Tax Type
Individual Income Tax
Description
Taxpayer did not complete process of changing domicile and remained a resident.
Topic
Domicile
Persons Subject to Tax
Date Issued
02-27-2014
February 27, 2014
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the Virginia individual income tax assessment issued to your client, ***** (the "Taxpayer"), for the taxable year ended December 31, 2010.
FACTS
The Taxpayer, a Virginia resident, leased an apartment in ***** (State A) from November 2009 through May 2010. At the same time, she leased her Virginia residence to another party for a term of three years. When her spouse died in December 2009, she became the sole owner of two additional Virginia residences they had co-owned. In 2010, the Taxpayer returned to Virginia periodically to handle matters related to the estate and to oversee repairs to his former residence. During one of these visits in May 2010, the Taxpayer renewed her Virginia motor vehicle registration.
In June 2010, the Taxpayer leased a residence in ***** (State B) through October 2011. The Taxpayer also states that she registered her vehicle in State B sometime in 2011. In November 2011, she returned to State A, leased another residence there and registered to vote. She also registered her vehicle in State A in August 2012 and obtained a State A driver's license in April 2013.
Under audit, the Department concluded that the Taxpayer was a domiciliary resident of Virginia for the 2010 taxable year and issued an assessment for taxes and interest due. The Taxpayer appeals the assessment, contending she was neither an actual nor a domiciliary resident of Virginia during the taxable year in question.
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 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 Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
The only action taken by the Taxpayer in 2009 that indicated she intended to change her domicile to State A was entering into a six month lease for an apartment. After extending the lease for one more month, she relocated to State B to be closer to family while recovering from a health issue. She leased a residence in State B and lived there until she returned to State A in November 2011. She also registered her vehicle in State B sometime in 2011. The information provided, however, indicates that the Taxpayer did not take any such additional steps to establish domicile in State A until after she returned there.
Consistent with intending to abandon her Virginia domicile, the Taxpayer leased her Virginia residence to another party for a term of three years which began in November 2009. At that time, she also co-owned two other residences in Virginia with her spouse, from whom she was separated. Her spouse, however, occupied one of the residences. The other was leased to a third party.
The Taxpayer also performed several activities consistent with retaining domicile in Virginia. The Taxpayer became sole owner of two other Virginia residences in December 2009, and one of them, her husband's former residence, would have been available for her use. She also returned to Virginia periodically in 2010, but these visits were necessary to handle matters related to her husband's estate and oversee repairs to his former residence. She was also hospitalized for a period of time in Virginia in 2010. In addition, she renewed her motor vehicle registration in Virginia in May 2010 and retained her Virginia driver's license until it expired in 2012.
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). In this case, the Taxpayer retained her Virginia license until it expired in 2012.
The Taxpayer contends that she established domicile in State A once she occupied the leased residence there. The Taxpayer compares her circumstances to those described in P.D. 99-203 (7/23/1999), in which the Department found that the taxpayers had successfully abandoned their Virginia domicile and established domicile in another state. In that case, the taxpayers leased a residence in the other state but returned to Virginia to complete the sale of their Virginia residence and administer a deceased parent's estate. The Taxpayer emphasizes that, unlike the taxpayers in P.D. 99-203, she did not have a Virginia residence available to her when she moved to State A.
In P.D. 99-203, however, the taxpayers performed numerous activities in addition to leasing a residence that were consistent with establishing domicile in the other state. They contracted to build a home, registered their vehicles, obtained driver's licenses, recorded a declaration of domicile and transferred their bank accounts there as well.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. After carefully weighing all of the evidence, I find that, even if the Taxpayer took steps to abandon her Virginia domicile in 2009, she did not establish a new domicile in either State A or State B before or during the 2010 taxable year. As such, the Taxpayer did not complete the process of changing her domicile and thus remained taxable as a domiciliary resident of Virginia.
Accordingly, the assessment for the 2010 taxable year is upheld. An updated bill, with interest accrued to date, will be mailed to the Taxpayer shortly. No further interest will accrue provided the outstanding balance is paid within 30 days from the date indicated on the revised bill.
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 *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5480754570.M
Rulings of the Tax Commissioner