Scuttle or Swim

Glover v. Comm, a recent tax court decision, presents several issues to Merchant Mariners. Mr. Glover worked for Reinauer Transportation. His tugs pushed oil coastwise as far as Virginia. The tugs would assist on docking jobs when in the New York area.

Mr. Glover took deductions on his income tax returns that would be considered acceptable if he was on a “temporary assignment”. Mariners have generally been characterized as such. Thus, their tax home has been considered to be their residence.

Mr. Glover’s attorney cited the now infamous Sailor Tax cases Johnson and Westling, stating that Glover’s tax home was in Missouri as per the decisions. Mr. Glover’s attorney did not introduce any statutory evidence (Jones Act Law) defining tax home for State tax liability purposes.

The attorney failed to meet substantiation requirements to shift burden of proof to the respondent. This means that the IRS’s position is considered to be correct and that Glover was required to meet the burden of proof.

The Tax Court has defined a Tax Home as the area surrounding a taxpayer’s principal place of business. If a taxpayer does not have a principal place of business, it can shift to their residence.

The Court concluded that all of Glover’s arguments were moot irrelevant, or without merit. This is a dangerous outcome that could cause global implications if not addressed. We’re talking coastwise and foreign.

We need someone to appeal this decision….

Suz asked this question

So, what about if you live in one state (TN) and work as a merchant mariner in another state (HI), 45 days on/45 days off rotation? Do you pay HI state taxes, or does the payroll clerk change your home state to TN, which has no state income tax? This will be my fiance’s issue next year as we are moving from Hawaii to Tennessee, but he will be commuting for his pull. Also, would travel expenses to and from HI be a deductible expense? I’ve looked at IRS publication 463 and it was a bit confusing. I’m hoping for a little clarification.

It’s going to be impossible to figure this one out via IRS publications. The problem is that we’re dealing with State law and the applicability of Title 46. Section 11108 says the following.

(a) Withholding.— Wages due or accruing to a master or seaman on a vessel in the foreign, coastwise, intercoastal, interstate, or noncontiguous trade or an individual employed on a fishing vessel or any fish processing vessel may not be withheld under the tax laws of a State or a political subdivision of a State. However, this section does not prohibit withholding wages of a seaman on a vessel in the coastwise trade between ports in the same State if the withholding is under a voluntary agreement between the seaman and the employer of the seaman.