December 23, 2015
Re: § 58.1-1824 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you appeal the denial of a Virginia individual income tax refund for ***** (the "Taxpayer) for the taxable year ended December 31, 2013. This letter will also address the protective claim for refunds you filed on the Taxpayer's behalf for the taxable years ended December 31, 2009 through 2012.
FACTS
The Taxpayer filed Virginia resident individual income tax returns for the 2009 through 2013 taxable years. In January 2014, the Department adjusted the Taxpayer's 2009 through 2011 returns to conform to adjustments the Internal Revenue Service (IRS) made to the Taxpayer's federal adjusted gross income (FAGI). The Taxpayer paid the additional taxes due in February 2014. Subsequently, the Taxpayer filed amended returns in April 2014, claiming a full refund of income tax paid to Virginia for each of the 2009 through 2013 taxable years. Under audit, the Department denied the Taxpayer's refund request as to the 2013 taxable year on the basis that he remained taxable as a domiciliary resident of Virginia. The Taxpayer appeals the denial of that refund and makes protective claims for refund for all the other taxable years at issue, contending he was a resident of ***** (Country A).
DETERMINATION
Protective Claim
Pursuant to the authority granted the Department under Va. Code § 58.1-1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Va. Code § 58.11821. As permitted by statute, the Taxpayers' request has been treated as an appeal under Va. Code § 58.1-1821.
Statute of Limitations
Generally, Va. Code § 58.1-1823 allows a taxpayer to file an amended return within three years from the last day prescribed by law for the timely filing of the return. The Taxpayer's 2009 return was due May 3, 2010 (May 1 was a Saturday). In order to timely file an amended return, the Taxpayer would have to have filed it on or before May 3, 2013. In this case, the Taxpayer's 2009 amended return was filed in April 2014, well after the general statute of limitations had expired. Virginia Code § 58.1-1823, however, also includes a number of exceptions to the general rule when specific circumstances are present.
Under Va. Code § 58.1-1823 A (iv), a taxpayer has two years from the payment of an assessment to file an amended return, provided that the amended return raises issues relating solely to such assessment and the refund does not exceed the amount of such payment. In this case, the Department adjusted the Taxpayer's 2009 return to reflect an increase in federal adjusted gross income (FAGI) reported to the Department by the Internal Revenue Service (IRS). The Taxpayer paid the assessment in February 2014. Although the Taxpayer filed an amended return in April 2014, well within the two year limitations period, the Taxpayer's amended return raised issues beyond the scope of the assessment. The Taxpayer claimed a full refund of all tax paid for the 2009 taxable year, contending he was not a domiciliary resident of Virginia. The prior assessment, however, concerned an increase in FAGI as determined by the IRS. As such, the exception described in Va. Code § 58.1-1823 A (iv) did not apply.
All of the Taxpayer's remaining amended returns, however, were filed within the general three year statute of limitations. In each case, the Taxpayer claimed a full refund of Virginia income taxes paid, contending he was not a domiciliary resident of Virginia.
Domicile
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 performed some activities indicating an intent to establish domicile in Country A. He moved to Country A to begin employment in 2007 and leased a personal residence there. He also registered a vehicle in Country A in 2013 and obtained a Country A driver's license in 2014. The Taxpayer's employer indicated that he would be returning to the United States when he began working in Country A. The Taxpayer, however, did not know how long he would be in Country A. His employment was extended until April 2015, then he returned to the United States and began living in ***** (State A).
The Taxpayer also maintained some connections with Virginia. He owned a vehicle which was registered in Virginia and he retained his Virginia driver's license, renewing it in 2009.
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).
The Taxpayer states that he renewed his Virginia driver's license when he returned to Virginia in 2009 to visit his spouse who was ill. At that time, they were legally separated. He states that the vehicle that was registered in Virginia was hers as well and that he is in the process of having his name removed from the registration.
The Taxpayer divorced his spouse in 2014. Under Virginia law, a suit for divorce may be brought only if one of the parties is and has been an actual bona fide resident and domiciliary of Virginia for at least six months preceding commencement of the suit. See Va. Code § 20-97. In the divorce decree, the court stated that it appeared, independently of the pleadings of the parties or otherwise, the Taxpayer was domiciled in and had been a bona fide resident of Virginia for at least six months preceding the commencement of the suit. The Department has found such statements in court documents to be strong indicators of domiciliary intent. See P.D. 15-125 (6/24/2015). The Taxpayer filed for divorce in June 2013. The implication of the court's statement is that the Taxpayer still had not abandoned his Virginia domicile as of that time. In light of this, in addition to the other connections the Taxpayer retained with Virginia, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia.
CONCLUSION
I find that the Taxpayer's amended return requesting a refund of Virginia individual income tax paid for the 2009 taxable was made after the statute of limitations had expired. In addition, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2010 through 2013 taxable years. Accordingly, the denial of the Taxpayer's refund as to the 2013 taxable year is upheld, and the protective claim for refund for the 2009 through 2012 taxable years is denied.
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/1-6066910212.M