July 28, 2016
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 “Taxpayers”) 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 Taxpayers, a husband and wife, may have been required to file a Virginia individual income tax return for the 2011 taxable year. A review of the Department's records showed the Taxpayers had not filed a return. The Department requested additional information from the Taxpayers in order to determine if their income was subject to Virginia income tax. When a response was not received, the Department issued an assessment. The Taxpayers filed an appeal, contending the husband remained a resident of ***** (State A) and is not required to file a Virginia return.
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 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 Taxpayers performed some activities indicating their intention to change their domicile to Virginia. The wife purchased their Virginia residence in November 2009, although it appears both the husband and wife were responsible for the mortgage. Virginia Department of Motor Vehicle (DMV) records indicate the wife obtained a Virginia driver's license in 2006 and renewed it in 2011. While the Taxpayers initially contended the wife's income was exempt from Virginia tax, during the course of the appeal the wife conceded to being domiciled in Virginia during 2011 and filed a Virginia income tax return. DMV records also indicate the husband registered a motor vehicle in Virginia during 2011. He surrendered his State A driver's license and obtained a Virginia license in 2013 and registered additional vehicles in Virginia in 2014.
The Taxpayers assert the husband maintained his residency in State A during 2011 and relocated to ***** (State B) in 2012. Other than the State A driver's license, the Taxpayers have provided no evidence that the husband remained in State A during 2011. The husband's income consisted of retirement income from the United States military and compensation from a ***** (State C) employer. State C borders Virginia. The information returns for both of these sources of income were both mailed to the Virginia home. Moreover, the Taxpayers filed their 2011 federal return, claiming a Virginia residence.
According to numerous Virginia court cases, changing domicile is a two-step process. First, a person must intend to permanently move away from one domicile. Second, the person must acquire a new domicile where he intends to remain permanently or indefinitely. See Robert H. Talley v. Commonwealth of Virginia, 127 Va. 516, 103 S.E. 612 (1920), State-Planters Bank, v. Commonwealth of Virginia, 174 Va. 289, 6 S.E.2d 629 (1940), and Barbara B. Woods v. Commonwealth of Virginia, Circuit Court of Wise County and the City of Norton, Law No. 97-422 (3/20/2002). Where a change of domicile has clearly been established through the preponderance of evidence, the Department will generally consider a change to have occurred toward the beginning of the process.
As stated above, the Taxpayers provided no evidence of the husband establishing a domicile in State B. Virginia court cases have also noted that acquisition of a new domicile at another place must be formed by “personal presence” and an intent to remain there permanently or indefinitely. See Talley v. Commonwealth 127 Va. 516, 103 S.E. 612 (1920); State-Planters Bank v. Commonwealth, 174 Va. 289, 6 S.E.2d 629 (1940); and Layton v. Pribble, 200 Va. 405, 105 S.E.2d 864 (1958). The Taxpayers have provided no evidence the husband was personally present in State B in 2012 with an intent to remain there permanently or indefinitely.
A change in domicile occurs as part of a process in which no single factor is dispositive. After carefully considering the information and explanations provided, the Department finds the husband was also domiciled in Virginia in 2011 and required to file a Virginia income tax return.
When both spouses are Virginia residents and file a joint return for federal income tax purposes, they may file a joint income tax return for Virginia purposes or they may elect to file separately on a combined return. See Va. Code § 58.1-324 B. Because both the husband and wife were domiciliary residents in 2011, they may file a joint return or the husband may file separately on a combined return.
The assessment at issue was adjusted based on information available as provided under Va. Code § 58.1-111. The Taxpayers may have information that better represents their Virginia income tax liability for the taxable year at issue. Therefore, the Taxpayers should file a 2011 Virginia resident tax return in accordance with the election they choose under Va. Code 58.1-324. The return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the return will be reviewed and assessment will be adjusted, as appropriate. If the return is not filed within the time allowed, the assessment will be considered to be correct and collection action may result.
Further, the Taxpayers should review the husband's residency status for the subsequent taxable years. Based on the information provided, the husband was likely a Virginia resident in 2012 and thereafter. Accordingly, he may be required to file returns for the succeeding taxable years.
The Code of Virginia sections 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/1-5976251145.D