Document Number
17-193
Tax Type
Individual Income Tax
Description
Domicile and Change of Domicile
Topic
Residency
Date Issued
11-16-2017

November 16, 2017

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 “Taxpayer”) for the taxable year ended December 31, 2013.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2013 taxable year.  A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia.  When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending he was a resident of ***** (Country A).

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 Department must conclude that he or she intended to remain indefinitely in Virginia.

The information provided indicates the Taxpayer resided in Virginia until 2006, then again from 2010 until June 2012, at which time he and his spouse left Virginia and resided for a brief time in ***** (State A).  The Taxpayer then left the United States and has been living in Country A since December 2012.  It is unclear what permanent connections the Taxpayer has made, if any, with Country A.  His spouse, however, is a citizen of Country A and owns property there.  The Department has found that the spouse's status as a citizen of a foreign country may be an important factor to consider in determining whether a taxpayer established domicile in that country. See Public Document (P.D.) 16-189 (9/19/2016).  In the Department's experience, the citizen spouse's status normally confers rights and privileges on the non-citizen spouse that he would not otherwise have in that country, such as the ability to remain indefinitely.  In addition, the spouse's citizenship status may be more significant in this case because there is no apparent independent basis for the Taxpayer to be legally present in Country A, such as employment.  In fact, the Taxpayer claims to be too old to be employable under Country A law.

The Taxpayer also maintained some connections with Virginia.  He owned property in Virginia but states that it has been for sale for several years.  The Department's records also indicate that some third party information returns such as W-2s, K-1s or 1099s were issued to the Taxpayer at a Virginia address.  In addition, the Taxpayer has retained a Virginia driver's license since 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 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. However, once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver's license even while absent from the state will be considered very strong evidence of the individual's intent to remain a domiciliary resident of Virginia.  That is because the basis of the individual's claim to be entitled to a Virginia driver's license would no longer be based on the length of time he was physically present in Virginia as an actual resident, but rather on the implication that he remained a domiciliary resident of Virginia.

In addition, the Taxpayer indicates that he obtained a State A voter's registration in November 2016 and voted in the November 2016 election.  The Taxpayer states that he did not, however, vote in any election in the previous twelve years.  The Department has observed that federal law generally allows United States citizens living abroad to vote in federal elections using a voter's registration from the state of the individual's last domicile.  See 52 U.S.C. § 20310 (formerly 42 U.S.C. § 1973ff-6).  See also P.D. 14­-141 (8/13/2014).  In addition, the exercise of such federal voting rights by an overseas citizen shall not affect the domicile or residence of such citizen for purposes of any federal, state or local tax.  See 52 U.S.C. § 20309 (formerly 42 U.S.C. § 1973ff-5). Therefore, the fact that the Taxpayer obtained a State A voter's registration has no bearing on whether or not he established domicile in Country A.

The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. After carefully considering all of the evidence presented, I find that the Taxpayer was not a domiciliary resident of Virginia as of the 2013 taxable year.  Accordingly, the assessment will be abated.

While the Department concedes that the Taxpayer was not a domiciliary resident of Virginia during the 2013 taxable year, the Taxpayer should be aware that continuing connections with Virginia, such as having information returns mailed to a Virginia address, retaining a Virginia driver's license or other indicators of a permanent residence in Virginia will likely result in future contacts by the Department with respect to the situs of the Taxpayer's domicile.  As in any determination, a change in the facts and circumstances could result in a change in the Department's determination in subsequent taxable years.  In addition, the Taxpayer should be aware that Virginia law does not permit nonresidents to obtain Virginia driver's licenses, and persons providing a false statement to an agency of the Commonwealth may be subject to penalty under Virginia law.  Any applicant who knowingly makes a false statement to DMV is subject to penalties under Va. Code § 46.2-348.

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/1324.M

Rulings of the Tax Commissioner

Last Updated 12/14/2017 12:48