October 26, 2023
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek a refund of income tax paid by ***** (the “Taxpayer”) for the taxable years ended December 31, 2017, and December 31, 2019.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file Virginia income tax returns for the 2017 and 2019 taxable years. A review of the Department’s records showed that the Taxpayer had not filed returns. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. Based on his responses and the information otherwise available to the Department, the Department determined that the Taxpayer was taxable as a domiciliary resident of Virginia and requested that the Taxpayer file Virginia resident income tax returns. The Taxpayer filed the requested returns and paid the tax due. The Taxpayer appeals, contending he was a resident 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 that person and the place to which that person intends to return even though they may be residing elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their 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 their 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 their 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 person’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. The taxpayer has the burden of proving that their Virginia domicile has been abandoned. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.
The Taxpayer explains that he enlisted in the military in 2010 at an enlistment center in ***** (State B). He was not a United States citizen at the time, but subsequently obtained his citizenship and moved to State A for training. He established residency in State A and obtained a State A driver’s license.
In 2013, the Taxpayer separated from active military duty and moved to Virginia for employment with a civilian employer. He also obtained a Virginia driver’s license, registered to vote and voted in Virginia in 2013. Beginning in 2014, he accepted a position with the Department of Defense and was assigned to Virginia until 2016. The Taxpayer initially leased a personal residence in Virginia and then purchased one in 2015. In addition, he filed Virginia resident income tax returns. By his actions of moving to Virginia and abandoning his State A connections, the Taxpayer demonstrated his intent to make Virginia his domiciliary residence.
In 2016, the Taxpayer was transferred to ***** (Country A) for a two-year assignment. Before leaving for the assignment, he returned to State A and resided for a short period with a friend. He states that he intended to abandon his Virginia domicile and reacquire his State A domicile at that time. He did not, however, acquire a State A driver’s license or register to vote in State A. From 2016 through 2019, he resided in ***** (State C) while working his assignment in Country A.
After his Country A assignment was completed in 2019, the Taxpayer moved to ***** (Country B) for another two-year assignment. He is currently assigned to a position in ***** (Country C). Other than brief visits, the Taxpayer states that he has not returned to Virginia since 2016.
The Taxpayer retained some connections to Virginia. He owned a personal residence in Virginia from 2015 through 2021, although he claims he has not resided there since 2016. He has also held a Virginia driver’s license since 2013, which he renewed in 2020. The Taxpayer explains that he renewed his Virginia driver’s license in 2020 because he happened to be in Virginia and needed identification. In addition, he retained his Virginia voter’s registration, although he has not voted in Virginia since 2013.
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 they retain 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 the purposes of Title 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.
Individuals who have resided in Virginia more than six months are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia, including the driver’s licensing provisions of Title 46.2, Chapter 3 (Virginia Code § 46.2-300 et seq.). In addition, because an individual who has been physically present and residing in Virginia for more than six months may nevertheless remain a domiciliary resident of another state or country, it may be necessary in such cases to examine additional factors to determine whether a person who has obtained a driver’s license based on physical presence and actual residency in Virginia also intended to become a domiciliary resident of Virginia. However, once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver’s license even while absent from the state will be considered very strong evidence of the individual’s intent to remain a domiciliary resident of Virginia. That is because the individual’s claim to be entitled to a Virginia driver’s license would no longer be based on the length of time they were physically present in Virginia as an actual resident, but rather on the implication that the individual remained a domiciliary resident of Virginia.
The Department expects that, when individuals are seeking a permanent change of domicile, they will normally register vehicles, obtain a new driver’s license, register to vote, and perform other official acts indicating their intent to change domicile. Retaining such connections with Virginia raises considerable doubt as to the individual’s intent to abandon their Virginia domicile. If a permanent change of residence were intended, there would be no need to retain such connections with the former state. Further, when a taxpayer performs none of those activities in the next state they claim to be their domicile, it is difficult for the Department reasonably to conclude that a domicile change was intended. In this case, the Taxpayer obtained and maintained these sorts of permanent ties with Virginia and re-established none with State A.
The Taxpayer does not contend that he acquired domicile in any of the countries where he was assigned. Further, the Department has considered similar cases involving United States government employees who take positions overseas. Rarely, if ever, do these employees establish domicile in these countries while maintaining connections to Virginia. See, e.g., P.D. 15-165 (8/18/2015), P.D. 17-72 (5/23/2017), P.D. 18-161 (8/22/2018), and P.D. 23-72 (6/23/2023).
As stated above, a change of domicile requires both establishing a new domicile and abandoning the old. These requirements must also be satisfied concurrently. The Taxpayer did not establish a permanent place of abode in State A because he merely stayed at a friend’s residence between his Virginia and Country A assignments. See, e.g., P.D. 20-148 (8/25/2020). He also did not re-establish any of the permanent connections with State A that would typically indicate an intent to change domicile. Further, he kept ties to Virginia during the taxable years at issue that are indicative of an intent to retain domicile.
After carefully reviewing all of the available evidence, I find that the Taxpayer has failed to carry his burden to prove he changed his domicile. Accordingly, he remained taxable as a domiciliary resident of Virginia for the 2017 and 2019 taxable years. As such, the Taxpayer’s request for a refund of Virginia income tax paid for the 2017 and 2019 taxable years cannot be granted. The Department’s records indicate that the Taxpayer has filed returns for the 2017 and 2019 taxable years and has paid the resulting assessments in full. Accordingly, no further action is required with respect to those taxable years.
Further, in light of this determination, the Taxpayer should reevaluate his residency status for the 2018 and 2020 through 2022 taxable years to determine if he had a Virginia filing requirement and, if necessary, file the appropriate returns. Under Virginia Code § 58.1-312 A, the Department may assess underreported tax at any time when a taxpayer fails to file a return or files a false or fraudulent return with the intent to evade tax.
For taxable years subsequent to the date of this determination, the Taxpayer should evaluate his intentions as to his domicile. If he intends to make State A his domicile, then he must demonstrate so by taking affirmative actions to abandon his Virginia domicile and establish one somewhere else. It is customary that, when individuals have the intent to change their domicile, they abandon previous connections with other states, such as driver’s licenses, vehicle registrations, voter’s registrations, and other indications of permanent residence and establish such connections in the new state. If the Taxpayer continues to hold such connections with Virginia, it is likely that he will continue to be contacted by the Department with respect to his filing status as a possible Virginia resident.
In addition, the Taxpayer should be aware that Virginia law does not permit nonresidents to obtain Virginia driver’s licenses, and persons providing a false statement to an agency of the Commonwealth may be subject to penalty under Virginia law. Any applicant who knowingly makes a false statement to the DMV is subject to penalties under Virginia Code § 46.2-348.
The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/4554.X