January 21, 2020
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 unemployed in 2015 and not a Virginia resident.
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.
It appears that the Taxpayer believes ***** (State A) was his residence because he refers to State A as his “home of record” in his appeal letter. The term “home of record” typically refers to the state from which a military service member entered the military. Its primary purpose is determining military benefits such as travel entitlements upon separation from service. Depending on the circumstances, a service member’s state of legal domicile and home of record might be the same. That is not true, however, for all service members. A change of domicile results from the establishment of a new residency in fact, coupled with an intent to abandon the old domicile and remain in the new, regardless of what state is listed as the home of record.
In this case, it does not appear that the Taxpayer was a military service member, but rather a civilian employee of the federal government. Even if the Taxpayer had a home of record for purposes of his government employment, just like with home of record for military servicemembers, that state may not necessarily have been or remained the Taxpayer’s domicile. As explained above, other factors must be considered in order to make that determination.
It appears that the Taxpayer came to Virginia because he was assigned to a position working for the federal government in ***** (State B) in 2014. At that time, the Taxpayer leased a personal residence in Virginia, registered a vehicle and obtained a Virginia driver’s license after relinquishing his State A license. Although it is unclear whether his employment was intended to be temporary or indefinite, the fact that the Taxpayer registered a vehicle in Virginia and obtained a Virginia driver’s license suggests that it may have been more than a temporary position.
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).
An individual only has one domicile at a time, and the Taxpayer has the burden of proving that he failed to establish domicile in Virginia. See Virginia Administrative Code (VAC) 10-110-30 B 3. On a questionnaire supplied to the Department during the course of the appeal, the only connection to State A the Taxpayer listed was the State A driver’s license he relinquished when he obtained his Virginia driver’s license. In addition, he states that he moved to ***** (Country A) in 2015 and began leasing a personal residence there in May, but it appears that the Taxpayer returned to Virginia later that year after being overseas for less than six months. Under Title 23 VAC 10-110-30, moving outside of Virginia and then returning within six months constitutes prima facie evidence that an individual did not intend to abandon his Virginia domicile. In the absence of having ongoing permanent connections to State A, Country A, or any other state or country that may indicate he was domiciled there and intended to remain domiciled there, the Department must consider the Taxpayer to have changed his domicile to Virginia in 2014. Once established, the Taxpayer would have remained a domiciliary resident of Virginia until he could show that he intended to abandon his Virginia domicile and establish domicile elsewhere.
Actual Residency
Even if the Taxpayer was not a domiciliary resident of Virginia during the 2015 taxable year, the information provided indicates he resided in Virginia for more than 183 days in 2015, in two different periods, one prior to and one after he was in Country A from April until October 2015. The Department considers actual residents of Virginia to be residents from the first date they enter Virginia to the last date they spend in Virginia. See P.D. 17-118 (6/29/2017). The Taxpayer, therefore, was also taxable as an actual resident of Virginia for the 2015 taxable year.
Income
Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income (VTI) with FAGI. Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Virginia Code § 58.1-322.01 through § 58.1-322.04.
The Department’s records indicate that the Taxpayer had taxable income reported on a Form W-2 and several Form 1099s for the 2015 taxable year. Even if the Taxpayer had been unemployed for some part or all of the 2015 taxable year, as a Virginia resident any income he received that year that was taxable for federal income tax purposes would also have been generally subject to Virginia income tax.
CONCLUSION
The Taxpayer was taxable as a domiciliary and actual resident of Virginia for the 2015 taxable year. Therefore, the Department was correct in issuing the assessment, and it was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer may have information that better represents his Virginia income tax liability for the year at issue. Therefore, the Taxpayer should file a 2015 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 the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct and an updated bill will be issued. In that event, the balance of the bill should be paid within 30 days of the bill date to avoid the accrual of additional interest and collection actions.
The Code of Virginia sections, regulation 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 ***** at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/2047.M