May 24, 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 her income was taxable in Virginia. Based on the information received, the Department determined that the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer appeals, contending she was a resident of ***** (State A).
DETERMINATION
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 or she has abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer was a Virginia resident and began attending college in State A in 2016. The Taxpayer moved to State A when she began her college education. While a student, the Taxpayer rented an apartment in State A and visited Virginia on holidays. After graduating in 2018, the Taxpayer purchased and registered a vehicle in State A. In addition, that same year, the Taxpayer relinquished her Virginia driver’s license and obtained a State A driver’s license. The Taxpayer’s State A address was also listed on her federal and state income tax returns, as well as her W-2 wage statement. The Taxpayer was still living in State A as of the time she filed her appeal.
The Taxpayer retained minimal connections with Virginia. Her parents continued to reside in Virginia, but it does not appear that the Taxpayer herself retained any connections that would indicate she still considered Virginia to be her domicile once she relinquished her Virginia driver’s license.
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).
It has been the Department’s experience that college students rarely establish domicile where they attend college. As such, most college students remain domiciled where they were domiciled at the time they entered college. See P.D. 11-121 (6/30/2011), and P.D. 19-91 (8/19/2019).
In this case, however, the Taxpayer has shown that she intended to remain in the state where she attended college by exchanging her driver’s license and registering a vehicle in State A. Although it does not appear that these connections were established until she graduated, the Department has acknowledged that a change of domicile occurs as part of a process and the exact timing of when the true intent of an individual forms to change domiciliary residence can be difficult to discern. See, e.g., P.D. 22-1 (1/1/2022). Unless a change in domicile has clearly been established through the preponderance of evidence, the Department will generally consider a change to have occurred toward the beginning of the process.
In this case, the Taxpayer has resided in State A continuously since 2016. She eventually obtained several connections that are indicative of permanent residency, such as a driver’s license and vehicle registration, and no longer had these connections with Virginia. Although it is difficult to know the exact timing of when the Taxpayer formulated the intent to change her domicile, in my opinion, the preponderance of the evidence tends to indicate she changed her domicile as of the date she graduated from the State A university. Prior to that date, she remained taxable as a domiciliary resident of Virginia.
Part-Year Residency
Virginia Code § 58.1-303 provides that a taxpayer who becomes a resident of Virginia during the taxable year, or becomes a permanent resident of another state during the taxable year, is subject to taxation for the period in which they were a Virginia resident. Accordingly, Virginia Taxable Income (VTI) is computed by determining income, deductions, subtractions, additions, and modifications attributable to the period of residence in Virginia.
The Taxpayer should review the instructions for the 2018 Virginia part-year resident return (Form 760PY) and file a return if her income met the threshold to file, or respond with an explanation if she believes she was not required to file based on such instructions. The return or explanation should be submitted within 60 days of the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the return or explanation will be reviewed, and the assessment will be adjusted as warranted. If the return or explanation is not received within the allotted time, the assessment will be adjusted based on the best information available.
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. In addition, the form and instructions can be found on the Department’s web site in the Forms and Filing section. 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/4183.Y