October 24, 2018
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond 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, 2014.
FACTS
The Taxpayer filed a Virginia part-year resident individual income tax return for the 2014 taxable year, claiming Virginia residency for the entire year and no Virginia taxable income. Under audit, the Department requested additional information to determine if the form type and Virginia taxable income amount were correct. Based on the information received, the Department adjusted the Taxpayer’s return to reflect Virginia residency until May 2014, and Virginia taxable income earned during her Virginia residency. The Department issued an assessment for the tax and interest due on the updated return.
The Taxpayer appealed, claiming she made the decision to abandon her Virginia domicile and relocate to ***** (State A) in 2013, and that she should be considered a Virginia resident only until January 2014. Along with her appeal, the Taxpayer filed an amended 2014 part-year Virginia individual income tax return, claiming Virginia residency until February 2014.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which she intends to return even though she 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 her 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 her 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, voter’s registration 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. See Virginia Code § 58.1-205. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer asserts that she made the decision to abandon her Virginia domicile and relocate to State A in 2013, and she should be considered a Virginia resident only until January 2014. She took a number of actions consistent with establishing domicile in State A. She leased a residence in State A, obtained a State A driver’s license, registered her vehicle in State A, and registered to vote in State A. None of these actions, however, took place until June 2014. The Taxpayer has continued to reside in State A since June 2014.
While she may have intended to establish domicile in State A earlier than June 2014, acquiring domicile in a new location requires both intent and physical presence. The Virginia Supreme Court has observed that neither physical presence alone, nor expressed intent alone, are sufficient to create a legal domicile for taxation purposes. See Coopers Adm’r v Commonwealth, 121 Va. 338, 93 S.E. 680 (1917). The Taxpayer, however, resided in Virginia until March 2014, when she moved temporarily to ***** (State B), before she relocated to State A in June 2014. Because her move to State B was only temporary, it did not affect her domicile. Additionally, she retained her Virginia driver’s license, Virginia vehicle registration, and Virginia voter’s registration until June 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 Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For purposes of Tile 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia 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.
Part-Year Residents
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 she was a Virginia resident. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, part-year residents may claim a portion of their Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, part-year residents may claim a prorated Virginia standard deduction if they claim the standard deduction for federal income tax purposes.
CONCLUSION
After carefully considering all of the evidence presented, I find that the Taxpayer remained a domiciliary resident of Virginia until she left State B and began living permanently or indefinitely in State A in June 2014. Because the Taxpayer changed her domiciliary residence to State A in June 2014, she would be considered a part-year resident under Virginia law until that time. The assessment at issue was based on the Taxpayer abandoning her Virginia domicile in May 2014 and the best information available to the Department pursuant to Virginia Code § 58.1-111.
The Taxpayer may have information that better represents her Virginia income tax liability for the taxable year at issue. Therefore, she should file a 2014 Form 760 PY reflecting residency until June 2014 to more accurately reflect her Virginia tax liability.
The return should be filed within 30 days of the date of this letter and mailed 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 the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be adjusted based on the information available.
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/1693-C