January 8, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to your clients, ***** (the "Taxpayers"), for the taxable year ended December 31, 2009. I apologize for the delay in responding to your appeal.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers may have been required to file a Virginia income tax return for the 2009 taxable year. A review of the Department's records showed that the Taxpayers had not filed a return. The Department requested additional information from the Taxpayers to determine if their income was subject to Virginia individual income tax. When the Taxpayers did not respond to the information request, the Department issued an assessment.
Subsequently, the Taxpayers submitted information to show that they were residents of ***** (Country A) during the taxable year in question. Under review, however, the Department concluded that the Taxpayers were domiciliary residents of Virginia because they had obtained Virginia driver's licenses in 2008. The Taxpayers appealed, contending that they had not established a Virginia domicile and that they remained domiciliary residents of Country A during the 2009 taxable year.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, situs of real or tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person's domicile. A person's true intention must be determined with reference to all the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
In this case, the evidence indicates that the Taxpayers had established domicile in Country A. The Taxpayers established a permanent place of abode in County A in 2001, and the husband has been employed there since then. They also obtained Country A driver's licenses in 2001 and continue to hold them. In addition, the wife obtained employment in Country A in 2008. The Taxpayers also registered a vehicle in Country A in 2004 and another vehicle in 2006. The question, therefore, becomes whether the Taxpayers abandoned their Country A domicile and established domicile in Virginia prior to or during the taxable year in question.
The Taxpayers performed a number of actions indicating an intent to establish a Virginia domicile. In 2004, the Taxpayers purchased residential property in Virginia. The Taxpayers state that the Virginia real estate was purchased for investment purposes.
The information provided indicates that the property was leased until the end of 2007. When the Taxpayers were unable to find a new tenant, however, they began renovating the home in 2009. The property was unoccupied the entire year, except for a brief period during the summer when their son stayed there. The Taxpayers also visited the home for a few days in 2009 in connection with the renovation work.
The Taxpayers also registered to vote in Virginia in 2008 and voted in the 2008 election. Under Va. Code § 24.2-101, an individual qualified to vote in Virginia must be a resident of the precinct in which he offers to vote. This statute requires a resident to have both legal domicile and a place of abode in Virginia. For Virginia voting purposes, domicile is determined by the intention of the individual, supported by an individual's factual circumstances. See State Board of Elections (SBE) Policy 2009-005. By registering to vote in Virginia, the Taxpayers asserted to the SBE that they were domiciliary residents of Virginia.
In addition, the Taxpayers obtained Virginia driver's licenses in June 2008. Virginia Code § 46.2-323.1 states, "No driver's license... shall be issued to any person who is not a Virginia resident." In fact, this section states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver's license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (12/9/2002). The Taxpayers state that they obtained Virginia driver's licenses to make credit card purchases and air travel more convenient. The Taxpayers, however, cancelled their Virginia driver's licenses in October 2013.
The Taxpayers also registered a vehicle in Virginia in June 2009. Although residency is not a requirement to register a vehicle in the Commonwealth, registration is generally required before the vehicle can be operated on any Virginia highway. See Va. Code § 46.2-600. Certain exceptions apply, such as temporary usage by nonresidents who have vehicles registered elsewhere. See Va. Code § 46.2-656. In this case, the Taxpayers state that the vehicle was used by their son who still lived in the United States but used it almost exclusively in other states.
Because the Taxpayers were domiciliary residents of Country A, the evidence must show that the Taxpayers both acquired domicile in Virginia and abandoned domicile in Country A. While the Taxpayers took steps indicative of establishing domicile in Virginia, they clearly retained domicile in Country A during the 2009 taxable year.
In addition, acquiring domicile in a new location requires both intent and personal presence. See Coopers Adm'r v. Commonwealth, 121 Va. 338, 93 S.E 680 (1917), in which the Virginia Supreme Court observed that neither physical presence alone, nor expressed intention alone are sufficient tocreate a legal domicile for taxation purposes. The information provided indicates that the Taxpayers have never resided in Virginia and only visited Virginia briefly on a few occasions from 2004 through the end of 2009. Absent of any evidence that the Taxpayers were physically present in Virginia for a sufficient amount of time to establish domicile, the Department must conclude that the Taxpayers were not domiciliary residents of Virginia in 2009. See P. D. 13-97 (6/11/2013). Accordingly, the assessment issued to the Taxpayers for the 2009 taxable year will be abated.
While the Department concedes that the Taxpayers were not residents of Virginia for the taxable year at issue, the Taxpayers should be aware that continuing connections with Virginia, such as registering vehicles, registering to vote, owning real property or other indicators of a permanent residence in Virginia, will likely result in future contacts by the Department with respect to the situs of the Taxpayers' domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department's determination in subsequent taxable years. In addition, the Taxpayers should be aware that Virginia law does not permit nonresidents to obtain Virginia driver's licenses. Virginia law also does not permit nonresidents to obtain voter's registrations if they are not domiciled in the Commonwealth or are living overseas and their last state of domicile was not Virginia. Any persons providing a false statement to an agency of the Commonwealth may be subject to penalty under Virginia law.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5618448617.M