March 15, 2017
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you request correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2012.
FACTS
In June 2011, the Taxpayer moved from Virginia to New Jersey for employment. While in New Jersey, she retained her Virginia driver's license and automobile registration. She also maintained her Virginia voter's registration. The Taxpayer filed a New Jersey resident income tax return for the 2012 taxable year. In January and February 2013, the Taxpayer interviewed for positions in New York, but moved back to Virginia in March of that year because she was unable to obtain employment.
Under audit, the Department issued an assessment to the Taxpayer for the 2012 taxable year as a domiciliary resident of Virginia. The Taxpayer appeals the assessment, contending that she was not a domiciliary resident of Virginia and earned all of her income in New Jersey during the taxable year at issue.
DETERMINATION
Domicile
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 providing 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, professional 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 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 several actions indicating an intent to change her domicile. The Taxpayer acquired a place of abode, employment and filed a resident income tax return in New Jersey.
The Taxpayer, however, maintained significant connections with Virginia. She retained her Virginia driver's and automobile registration. 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 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 Taxpayer has maintained her Virginia driver's license since 2003.
In addition, the Taxpayer was registered to vote in Virginia during the taxable year at issue. The Department has found voter registration statutes do not precisely mirror residency as it applies to income tax. Under Va. Code § 24.2-101, an individual qualified to vote in Virginia must be a resident of the precinct in which he offers to vote. This statute requires a resident to have both legal domicile and a place of abode in Virginia. For Virginia voting purposes, domicile is determined by the intention of the individual, supported by an individual's factual circumstances. See State Board of Elections (SBE) Policy 2009-005.
Further, by her own admission, the Taxpayer's move to New Jersey was temporary. First, she admits that she retained access to her parent's address in Virginia because the living arrangements in New Jersey were temporary. Second, she stated her intention to move to and pursue a career in New York after gaining experience in New Jersey. To that end, she indicated that she interviewed for positions in New York and almost moved there even though she had not secured employment.
Because the Taxpayer maintained her Virginia driver's license, automobile registration and voting registration, and expressed her intent to move to New York, she has failed to show that she established domicile in New Jersey with the intent to live there permanently and indefinitely. Until intent can be established by circumstances indicating a permanent change of domicile, the Department must conclude a change has not occurred. As such, the Taxpayer was a domiciliary resident of Virginia for the 2012 taxable year that was liable for Virginia income tax.
Credit for Taxes Paid to another State
Similar to Virginia, an individual can be a resident of New Jersey either by establishing domicile or maintaining a permanent place of abode and spending an aggregate of more than 183 days of the taxable year there. See N.J. Rev. Stat. § 54A:1-2. Because of the length of time spent in New Jersey, the Taxpayer was subject to tax as a resident. At the same time, she maintained domicile in Virginia and was, therefore, subject to Virginia's income tax.
Virginia Code § 58.1-332 A allows Virginia residents a credit on their Virginia return for income taxes paid to another state provided the income is either earned or business income or gain from the sale of a capital asset, derived from sources outside Virginia, and subject to Virginia's income tax. Virginia law does not necessarily allow a taxpayer to claim a credit for the total amount of tax paid to another state. Rather, the credit is limited to the lesser of the amount of tax actually paid to the other state or the amount of Virginia income tax actually imposed on the taxpayer on the income earned or derived in the other state. See P.D. 97-301 (7/7/1997). The limitation is computed by multiplying the individual's Virginia tax liability by a fraction, the numerator of which is the income upon which the other state's tax is imposed, and the denominator of which is Virginia taxable income.
In this case, the Taxpayer paid individual income tax to New Jersey on New Jersey source income. Because the income was primarily earned from sources outside Virginia, the Taxpayer would be eligible to claim the credit pursuant to Va. Code § 58.1-332 A for the tax paid to New Jersey on earned or business income or gain from the sale of a capital asset that was also and subject to income tax in Virginia.
The assessment at issue was made based on the best information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayer may have information that better represents her Virginia income tax liability for the year at issue. Therefore, the Taxpayer should file a 20'12 Virginia resident income tax return. 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 received within the allotted time, the assessment will be revised based on the copy of the New Jersey return provided with the appeal.
The Code of Virginia sections, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department's website. 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/872.B