May 23, 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 income subject to Virginia income tax. Under audit, the Department held the Taxpayer as a domiciliary resident of Virginia and issued an assessment. The Taxpayer appeals the assessment, contending she resided in ***** (State A) during the 2013 taxable year.
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 and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency or domicile.
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 asserts she took a number of actions to establish domicile in State A. She claims she accepted employment in State A, sold her Virginia residence, rented a place of abode in State A, transferred her motor vehicle registration, and obtained a State A driver's license.
The Department's records show the Taxpayer filed Virginia resident returns for the 2003 through 2012 taxable years. Further, Department of Motor Vehicle (DMV) records show, the Taxpayer held a Virginia driver's license in prior years and it was reissued in January 2014.
Information provided with the Taxpayer's appeal includes a move-in inspection report from a rental property in State A, transaction statements appearing to show payments for the rental property, a statement of address change from her investment broker, and 2013 federal information returns showing a State A Address. While this information is helpful, it does not provide a complete picture of her residency for 2013 and includes some contradictory information. For example, the move in inspection form appears to be dated in January, but transaction statements are only provided for June through December. In addition, although it appears the Taxpayer received the information returns in State A, her employer withheld Virginia income tax.
The information provided is not sufficient to determine when or if the Taxpayer moved to State A and if she intended to establish permanent residency in State A. Thus, it is unclear whether the Taxpayer was a resident, nonresident, or part-year resident of Virginia during 2013.
By letter dated June 23, 2016, the Department requested additional information to support the Taxpayer's assertion of establishing domicile in State A. In her appeal, the Taxpayer indicated water damage to some of her records prevented her from providing more information. However, she should still be able to get certain documents from State A government agencies, such as driver's license records, motor vehicle registrations, and income tax returns.
Pursuant to Va. Code § 58.1-205, any “assessment of tax by the Department shall be deemed prima facie correct. As such, the burden of proof is on the Taxpayer to show she was not subject to Virginia income tax.
Because the Taxpayer has failed to respond to the Department's request for documentation to clarify her residency status for 2013, the Department is unable to abate the assessment at this time. The assessment at issue, however, 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 taxable year at issue. Therefore, the Taxpayer will be granted one last opportunity to provide adequate documentation with regard to her domiciliary status in State A or file the appropriate Virginia income tax return. The documentation or return should be submitted within 60 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 documentation will be reviewed and the assessment will be adjusted, as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.
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/721.D