August 2, 2019
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, 2015.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2015 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 ***** (State A).
DETERMINATION
Domicile
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 Taxpayer performed several actions that may indicate he intended to change his domicile to State A. The Taxpayer leased a personal residence in State A from August 2010 to October 2017, at which time he purchased a personal residence there. He also registered a vehicle in State A in 2015.
However, the Taxpayer maintained significant connections with Virginia. The Taxpayer retained a Virginia driver’s license, vehicle registration, and voter’s registration. He voted in Virginia elections several times while he claims he was residing in State A, including in 2012 and 2016. The Taxpayer also continued to receive tax-reporting documents at a Virginia address.
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).
Under Virginia 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. By registering to vote in Virginia, the Taxpayer asserted to the SBE that he was a domiciliary resident of Virginia. Consistent with Cooper’s Adm’r v. Commonwealth, 121 Va. 338, 349, 93 S.E. 680, 683 (1917), the Department considers the fact that a taxpayer continues to use a Virginia voter’s registration to vote in Virginia elections to be very strong evidence of intent to retain a Virginia domicile.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. In the Department’s opinion, the facts demonstrate that the Taxpayer intended to retain his Virginia domicile.
Written Advice
Virginia Code § 58.1-1835 provides that the Department must abate any portion of tax, interest and penalty attributable to erroneous written advice by the Department under the following conditions:
1. The written advice was reasonably relied upon by the taxpayer and was in response to a specific written request by the taxpayer;
2. The portion of the penalty or tax did not result from a failure by the taxpayer to provide adequate or accurate information; and
3. The facts of the case described in the written advice and the request thereof are the same, and the taxpayer’s business or personal operations have not changed since the advice was rendered.
Based on the above statutory provisions, the erroneous advice must be reasonably relied upon by a taxpayer, and such advice must be in writing. In addition, such written advice must be provided based on a specific request by a taxpayer who has provided sufficient and accurate facts so that the Department may issue a correct decision. See P.D. 13-229 (12/18/2013).
Although the Taxpayer remained a domiciliary resident of Virginia during the 2015 taxable year, the Taxpayer was selected for review in 2014 for failing to file a 2011 Virginia income tax return as a Virginia resident. After an assessment was made, the Taxpayer disputed the residency determination, contending he was a resident of State A. In order to determine the Taxpayer’s residency status, the Department requested further information by questionnaire, which the Taxpayer completed and returned. The Taxpayer similarly reported that he retained a Virginia driver’s license, vehicle registration and voter’s registration. He also expressly stated on the questionnaire that he liked knowing he was still a part of the Virginia community. Clearly, the retention of such connections and his statement indicated his intention to retain his Virginia domicile at that time.
Despite receiving this information, the Department’s auditor abated the assessment and informed the Taxpayer in writing that based on the information he submitted about his residency in State A, he had no liability to Virginia for the 2014 taxable year. The Department also selected the Taxpayer for review for the 2012 and 2014 taxable years and each time abated the assessments that had been issued. The question is whether the provisions of Virginia Code § 58.1-1835 apply in this case.
The Taxpayer was informed in 2014 that the Department considered him to be a resident of State A. In his appeal, the Taxpayer claimed the he was a resident of State A and provided a copy of his State A income tax return. Based on his assertion, he could have reasonably relied on the written guidance provided by the Department in 2014.
As indicated above, the Taxpayer has been responsive and forthcoming during the appeals process. Throughout the audit and appeals processes, the Taxpayer has consistently responded with adequate and accurate information.
After the Taxpayer appealed the 2015 assessment, the Department requested that the Taxpayer complete a questionnaire similar to the one he previously completed for the 2011 review. A comparison of the answers to the two questionnaires indicates his circumstances essentially remained unchanged since the advice was given in 2014.
Therefore, I believe it appropriate in this case to apply the provisions of Virginia Code § 58.1-1835 for the 2015 taxable year. Accordingly, I am ordering the abatement of the 2015 assessment.
Further, the Taxpayer will be considered to have relied on the Department’s written advice up to the date of this determination. If the Taxpayer is contacted by the Department regarding his residency status for any taxable years covered by this determination, he should respond by including a copy of this determination letter to the appropriate audit staff.
The Taxpayer should be aware, however, that if he continues to retain his Virginia connections or obtains other Virginia connections after the date of this determination, they will be considered evidence of his intention to retain a Virginia domicile. If such connections are retained during 2019, the Taxpayer should file the appropriate Virginia income tax return in accordance with his domiciliary residence in Virginia.
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/1881.A