06-118 | Virginia Tax

Tax Type

Individual Income Tax

Description

Actions do not support a finding that establishes a domicile outside Virginia

Topic

Domicile

Date Issued

10-16-2006

October 16, 2006

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 assessments issued to ***** (the "Taxpayer") for the 1998 through 2001 taxable years. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer was in the military on active duty and claimed ***** ("State A") as his home of record in 1985. He later transferred to Virginia, where he was living when he was discharged from active duty in 1992. After being discharged, he remained in Virginia and accepted a military reserve assignment. In 1994, he became employed as a pilot for a *****-based ("State B") airline. His family remained in Virginia. Although the Taxpayer obtained a State B driver's license, he has not asserted that he became a domiciliary resident of State B.

In 1997, the Taxpayer transferred to State A. During the same year, the Taxpayer obtained a Virginia driver's license and purchased a new family home in Virginia. In 1999, the Taxpayer obtained a State A driver's license. Because his employment required extensive travel, he lived in short-term residences while in State A. For the taxable years at issue, he spent three months or less per year in State A.

Throughout the taxable years under review, the Taxpayer retained ownership in the family home and real estate rental property in Virginia. The Taxpayer also purchased and registered automobiles in Virginia. Along with his wife, the Taxpayer continued to file joint federal income tax returns indicating a Virginia address. Numerous documents were mailed to the Taxpayer at the Virginia address. In 2002, in preparation for obtaining a divorce in Virginia, the Taxpayer converted the jointly owned rental property in Virginia into his personal residence. After the divorce became final, the personal residence in Virginia was sold in 2004. The Taxpayer remarried in 2003 and lived in State A with his spouse.

Under audit, the Department determined that the Taxpayer was a domiciliary of Virginia for the 1998 through 2003 taxable years. The Taxpayer has conceded domiciliary residency for the 2002 and 2003 taxable years, but appeals the remaining assessments, contending that he was a domiciliary resident of State A during the other taxable years at issue.

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. Domiciliary residence means the permanent place of residence of a taxpayer or the place to which he or she intends to return even though they may actually reside elsewhere. For an individual to change domiciliary residency to another state, that individual must abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that individual 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 an individual who, for an aggregate of more than 183 days of the taxable year, maintained a place of abode within Virginia. A Virginia domiciliary resident working in other parts of the country, who has not abandoned his Virginia residency, continues to be subject to Virginia taxation. Additionally, an individual 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 as a resident.

In determining domicile, consideration may be given to an 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, sites of real and tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine an individual's domicile. An individual's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish domiciliary residency.

The Department concedes that it is difficult to know whether an individual intends to return to Virginia. The individual has the burden of proving abandonment of his or her Virginia domicile and acquisition of a domicile elsewhere. If the information is inadequate to meet this burden, the Department will conclude that he or she intended to return to Virginia. The Department also acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case.

In this case, the Taxpayer and his family lived in Virginia when he was on active duty in the armed forces. After being discharged in 1992, he continued to live in Virginia with his family and accepted a military reserve assignment in Virginia. By remaining in Virginia to live and work as a civilian after being discharged, the Taxpayer's actions do not support his position that he maintained a State A domicile. Instead, the available evidence indicates the Taxpayer established a Virginia domicile.

In 1994, the Taxpayer accepted employment in State B. In 1997, the Taxpayer's employer transferred him from State B to State A. The Taxpayer asserts that he was neither an actual nor a domiciliary resident of Virginia from 1995 through 2001.

Because of the nature of his employment, the Taxpayer did not spend a preponderance of time in any state during the periods at issue. The Taxpayer also failed to establish a permanent place of abode in any other state. Housing arrangements consisted of short-term lodging. Because his employment required frequent travel for extended periods, the Taxpayer states that it did not make economic sense to obtain a permanent place of abode that would remain unoccupied for long portions of the year.

One document provided to substantiate one of his living arrangements in State A requests that the guest not mention to anyone that the apartment is a "crash pad." This document does not contain the Taxpayer's name. Under such terms, the Department finds it difficult to conclude that the Taxpayer established a permanent place of abode outside Virginia during the periods at issue.

During this period, the Taxpayer indicates that he became estranged from his wife. The Taxpayer and his wife, however, continued to file joint federal income tax returns reporting a Virginia address. He also retained ownership in the family home and owned automobiles registered in Virginia. Further, in November 1997, the Taxpayer and his wife purchased a new home together in Virginia.

The Taxpayer states that he spent little time in Virginia during the years at issue. He argues that the automobiles registered in Virginia were purchased for and primarily used by his children, and the Virginia home was maintained primarily for his estranged wife and children. No documentation has been provided to show that the Taxpayer stayed outside the home on the occasions when he spent time with his family in Virginia.

The Taxpayer did purchase and register several automobiles in State A beginning in 1999. He also obtained a driver's license in State B in 1994, a Virginia driver's license in 1997 after his discharge from the military reserve, and a State A driver's license in 1999. Virginia Code § 46.2-323.1 provides that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles a statement that certifies that the applicant is a Virginia resident. State A's Department of Revenue states that obtaining a State A driver's license only indicates an intent to establish residency, as would ownership of a State A residence or declaration of State A residency on one's federal income tax return.

CONCLUSION

The facts and evidence provided support the conclusion that the Taxpayer became a domiciliary resident following his discharge from the military. He continued to reside and work in Virginia. Furthermore, the Taxpayer's actions do not support a finding that he established a domicile outside Virginia. The only constant actions engaged in by the Taxpayer during the years at issue was the maintenance of family homes in Virginia and receiving annual financial documents, such as his wage and tax statements, through the mail sent to these homes.

Consequently, I find that the Taxpayer has not demonstrated, by his actions, that he intended to permanently abandon his Virginia domicile for the taxable years at issue. Therefore, the assessments issued for the 1998 through 2003 taxable years are upheld.

The Taxpayer will shortly receive updated bills that include accrued interest. No additional interest will accrue provided the outstanding balance is paid within 30 days from the date of the bill. Payment should be remitted to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. If you have any questions concerning payment of the assessments, you may contact ***** at *****.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Policy and
Administration, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/52619E

Rulings of the Tax Commissioner