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 “Taxpayers”) for the taxable year ended December 31, 2018.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, 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 Taxpayers had not filed. The Department requested additional information from the Taxpayers in order to determine if their income was taxable in Virginia. In response, the Taxpayers submitted a Virginia nonresident income tax return along with other information. After reviewing the information provided, the Department determined that they were domiciliary residents of Virginia and issued an assessment. The Taxpayers appeal, contending the wife was a resident of ***** (State A).
DETERMINATION
Wife’s Domicile
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 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.
The Department determines a taxpayer’s intent through the information provided. A taxpayer has the burden of proving that he has abandoned his Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he intended to remain indefinitely in Virginia.
The wife accepted employment in State A and began living and working there in January 2017. She registered two vehicles in State A, but did not acquire a State A driver’s license. She also filed her federal and State A income tax returns using her State A address. Except for brief periods for vacations and visiting family in Virginia, she remained in State A until 2021 when she moved to ***** (State B).
The wife also retained some connections to Virginia. She and her husband continued to own a home in Virginia. She states that they retained the home to use for weekend and holiday visits. A vehicle was registered in Virginia and was garaged at their Virginia residence for her use when she and her family visited. She explained that her husband continued to live in their Virginia home until June 2018 when their children finished school. Her W-2s from State A were mailed to her Virginia residence, and both she and her husband maintained their Virginia driver’s licenses until they moved to State B in 2021.
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 wife explains that she did not relinquish her Virginia driver’s license because it had not expired. While she did retain the Virginia license, it was never renewed and, when she eventually moved to State B, she and her husband both obtained State B driver’s licenses.
The wife also explained that she had her W-2s sent to her Virginia address as a security measure because, at that time, her residence in State A was an apartment rental. Further, her husband stayed in the Virginia home with their children only long enough for them to finish the school year and she only returned to that home intermittently.
Part-Year Residency of Husband
Virginia Code § 58.1-303 provides that any individual who becomes a resident of another state during a taxable year shall be taxable as a Virginia resident for only that portion of the taxable year during which that person was a resident of the Commonwealth. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 further explains that the Virginia taxable income of a part-year resident shall be computed by determining income, deductions, subtractions, additions, and modifications attributable to the period of residence in Virginia. As such, any individual who is a part-year resident of Virginia during a taxable year must apportion their income between their periods of residence in and outside of Virginia on a schedule of income filed with their return (Form 760PY). Part-year residents who cease residing in Virginia during a taxable year, and meet the filing threshold of Virginia Code § 58.1-321, must file a Virginia part-year return.
The husband was a resident of Virginia until he left Virginia in June 2018. As such, he would have been required to file a part-year return for the 2018 taxable year if he met the filing threshold of Virginia Code § 58.1-321.
CONCLUSION
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. After carefully considering all of the evidence presented, I find that the wife was not a domiciliary resident of Virginia in 2018. Accordingly, the assessment will be abated. The husband is instructed to file a part-year return if he met the filing threshold for doing so under Virginia Code § 58.1-321. More information is available in the instructions accompanying the 2018 part-year return form (Form 760PY).
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/4177.Y