December 8, 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, 2012.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 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 to determine if his income was subject to Virginia individual income tax. When an adequate response was not received, the Department issued an assessment. The Taxpayer appeals, contending he resided in ***** (Country A), *****, (Country B) and ***** (State A) for most of the 2012 taxable year.
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 Taxpayer contends that an assessment for the entire 2012 taxable year was unreasonable because he spent most of the year outside Virginia. The Taxpayer claims that he spent 30 to 40 days in Virginia in 2012. He states that he spent part of the summer in State A caring for a family member. The Taxpayer asserts that, prior to August, whatever time he did not spend in Virginia or in State A he was travelling abroad in connection with his employment. In July, the Taxpayer accepted a job with a new employer in Country A.
As stated above, a Virginia domiciliary resident working in other parts of the country or another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. For income tax purposes, therefore, it is irrelevant how much time a domiciliary resident is away from his state of domicile. He remains subject to tax because of his status as a domiciliary resident, regardless of where he is actually located.
The Taxpayer was a domiciliary resident of Virginia and filed Virginia resident income tax returns for several years prior to 2012. The Taxpayer performed some activities indicating an intent to abandon his Virginia domicile in 2012 and establish domicile in Country A. The Taxpayer accepted employment in Country A in July 2012 and began leasing a personal residence there in August 2012. He also obtained a Country A driver's license and vehicle registration in September 2012.
The Taxpayer also retained some connections to Virginia. He continued to own a personal residence in Virginia. The Taxpayer states that he began renting it to another family in August 2013 and sold it to them in September 2014. The Taxpayer's vehicle was also registered in Virginia through August 2012. In addition, the Taxpayer retained his Virginia driver's license even after he obtained the Country A license.
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 prior correspondence with the Department concerning the 2012 assessment, the Taxpayer stated that State A was his official state of residence in the United States. Although he had family members who still resided in State A and he spent some time there to care for one of them in 2012, it appears that the only connection the Taxpayer retained with State A was a voter's registration he obtained during a prior period of residency. In order to have established domiciliary residence in State A, the Taxpayer would have to have abandoned any previous domicile and been physically present in State A with the intention to remain permanently or indefinitely. The Taxpayer, however, returned to State A temporarily in 2012 to care for a family member. As such, the evidence does not indicate he was a domiciliary resident of State A during any part of the 2012 taxable year. Rather, the evidence indicates that the Taxpayer remained a domiciliary resident of Virginia until he changed his domiciliary residency to Country A in August 2012.
Part-Year Residents
Virginia Code § 58.1-303 provides that a taxpayer who becomes a resident of another state during the taxable year is subject to taxation for the period in which he was a Virginia resident. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, part-year residents may claim a portion of their Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, part-year residents may claim a prorated Virginia standard deduction if they claim the standard deduction for federal income tax purposes.
Because the Taxpayer changed his domiciliary residence to Country A in August 2012, he would be considered to be a part-year resident under Virginia law. As such, the Taxpayer should file a part-year return (Form 760PY) and report only the income he received while he remained a domiciliary resident of Virginia.
The requested return should be filed within 30 days of the date of this letter and mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23216-7203, Attention: *****. Once the return is received, it will be processed and the assessment will be adjusted accordingly. If the return is not filed within the allotted time, the assessment will be considered to be correct and collection action will resume.
While the Department concedes that the Taxpayer was not a domiciliary resident of Virginia beginning in August 2012, the Taxpayer should be aware that continuing connections with Virginia, such as retaining a Virginia driver's license or other indicators of a permanent residence in Virginia, will likely result in future contacts by the Department with respect to the situs of the Taxpayer's domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department's determination in subsequent taxable years.
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/1-6064636609.M