10-112 | Virginia Tax

Tax Type

Individual Income Tax

Description

Taxpayers must file nonresident income tax returns

Topic

Domicile

Records/Returns/Payments

Tangible Personal Property

Taxable Income

Date Issued

07-01-2010

July 1, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This is in response to your letter in which you appeal the individual income tax assessments issued to your clients, ***** (the "Taxpayers"), for the taxable years ended December 31, 2004 through 2006. I apologize for the delay in this response.

FACTS

The Department received information from the Internal Revenue Service that tax documents for the 2004 taxable year were sent to the Taxpayers at a Virginia address. Additional information indicated the Taxpayers maintained Virginia driver's licenses and a voting residence in Virginia. Based on this information, the Department determined that the Taxpayers were domiciliary residents of Virginia for the 2004 through 2006 taxable years and issued assessments. The Taxpayers appeal the assessments, contending that they moved from Virginia to ***** (State A) in 2004, where the husband had obtained permanent full-time employment, and later moved to the ***** (Country A) when the husband way transferred there.

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 actually reside elsewhere. 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.

In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with 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 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, sites of real and 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 of 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 he or she has abandoned his or her original domicile. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer did intend to return to his or her original domicile.

The Taxpayers performed a number of actions that indicate a change to a domicile outside of Virginia. The Taxpayers moved to State A in March 2004 after the husband found employment there. They listed their home for sale, and it was sold in May 2004. The Taxpayers filed a State A income tax return as part-year residents for the 2004 taxable year. The husband was transferred to Country A in April 2004, where the Taxpayers purchased a home, purchased an automobile and became licensed to drive.

The only evidence that the Taxpayers remained domiciliary residents of Virginia for the taxable years at issue is their Virginia driver's licenses and voter registrations. The Taxpayers moved back to Virginia in 2009 when the husband's employment in Country A was unexpectedly terminated.

Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." 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 the applicant is a Virginia resident. A person providing a false statement is subject to punishment under the laws of the Commonwealth. The Department has found that an individual may successfully establish a domicile outside Virginia even if they retain a Virginia driver's license. See Public Document (P.D.) 00151 (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 (12/09/2002).

In this case, the Taxpayers did not renew their Virginia driver's licenses while they lived in State A or Country A. The Taxpayers notified the Virginia Department of Motor Vehicles (DMV) when they sold one vehicle and shipped the second to Country A. DMV advised the Taxpayers that their Virginia driver's licenses were to be cancelled unless certain actions were taken by a specific date. The Taxpayers took no action to continue their Virginia licenses; however, the licenses were not cancelled.

Based on the evidence provided, I find that the Taxpayers abandoned their Virginia domicile in 2004 and obtained domiciliary residences outside Virginia after moving to State A in 2004.

The evidence also shows that the Taxpayers owned rental real estate property in Virginia for the taxable years at issue. Accordingly, the Taxpayers must file nonresident income tax returns for the 2004 through 2006 taxable years, and for each succeeding taxable year for which a return was not filed. The returns must be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. Upon receipt, the returns will be reviewed and processed and the assessments for the 2004 through 2006 taxable years will be adjusted accordingly. If the returns are not received within this time, the assessments will be considered correct and collection action will resume.

The Code of Virginia sections and public document 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 Department's Office of Tax Policy, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Linda Foster
        Deputy Tax Commissioner

AR/1-3954882172.E

Rulings of the Tax Commissioner