May 22, 2024
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to your client, ***** (the “Taxpayer”), for the taxable year ended December 31, 2018.
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 2018 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. Based on the information received, the Department determined that the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer filed an application for correction, 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 reside 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 lived and worked in ***** (State B) from 1996 through 2017. The Taxpayer then accepted employment in State A in January 2018. He initially leased a residence in State A and, in May 2019, he and his spouse purchased a home. He also acquired a State A driver’s license and registered to vote in State A in September 2019.
The Taxpayer also had some connections with Virginia. He had previously purchased a residence in Virginia in May 2014, which was used primarily as a vacation home for visiting family. He registered and garaged a vehicle at the Virginia residence. In May 2018, the Taxpayer obtained a Virginia driver’s license using the Virginia residence as the address on the license. A federal Form W-2 was also sent to the Taxpayer at this address, and Virginia income tax was withheld. The W-2 was for certain deferred compensation that the Taxpayer received in 2018 related to his prior employment in State B.
The Taxpayer explains that he obtained a Virginia license because his State B license had expired and he and his wife had not yet completed their move to State A. He indicates that he did not understand the implications of obtaining a Virginia driver’s license and that it was done out of convenience. 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 that individual 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 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. While the Taxpayer may have acted out of ignorance, attesting to being a domiciliary resident of Virginia when one is a resident of another state could be considered to be a false statement subject to penalties under Virginia Code § 46.2-348.
The documentation provided by the Taxpayer shows that he was a domiciliary and actual resident of State B until he accepted employment in State A in January 2018. The Taxpayer owned a residence in Virginia that appeared to be used strictly as a vacation property. The Taxpayer owned a vehicle that was registered in Virginia and kept at the Virginia property. The Taxpayer kept a vehicle at the Virginia residence because he was normally traveling by air rather than driving between Virginia and State A or State B.
As stated above, to change from one domicile to another requires both abandoning the previous domicile and establishing a new domicile. Establishing a new domicile requires that the individual be physically present in a new state or country with the intent to establish a permanent residence there at that time. The Taxpayer was clearly living and working in State A in 2018 and only returning to Virginia for visits. Further, while he did obtain a Virginia driver’s license in May 2018, the Taxpayer only held it for 15 months when he received his State A driver’s license. After considering the totality of the circumstances, the efforts that the Taxpayer undertook in 2018 and 2019 to establish a permanent residency somewhere were done with respect to State A, not Virginia. As such, I find that the Taxpayer was not taxable as a domiciliary resident of Virginia for the 2018 taxable year. Accordingly, the assessment issued for the taxable year ended December 31, 2018, will be abated and the Virginia income tax that was withheld will be refunded with interest.
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 ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4663.B