March 31, 2016
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This is 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 Taxpayer lived in ***** (State A) from January through August 2012 and stayed in her Virginia place of abode from August through December 2012 as required by her work. She filed a Virginia part-year resident individual income tax return reporting the income earned for the period. The Taxpayer was audited and an assessment was issued because the Department determined that she was a domiciliary resident of Virginia for the entire 2012 taxable year.
The Taxpayer's employment ended in January 2013. She applied for, but was denied, unemployment benefits from Virginia because a portion of her 2012 income was earned in State A.
The Taxpayer filed an appeal contending that she should only be taxed on the income she earned in Virginia for 2012 because her employer required the Taxpayer to work in State A for a portion of that year. In the alternative, the Taxpayer requests that interest be abated because of the confusion caused by the denial of the unemployment benefits and the length of time it took the Department to issue the assessment. She also requests credit for the Virginia unemployment benefits because she worked in Virginia for a portion of the 2012 taxable year.
DETERMINATION
Residency
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.
During the 2012 taxable year, the Taxpayer owned a place of abode in Virginia. She maintained a Virginia driver's license, registered her automobile and voted in Virginia. In addition, her work assignment in State A was clearly temporary and she returned to Virginia at the end of the assignment. The Department has repeatedly ruled that individuals generally lack the intent to abandon their Virginia domicile when they engage in temporary employment outside the Commonwealth. 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).
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 or she was a Virginia resident. Thus, in order to file a part-year resident return, an individual must be both a resident of another state and a nonresident of Virginia for the portion of the year they were a resident of the other state. Further, a change in domicile requires that a taxpayer abandon his or her Virginia domicile and intentionally acquire a new domicile without Virginia. In this case, however, the Taxpayer did not become a domiciliary resident of State A. She temporarily resided in State A for a portion of 2012 as required by her employer. As such, she remained a Virginia resident for the entire 2012 taxable year.
Interest
The application of interest to tax underpayments is mandatory under Va. Code § 58.1-1812. Interest cannot be waived unless the associated tax is adjusted. Interest is not assessed as a penalty, but represents a fee for the use of money that was properly due the Commonwealth.
In addition, like the federal tax regime, Virginia's taxing system is based largely on the theory of self-assessment. A taxpayer computes his own income tax, fills out his own return, and pays the tax indicated. Virginia has implemented a self-assessment system based on the federal system because it is less intrusive upon taxpayers, simpler, and less costly to administer.
Virginia receives approximately 3.5 million individual income tax returns per year. Only a small portion of the individual taxpayers can be audited or reviewed annually. In this case, the Taxpayer filed a part-year resident return for the 2012 taxable year even though she was a domiciliary resident of Virginia for the entire year. As such, the Department finds no basis for abating any portion of the assessed interest.
Unemployment Benefits
The Taxpayer requests that unemployment benefits be issued to her for the first quarter of 2013 because she worked in Virginia for a portion of 2012. Under Va. Code § 58.1-202, the Department has the authority to administer state, and to a limited extent, local business taxes. It does not have the authority to issue unemployment benefits. In Virginia, unemployment benefits are administered by the Virginia Employment Commission (VEC). The Taxpayer would need to contact the VEC regarding unemployment benefits.
CONCLUSION
Based on the information provided, the Taxpayer was a Virginia domiciliary resident for the 2012 taxable year and was subject to Virginia income tax on all income earned during that year. As such, the assessment for the 2012 taxable year is upheld. An updated bill will be issued shortly. The Taxpayer should remit payment for the outstanding balance within 30 days of the bill date to avoid any collections actions.
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/1-6171471377.B