September 30, 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, 2010.
FACTS
The Taxpayer, a domiciliary resident of Virginia, was employed with the Department of Defense (DOD). In March 2008, the Taxpayer was assigned to duty station in ***** (Country A). In March 2011, the Taxpayer's assignment ended and she returned to Virginia. The Taxpayer acknowledges that she remained in Virginia until October 2014.
The Department received information from the Internal Revenue Service (IRS) that the Taxpayer may have income subject to Virginia income tax. Under review, the Department held that the Taxpayer was a domiciliary resident of Virginia and issued an assessment for the 2010 taxable year. The Taxpayer appeals the assessment, contending she was not a resident of Virginia from March 2008 through March 2011.
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 abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The information provided indicates that the Taxpayer was a domiciliary resident of Virginia. Approximately three months before transferring to the duty station in Country A, the Taxpayer obtained a ***** (State B) driver's license and voter's registration card. The Taxpayer was assigned to Country A for three years then returned to Virginia.
In considering employment as it relates to an individual's domicile, the Department has analyzed whether a specific employment contract was established permanently or for an indefinite period of time. See Public Document (P.D.) 99-158 (6/21/1999). In the case of individuals who engage in employment under set term contracts, the Department has ruled that such individuals generally lack the intent to abandon their Virginia domicile based on the temporary nature of the activity. See P.D. 86-219 (11/3/1986), P.D. 94-353 (11/23/1994), P.D. 96-207 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), and P.D. 10-134 (7/12/2010). In P.D. 01-161 (10/23/2001), the Department held, however, that a taxpayer who took sufficient actions to abandon his Virginia domicile can be considered to have established a new domicile even though he was temporarily employed for a definite period of time.
The Taxpayer has not provided any evidence, other than a temporary position, that she intended to establish domicile in Country A during the 2008 through 2011 taxable years. Instead, the Taxpayer, provided evidence that she intended to establish domiciliary connections in State B. The Taxpayer registered to vote, obtained a driver's license, and registered her motor vehicles in State B in November 2007. While such actions are factors in determining domicile, all factors must be considered.
In Coopers Adm'r v. Commonwealth, 121 Va. 338, 93 S. E. 680 (1917), the Virginia Supreme Court ruled that acquiring domicile in another state requires both intent and personal presence. In this case, the Taxpayer has provided no evidence that she actually moved to State B. In fact, statements in her correspondence indicate she was living in Virginia just prior to the time of her transfer to Country A. Further, she indicated that she was residing in Virginia on both her 2007 and 2008 Virginia income tax returns. Under these circumstances, the Department finds it doubtful that the Taxpayer took sufficient steps to establish a physical presence in State B prior to transferring to Country A.
In addition, the Taxpayer began filing Virginia income tax returns when she returned to Virginia in 2011. This raises doubts as to whether the Taxpayer intended to move to State B permanently and indefinitely.
Based on the information provided, I find that the Taxpayer did not abandon her Virginia domicile while living in Country A. The Taxpayer, however, may have additional information to more accurately reflect her Virginia income tax liability. The Taxpayer may file a 2010 Virginia income tax return. The return should be mailed to: Virginia Department of Taxation, P.O. Box 27203, Richmond, Virginia 23261-7203 within 30 days from the date of this letter. If the return is not filed, the assessment will be upheld and collection actions may resume.
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/1-6057602285.D