April 28, 2015
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 ***** (the "Taxpayer") for the taxable year ended December 31, 2011.
FACTS
The Taxpayer and his wife filed a joint 2010 Virginia income tax return as residents of the Commonwealth. In August 2010, the Taxpayer formed ***** (ASC) in ***** (State A). In 2010, the husband leased a residence and furnishings and registered a motor vehicle in State A. The Taxpayer acquired a State A driver's license, which he allowed to lapse in September 2012. He simultaneously had a Virginia driver's license that he renewed in December 2011.
While working at the State A office on a full time basis, the husband resided at his State A place of abode. The husband traveled frequently to Virginia throughout the 2011 taxable year while his wife and the couple's child continued to reside in Virginia. A motor vehicle was registered in Virginia in both the Taxpayer and his wife's name. In addition, the Taxpayer and his wife jointly owned ***** (VALLC).
Most of the Taxpayer's federal tax documents were sent to the Virginia residence. The Taxpayer and his wife filed a joint federal income tax return using the Virginia address. The Taxpayer filed a nonresident Virginia individual income tax return under the status "married, filing separately on this combined return" for the 2011 taxable year and attributed all of the Taxpayer's income to State A.
The Taxpayer and his wife were audited and the Department concluded that the Taxpayer was a domiciliary resident of Virginia. As a result, the Department issued an assessment for additional tax and interest for the 2011 taxable year. The Taxpayer appeals the assessment, contending that he was not an actual or domiciliary resident of Virginia during the 2011 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 actual abandonment of the old domicile, coupled with an intent not to return to it, and 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 individuals' expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, sites of real and 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 actions to establish domicile in State A. He moved to State A in order to open and operate a business. The business required the Taxpayer to perform his services at the State A location. He acquired a place of abode in State A and also registered a motor vehicle in State A. He possessed a State A driver's license during the taxable year at issue.
The Taxpayer also maintained a number of connections with Virginia. The Taxpayer jointly owned a Virginia residence and a motor vehicle registered in the Commonwealth with his wife. The Taxpayer's family remained in Virginia to which he returned regularly in 2011. The Taxpayer also continued to hold an interest in VALLC. A joint federal return was filed using the Virginia address. Even though the Taxpayer possessed a State A driver's license, he renewed his Virginia driver's license in December 2011. He then allowed his State A driver's license to lapse in September 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 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 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 Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. Although the Taxpayer took significant steps to change his domicile to State A, he did not abandon his Virginia domicile. The Taxpayer also made inconsistent claims about the amount of time he spent in Virginia while admitting he failed to keep a log of or any documentation as to his location during 2011. As such, I find that the Taxpayer was a Virginia domiciliary resident during the 2011 taxable year. Accordingly, the assessment for the 2011 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 document 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/1-5451117127.B