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 31, 1990 requesting, on behalf of the above-referenced taxpayer, two rulings from the Commonwealth of Virginia:
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- l ) Based on the facts and circumstances presented, the taxpayer will not be taxed as a resident of Virginia in taxable years 1990 or 1991.
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- 2 ) The taxpayer may provide his Virginia employer with authority from the Commissioner to withhold tax not to exceed $21,000, the estimated liability on the portion of his earnings that will be taxable by Virginia as nonresident income .
FACTS
The taxpayer is a high level executive of a major corporation which moved its headquarters from New York to Virginia in 1990. The company has facilities throughout the world including major United States facilities in eleven states and overseas in six countries. The taxpayer's job requires him to spend a substantial number of days traveling all over the world.
The taxpayer has been domiciled in New York for a number of years. His primary residence will remain in New York for the foreseeable future. The taxpayer will occupy a condominium in Virginia, which he owns, during the week, but his wife and children will continue to reside in their New York home. He will return to his residence in New York during weekends, holidays and vacations. The taxpayer will continue to vote in the State of New York. The taxpayer will maintain a car for use while in Virginia, but he will maintain his New York driver's license and will own other automobiles which are registered in and located in New York. The taxpayer is a member of several country clubs around the nation, none of which are located in Virginia. The bulk of his personal property will remain in his New York residence. He has no intention of establishing bank accounts in Virginia. since he will maintain his present banking relationships in New York. His other intangible assets will remain in brokerage accounts outside of Virginia. The taxpayer does not anticipate that he will be physically present in Virginia for more than 183 days for either 1990 or 1991, and he does not intend to establish a Virginia domicile.
Based upon the forecasted amount of time the taxpayer expects to spend in and out of Virginia during 1990, the taxpayer estimates that his 1990 Virginia income tax liability will be**************.
RULING
First, I will address the taxpayer's 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, marital status, 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 taxpayer will continue to actively maintain his domicile in New York during taxable years 1990 and 1991. As an individual who maintains a place of abode in Virginia for fewer than 183 days during the taxable year, and who is domiciled in a jurisdiction other than Virginia, the taxpayer will be considered a nonresident, and as such, will only be required to file a return in Virginia if he has income from Virginia sources.
However. if in actuality, the taxpayer maintains a place of abode in Virginia for more than 183 days. he will be subject to the Virginia individual income tax as an actual resident. In such a case. he will be subject to Virginia income tax on his income from all sources. To the extent that he is taxed on the same income by both New York and Virginia. he may be eligible for a credit against his Virginia income tax liability for all or a portion of the liability to New York. (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). (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 taxpayer qualifies 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 $21,000. However, the taxpayer 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