June 29, 2017
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek a reconsideration of Public Document (P.D.) 16-112 (5/31/2016) and correction of the Virginia individual income tax assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 2012 and 2013. I apologize for the delay in responding to your appeal.
FACTS
In P.D. 16-112, the Department upheld the assessment issued to the Taxpayer for the 2012 taxable year because she did not provide documentation to show that she did not establish a Virginia residency. Pending the issuance of P.D. 16-112, an assessment was made for the 2013 taxable year. The Taxpayer filed an appeal and provided documentation to show that she resided in Virginia from August 2012 through June 2013, and all her income was earned outside of Virginia.
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.
The Taxpayer was transferred from ***** (State A) to one of her employer's Virginia offices in August 2012. She leased a place of abode in the Commonwealth for a year. Her husband remained in their State A residence. The Taxpayer contends she never established a Virginia domicile because she retained her State A driver's license and automobile registration. She also asserts that was not present in Virginia for the requisite number of days to be an actual resident for either the 2012 or 2013 taxable years.
However, the Department's records indicate that the Taxpayer acquired a Virginia driver's license and registered her motor vehicle in the Commonwealth in July 2013. She then surrendered her Virginia driver's license and registered her car in ***** (State B) in July 2014.
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 fact that an individual has a Virginia driver's license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver's licenses. See Va. Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Va. Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Va. Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver's license.
Individuals who have resided in Virginia more than six months, however, are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia, including the driver's licensing provisions of Title 46.2, Chapter 3 (Va. Code § 46.2-300 et seq.). In addition, because an individual who has been physically present and residing in Virginia for more than six months may nevertheless remain a domiciliary resident of another state or country, it may be necessary in such cases to examine additional factors to determine whether a person who has obtained a driver's license based on physical presence and actual residency in Virginia also intended to become a domiciliary resident of Virginia.
The Taxpayer's only connection with Virginia until July 2013 was leasing a place of abode. The nature of her employment appears to be temporary assignments that required periodic transfers to other states. Although the Taxpayer obtained a Virginia driver's license and registered her car in Virginia in July 2013, she subsequently surrendered the license and reregistered her motor vehicle in State B in July 2014.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. It appears that the Taxpayer did not establish a Virginia domicile. Although she eventually obtained a Virginia driver's license and registration, she was in the process of being reassigned to an office in another state.
An individual is an actual resident of Virginia if for an aggregate of more than 183 days of the taxable year, maintained a place of abode within Virginia. The Taxpayer contends that she was in Virginia less than 183 days in each of 2012 and 2013 because she traveled extensively for her employment. The Taxpayer's residential lease ran from August 2012 through the end of July 2013. Therefore, while she rented her Virginia residence for less than 183 days in 2012, she leased her place of abode for more than 183 days in 2013.
The Taxpayer has provided no evidence that she surrendered her residence prior to the end of the lease. In addition, she obtained a Virginia driver's license and registered her car in Virginia in July 2013 indicating she remained in Virginia beyond the rental period.
Nonresidents
Under Va. Code § 58.1-325, individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. Virginia Code § 58.1-302 limits the term income and deductions from Virginia sources to the items of income, gain, loss and deductions attributable to the ownership of property in Virginia or the conduct of a business, trade, profession or occupation in Virginia. Title 23 of the Virginia Administrative Code (VAC) 10-110-180 B provides that “net income from Virginia sources includes salary, tips or wages earned in Virginia . . .”
The Taxpayer contends she had no Virginia source income because she performed work in other states. The fact that the Taxpayer was based at the Virginia office of her employer necessitating the lease of a permanent place of abode raises serious doubts to the Taxpayer's assertion. The Taxpayer admits she spent in excess of 100 days in Virginia in both 2012 and 2013. The Department finds it highly doubtful she performed no services for her employer while she was in Virginia.
CONCLUSION
Based on the evidence, the Taxpayer appears to have been a nonresident during the 2012 taxable year. Although no Virginia income tax was withheld, the Department's records indicate that her salary was paid by her employer's Virginia office. Further, as indicated above, the Department finds it unlikely the Taxpayer performed no work activities at the Virginia office she was assigned to during 100 plus days she claims she was in Virginia in 2012. Such income would be considered Virginia source income subject to Virginia income tax. As such, the Taxpayer must file a nonresident Virginia individual income tax return for the 2012 taxable year.
By her actions to obtain a Virginia driver's license, in addition to establishing a permanent place of abode and working in Virginia for a Virginia employer, coupled with a lack of evidence showing she retained her domicile in State A, the Taxpayer appears to have declared her intent to change her domicile to Virginia 2013. As such, she was required to file a Virginia resident income tax return for the 2013 taxable year.
The information provided, however, indicates the Taxpayer may have moved to State B prior to the end of 2013. If she can show she changed her domicile to State B, she may be considered a part-year resident for 2013. Virginia Code § 58.1-303 provides that a person who becomes a resident of Virginia is subject to taxation during the period in which she is a Virginia resident and is taxed as a resident only for the portion for the year in which she resides in Virginia. Part-year residents are required to file a part-year resident Virginia individual income tax return.
Based the Taxpayers residency status, appropriate returns should be filed within 30 days from the date of this letter and mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attention: *****, P.O. Box 27203, Richmond, Virginia 23261-7203. When the returns are received, they will be reviewed and processed, and the assessments will be adjusted accordingly. If they are not submitted within the time allotted, the assessments for the 2012 and 2013 taxable years will be considered to be correct and collection action will resume.
The Code of Virginia sections and regulation 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/754.B