whoever the head honcho may be in the state tax office) and write a formal letter asking for the procedure to get an official ruling on change of DOMICILE. Use that word, not residence. Stress in the initial letter that you have NO PLANS to move back to Illinois.

I would pay little/no attention to this email. In your case, at this point in time, you are not residing in the UK temporarily; you intend to make this your home. This is not necessarily a permanent, irrevocable choice; *stuff* may happen, but at this point you have moved the center of your life to the UK.

The key is always whether the 'absence' is 'temporary', and taking up citizenship or renouncing US citizenship is not considered necessary.

You need to get the name of the tax commissioner (or equivalent  - whoever the head honcho may be in the state tax office) and write a formal letter asking for the procedure to get an official ruling on change of DOMICILE. Use that word, not residence. Stress in the initial letter that you have NO PLANS to move back to Illinois.

I would pay little/no attention to this email. In your case, at this point in time, you are not residing in the UK temporarily; you intend to make this your home. This is not necessarily a permanent, irrevocable choice; *stuff* may happen, but at this point you have moved the center of your life to the UK.

Ceasing to be Illinois domiciled could significantly increase the amount of UK income tax, CGT and IHT payable; so may not be suitable for everyone.