May 15, 2015
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, 2011. I apologize for the delay in responding to your appeal.
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 2011 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 his income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending that he was a domiciliary resident of West Virginia during the taxable year at issue and a reciprocal income tax agreement exempted his wages from Virginia income tax.
DETERMINATION
Residency
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 Taxpayer performed a number of activities indicating that he intended to establish domicile in West Virginia. He purchased a residence in West Virginia in December 2010 and lived at that residence throughout 2011. His employer withheld West Virginia income taxes, and he filed a West Virginia income tax return for the 2011 taxable year. In April 2011, he also registered a vehicle in West Virginia.
The Taxpayer also retained some connections to Virginia. He continued to work in Virginia. He also renewed his Virginia driver's license in January 2011. 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 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).
The Taxpayer also returned to Virginia in January 2012. According to the Taxpayer, his children had moved overseas to live with their mother. At that time, the Taxpayer sold his house in Virginia and moved to West Virginia. The children, however, decided to return to the United States, and he moved back to Virginia so they could be in the same school district they had previously attended.
In addition, the Taxpayer states that he renewed his Virginia driver's license because his work schedule did not allow him enough time to obtain a West Virginia license during the issuing agency's operating hours. His license was set to expire soon, so he renewed it with the intention of obtaining a West Virginia license later. When he learned the children would be returning, however, he kept the Virginia license knowing he would also be returning to Virginia.
After carefully considering all of the facts and circumstances of this case, I find that the Taxpayer was not taxable as a domiciliary resident of Virginia for the 2011 taxable year. Although he did renew the Virginia driver's license early in 2011, he continued to make changes consistent with a permanent change in domicile.
Reciprocity
Virginia Code § 58.1-342 B grants the Department the authority to enter into reciprocal agreements with other states to exempt nonresidents from the Virginia income tax when they earn salaries and wages from working in Virginia if such other states similarly exempt Virginia residents. In addition, employers are not required to withhold Virginia income tax from residents of these states. Virginia currently has this type of agreement with Maryland, West Virginia and Pennsylvania.
In this case, the Taxpayer was an actual and domiciliary resident of West Virginia who earned wages in Virginia during the 2011 taxable year. As such, his wage income was exempt from Virginia taxation pursuant to Virginia's reciprocal agreement with West Virginia. In addition, it does not appear that the Taxpayer had any other income that would have been considered Virginia source income subject to Virginia income tax. Accordingly, the assessment for the 2011 taxable year will be abated.
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 *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5758036248.M