Tax Type
Individual Income Tax
Description
Domiciliary residents; Withholding allowances
Topic
Residency
Withholding of Tax
Date Issued
11-09-1990
November 9, 1990
Re: Request for Ruling: Individual Income Tax
Dear ****
This will reply to the letter from your firm dated July 3, 1990 requesting, on behalf of the above-referenced taxpayers, two rulings from the Commonwealth of Virginia:
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- 1) Based on the facts and circumstances presented. the taxpayers will not be taxed as residents of Virginia in taxable years 1990 or 1991.
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- 2 ) The taxpayers may provide a Virginia employer with authority from the Commissioner to withhold tax not to exceed $5.500. the estimated liability on the portion of the taxpayers' earnings that will be taxable by Virginia as. nonresident income.
FACTS
The taxpayers. a married couple. have been domiciled in Connecticut since April 1986. The husband is a high level executive of a major corporation which moved its headquarters from New York to Virginia in 1990. Three of the subsidiaries will be headquartered in Virginia, but have facilities in eleven other states in the United States, as well as in five other countries. one subsidiary is headquartered in Massachusetts .
The taxpayers will rent a townhouse in Virginia during 1990, but their primary residence will remain in Connecticut for the foreseeable future. They will continue to vote in the State of Connecticut and both expect to be at their residence in Connecticut most holidays, weekends and vacations. They will rent a car for use while in Virginia but they will maintain their Connecticut drivers' licenses and will own two automobiles that are registered in and located in Connecticut. The bulk of their personal property will remain in their Connecticut residence. Aside from a checking account for convenience, their intangible assets will remain in brokerage accounts outside of Virginia, and they will maintain banking relationships in Connecticut. They will continue to be involved in their Connecticut church. The taxpayers do not anticipate that they will be physically present in Virginia for more than 183 days for either 1990 or 1991, and they do not intend to establish a Virginia domicile.
Based upon the forecasted amount of time the taxpayers expect to spend in and out of Virginia during 1990, the taxpayers estimate that their 1990 Virginia income tax liability will be $*******.
RULING
First, I will address the issue of the taxpayers' residency status.
For purposes of income taxation. Va. Code §58.1-302 sets forth two classes of residents. (1) actual residents and (2) domiciliary residents. Domiciliary residents are those whose legal domicile is Virginia. An actual resident is any individual who is not domiciled in this State, but who actually maintains a place of abode in Virginia for more than 183 days during the taxable year.
In determining domicile. consideration may be given to the applicant's expressed intent. conduct, and all attendant circumstances including, but not limited to. financial independence, business pursuits, employment, income sources, residence for federal income tax purposes, residence of parents. spouse, and children of the taxpayer, and real property owned by the applicant, motor vehicle and other personal property registration, residence for purposes of voting as proven by registration to vote, if any. and such other factors as may reasonably be deemed necessary to determine the person's domicile. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. (See Va. Code §58.1-302).
Analysis of the domicile issue has been offered in numerous Virginia cases, Talley v. Commonwealth, 127 Va. 516, 103 S.E. 612 (1920): State-Planters Bank v. Commonwealth, 174 Va. 289. 6 S.E. 2d 629 (1940); and Layton v. Pribble. 200 Va. 405, 105 S.E. 2d 864 (1958) . Articulated in the foregoing cases is the legal principle that in order for one to change a legal domicile from one place to another, there must be (1) an 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 intent of the person. often being the question.
Based upon the information that you have supplied in your letter, it appears that the taxpayers will continue to actively maintain their domicile in Connecticut during taxable years 1990 and 1991. As individuals who maintain a place of abode in Virginia for fewer than 183 days during the taxable year, and who are domiciled in a jurisdiction other than Virginia, the taxpayers will be considered nonresidents, and as such, are only required to file a return in Virginia if they have income from Virginia sources .
However. if in actuality, the taxpayers maintain a place of abode in Virginia for more than 183 days, they will be subject to the Virginia individual income tax as actual residents. In such a case. they will be subject to Virginia income tax on their income from all sources. To the extent that they are taxed on the same income by both Connecticut and Virginia, they may be eligible for a credit against their Virginia income tax liability for all or a portion of the liability to Connecticut. (See VR 630-2-332. copy enclosed.)
Next, I will address income tax withholding.
Generally, income tax withholding is computed by an employer based upon table amounts which correspond to the appropriate number of income tax withholding exemptions. Income tax withholding exemptions are allowed to each employee on the basis of a Virginia Employee's Withholding Exemption Certificate, Form VA-4. signed by the employee. If an employee fails to furnish a certificate, an employer is required to withhold tax as if the employee had claimed no withholding exemptions. An employer is not required to determine whether the employee has claimed the correct number of exemptions .
The department's long-standing policy, set forth in VR 630-6-470(A)t (copy enclosed), has been that an employee is entitled to the number of exemptions for which he qualifies for federal income tax purposes, but that he may seek written permission from the Commissioner to take additional allowances where the amount withheld under the withholding tables will result in a substantial overpayment of his income tax.
Therefore, because you have demonstrated that limiting the number of Virginia. withholding exemption allowances to the number of exemptions for which the taxpayers qualify for federal income tax purposes, would result in a substantial overpayment, I will allow the taxpayer to take additional allowances such that total withholding for 1990 will not exceed $5.500. However, the taxpayers should be advised that in the case of an underpayment of the withholding tax. an addition to tax may be due from the taxpayer.
I hope that the foregoing has answered your inquiries. however. If you need any further information, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner