January 23, 2023
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 ***** (the “Taxpayer”) for the taxable year ended December 31, 2018.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2018 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. When a response was not received, an assessment was issued. Subsequently, the Taxpayer submitted information to show he was a resident of ***** (State A) in 2018. Based on the information provided, however, the auditor concluded that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2018 taxable year. The Department allowed a credit for income tax the Taxpayer paid to State A and adjusted the assessment. The Taxpayer appeals, contending he was a resident of State A.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of that person and the place to which that person intends to return even though they may be residing elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their 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 their 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 their 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 person’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.
The Department determines a taxpayer’s intent through the information provided. The taxpayer has the burden of proving that their Virginia domicile has been abandoned. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.
The Taxpayer established connections in State A that indicate he may have intended to establish domicile there. After the Taxpayer graduated from a Virginia university in 2017, he obtained employment in State A. The Taxpayer leased personal residences in State A from September 2017 until September 2019. He filed his 2018 federal income tax return using his State A address. He also filed a 2018 State A resident income tax return.
The Taxpayer also retained some connections with Virginia. In particular, he retained a Virginia driver’s license and maintained two vehicles that were registered in Virginia.
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 that individual 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 Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. In this case, it appears that the Taxpayer graduated from college, obtained employment in another state, and intended for it at least to be an indefinite residence. Although the Taxpayer retained a Virginia driver’s license and had vehicles that were still registered at his parents’ Virginia home, he did not renew his license during this period and it appears the vehicles were actually garaged with him in State A. The Taxpayer acknowledges the mistake in not changing these connections over to State A and states that he will be more aware of the requirements in any future moves. Thus, it appears that the Taxpayer, just recently out of college, was more careless about keeping such connections than purposeful as to retaining his Virginia domicile. Further, the Taxpayer has not returned to Virginia to reside at any time after graduation.
After carefully considering all of the evidence presented, I find that the Taxpayer abandoned his Virginia domicile and acquired a State A domicile as of the 2018 taxable year. Accordingly, the assessment issued for the taxable year ended December 31, 2018 will be abated.
While the Department concedes that the Taxpayer was not a resident of Virginia for the taxable year at issue, he should be aware that continuing connections with Virginia, such as possession of a Virginia driver’s license will likely result in future contacts by the Department with respect to the situs of the Taxpayer’s 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.
The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/4331.B