Tax Type
Individual Income Tax
Description
Taxpayer had no income from Virginia sources
Topic
Domicile
Persons Subject to Tax
Records/Returns/Payments
Date Issued
08-10-2010
August 10, 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 assessment issued to your client, ***** (the "Taxpayer"), for the taxable year ended December 31, 2006. I apologize for the delay in the Department's response.
FACTS
The Taxpayer was employed in ***** (Country A), where he lived with his family. The Department received information from the Internal Revenue Service that financial documents for the 2006 taxable year were sent to the Taxpayer at a Virginia address. Additional information indicated the Taxpayer maintained a Virginia driver's license and was also registered to vote in Virginia.
On audit, it was concluded that the Taxpayer's employment assignment in Country A was temporary, and he intended to return to Virginia after he was transferred back to the Commonwealth in 2007. Because he was considered to be a domiciliary resident of Virginia, the Department issued an assessment to the Taxpayer for additional tax, interest and penalty for the 2006 taxable year. The Taxpayer contests the assessment, asserting that he was not a domiciliary resident of Virginia during the taxable year at issue.
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 that the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. For a person to change domiciliary residency to another state, 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 the world 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, 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 or domicile.
The Department concedes that it may be difficult to ascertain whether a taxpayer intends to return to Virginia. 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 Virginia domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
In this case, the Taxpayer and his family clearly established their domiciliary residency in Virginia when the Taxpayer was transferred from ***** (State A) by his employer in 2000. In January 2004, the Taxpayer was assigned to a position Country A for an indefinite period of time.
The Taxpayer engaged in a number of activities indicating a change of domicile to Country A. He sold his home and automobiles in Virginia and moved to Country A with his family. The Taxpayer moved all of his family's personal property to Country A. He entered into a two-year lease agreement for an apartment in Country A and renewed it for an additional two years. He obtained Country A and International driver's licenses, and purchased and registered an automobile in Country A. He joined a church and became active in numerous civic and professional organizations. His children attended school in Country A. Further, after leaving Virginia, his professional license was revoked by the Virginia Department of Professional and Occupational Regulation.
The Taxpayer also took actions consistent with maintaining his Virginia domicile. He continued to hold a Virginia driver's license and voter's registration after moving to Country A. He returned to Virginia in July 2007 after being transferred here by his employer. At that time, he obtained a new 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." 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.) 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 (12/09/2002). In this case, the evidence shows that the Taxpayer did hold a Virginia driver's license after moving to Country A, but he did not renew the license until after returning to Virginia.
The auditor's analysis relied heavily on the fact that the Taxpayer obtained a temporary resident work permit from Country A. Because the permit was temporary, the auditor concluded that the Taxpayer's employment status in Country A could not be considered indefinite. The Taxpayer, however, was in Country A for more than three years, meaning that the temporary work permit was renewed. Renewing a temporary work permit can be an indication of intent to establish domicile in a foreign country. See P. D. 05-46 (4/05/2005).
After reviewing all the evidence in this case, I find that the Taxpayer was not a domiciliary resident of Virginia for the 2006 taxable year. Because the Taxpayer had no income from Virginia sources, the assessment has been abated.
The Code of Virginia sections and public documents 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 *****.
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- Sincerely,
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- Linda Foster
Deputy Tax Commissioner
- Linda Foster
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AR/1-4182931431.E
Rulings of the Tax Commissioner