March 14, 2018
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 assessments issued to ***** (the “Taxpayers”) for the taxable years ended December 31, 2013, through 2015.
FACTS
The Taxpayers, husband and wife, filed Virginia nonresident individual income tax returns for the 2013 and 2015 taxable years. Under review, the Department determined that the Taxpayers' entire income was subject to Virginia income tax for each of the taxable years on the basis that they remained domiciliary residents of Virginia. As a result, assessments were issued. The Taxpayers appealed, contending they were residents of ***** (State A).
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 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 Taxpayers were domiciliary residents of Virginia prior to the taxable years at issue. In 2013, the Taxpayers established some connections with State A. The husband obtained employment in State A and began residing there with his family in April 2013. The children attended schools in State A, and they were involved in various community activities. They resided at several different residences in State A, including one they leased from April 2014 through September 2015. Subsequently, the husband obtained employment in ***** (State B), and the family moved to State B from October 2015 through April 2016. The Taxpayers state that when the husband's employment in State B ended, they decided to return to Virginia and make it their permanent home.
The Taxpayers also retained connections to Virginia. They continued to own a personal residence in Virginia and filed their 2014 and 2015 federal income tax returns using a Virginia address. They were also investors in a Virginia business that was operating during the years in question. In addition, they had Virginia voter's registrations. They did not, however, use them to vote in any Virginia elections. Further, they retained Virginia motor vehicle registrations and their Virginia driver's licenses.
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).
As stated above, a change of domicile requires both (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. Each element has to be satisfied concurrently. Even assuming the Taxpayers acquired a new domicile in State A, by retaining connections with Virginia such as a personal residence, business interests, motor vehicle registrations and driver's licenses, the Taxpayers have failed to prove they abandoned their Virginia domicile. Therefore, I find that the Taxpayers remained taxable as domiciliary residents of Virginia for the 2013 through 2015 taxable years.
The assessments at issue were made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayers, however, may have information that better represents their Virginia income tax liability for the taxable years at issue. For example, the Taxpayers may be entitled to an out-of-state tax credit for tax properly paid to State A and State B. See Virginia Code § 58.1-332. Therefore, the Taxpayers should file Virginia resident income tax returns for the 2013 through 2015 taxable years.
The returns 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: *****. The returns will be reviewed and processed, and the assessments will be adjusted as warranted. If the returns are not received within the allotted time, the assessments will be considered correct.
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/1409.M