Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
10-08-1999
October 8, 1999
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letter in which you protest the assessment made against you and your spouse (the "Taxpayers') for the 1995 and 1996 taxable years.
FACTS
The Taxpayers moved to Virginia in 1986. The husband is employed as a foreign service officer by the United States ("U.S.') government. Due to the nature of his employment, the Taxpayers have lived in numerous locations within and without the U.S. during the husband's service with the U.S. Department of State. The Taxpayers have maintained that they are, and have always been domiciled in another state ("State A'). The Taxpayers are registered to vote in State A. The Taxpayers hold Virginia drivers' licenses, but have also held State A drivers' licenses during overseas assignments. The husband's employment records indicate a State A address as the required destination for home leave after every long-term overseas assignment.
From October 1986 to October 1989, the Taxpayers lived in Virginia. The Taxpayers purchased a home in Virginia during this period. The Taxpayers returned to Virginia briefly in 1993 and 1994 before being given an overseas assignment. Upon completion of that assignment in September 1996, the Taxpayers returned to Virginia where they presently reside. While the Taxpayers claim State A as their domicile state, they have not actually lived there since 1981. The children of the Taxpayers attend public schools within Virginia. The Taxpayers do not own or maintain a home in State A. The Taxpayers own two homes in Virginia, one which is a rental home and another which they use during the times they stay in Virginia. Virginia is the only state in which the Taxpayers have lived for an extended period of time in the U.S. since the husband accepted employment as a foreign service officer in 1981.
The Taxpayers filed Virginia individual income tax returns for 1987, 1988, and 1997 as actual residents and part-year resident returns for 1989 and 1993. For all other years between 1987 and 1997, the Taxpayers filed nonresident individual income tax returns. Under audit, the department determined that the Taxpayers were domiciliary residents and assessed additional income tax for the 1995 and 1996 taxable years. The Taxpayers have paid the assessment and have filed an appeal requesting a refund.
DETERMINATION
For purposes of income taxation there are two classes of residents in Virginia, (1) domiciliary residents and (2) actual residents. Domiciliary residents are those whose legal domicile is Virginia. Any person who is a domiciliary resident, who has not moved from Virginia with the intention of permanently residing outside of Virginia, is still a domiciliary resident even though he may be actually living somewhere else.
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. An individual may remain an actual resident of Virginia until such time that he demonstrates the intent and actions necessary to establish his domicile in Virginia. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
In Public Document ("P.D.') 87-161, 6/2/87, copy enclosed, the department ruled on a set of circumstances where an individual was domiciled in California and employed as a foreign service officer. The individual was contemplating purchasing a home in Virginia to use during the time in which she was on assignment in the Washington, D.C. area. The department ruled that the purchase of a house in Virginia was not enough to establish a domicile in Virginia if the individual maintained her California domicile and took no overt steps to establish a domicile in Virginia. In addition, the department stipulated that the individual would be subject to Virginia individual income tax as an actual resident if she resided in Virginia for more than 183 days in any calendar year. Further, the ruling states the individual would become subject to Virginia income tax as a nonresident if she received income from the rental of the house in Virginia while she was not residing in Virginia.
While the circumstances between this case and those ruled upon in P.D. 87-161 have a similar background, they can be differentiated. The ruling articulated in P.D. 87-161 was based on a foreign service officer whose only connection with Virginia was the purchase of the home. Specifically, the ruling stated that "as long as it appears that (the taxpayers) continue to actively maintain (their) California domicile and take no overt steps to establish a domicile in Virginia, other than to purchase a house in Virginia, such purchase by itself, is not sufficient to demonstrate an intent to establish a domicile in Virginia.' (Emphasis added).
In the present case, the Taxpayers have not actively maintained their domicile in State A and they have taken overt steps to establish a domicile in Virginia. The Taxpayers' only remaining ties with State A are a savings account, safe deposit boxes, and a parcel of undeveloped land in State A. The Taxpayers are also registered to vote in State A, but have not voted since 1992. While their State A domicile has not been maintained, the Taxpayers have connections with Virginia beyond the purchase of a residence. The fact that the Taxpayers own two homes in Virginia, have Virginia drivers' licenses, have automobiles registered in Virginia, and have children attending Virginia public schools clearly shows that the Taxpayers have taken overt steps to establish a domicile in Virginia. This is aided by the fact that the only state in which the Taxpayers have lived in since 1982 is Virginia. After every overseas assignment that the Taxpayers have completed, they have returned to live in Virginia. Except for possible visits to family, the Taxpayers have not lived in State A since 1981. The facts clearly show that the Taxpayers have established domicile in Virginia.
The Taxpayers argue that their stay in Virginia is not indefinite. They state that under State Department regulations, the maximum tour of duty in Washington, D.C. is six years and they plan to leave Virginia upon retirement. The Taxpayer cite language from State-Planters Bank v. Commonwealth, 174 Va. 289 (1940), in which the Virginia Supreme Court said that "Domicile is residence at a particular place, accompanied by intention to remain there for an unlimited time. Both residence and intention to remain there must concur to constitute domicile... Mere change of place or absence from a fixed home does not work a change of domicile.' While residence in Virginia clearly exists, it is the intent of the Taxpayers that must be determined. In State-Planters Bank, the Virginia Supreme Court also said, "Intent must frequently be determined from the declarations and conduct of the person in light of the attending circumstances.'
The Taxpayers have declared that they are domiciliary residents of State A. However, the large majority of their conduct demonstrates an abandonment of the domicile in State A and the establishment of a Virginia domicile. The Taxpayers point to the fact that their maximum tour of duty in Washington, D.C. is six years. They further assert that they do not intend to remain in Virginia when they retire. The Taxpayers believe this shows that their move to Virginia is temporary. The department disagrees. The Taxpayers have taken significant steps to establish Virginia as their permanent home even though their assignment to Washington, D.C. may be temporary. The fact that the job is only for a limited time is not enough by itself to defeat domicile in Virginia.
Accordingly, your request for a refund cannot be granted. If you have any questions concerning this ruling, please contact ***** at*****.
Sincerely,
Danny M. Payne
Tax Commissioner
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letter in which you protest the assessment made against you and your spouse (the "Taxpayers') for the 1995 and 1996 taxable years.
FACTS
The Taxpayers moved to Virginia in 1986. The husband is employed as a foreign service officer by the United States ("U.S.') government. Due to the nature of his employment, the Taxpayers have lived in numerous locations within and without the U.S. during the husband's service with the U.S. Department of State. The Taxpayers have maintained that they are, and have always been domiciled in another state ("State A'). The Taxpayers are registered to vote in State A. The Taxpayers hold Virginia drivers' licenses, but have also held State A drivers' licenses during overseas assignments. The husband's employment records indicate a State A address as the required destination for home leave after every long-term overseas assignment.
From October 1986 to October 1989, the Taxpayers lived in Virginia. The Taxpayers purchased a home in Virginia during this period. The Taxpayers returned to Virginia briefly in 1993 and 1994 before being given an overseas assignment. Upon completion of that assignment in September 1996, the Taxpayers returned to Virginia where they presently reside. While the Taxpayers claim State A as their domicile state, they have not actually lived there since 1981. The children of the Taxpayers attend public schools within Virginia. The Taxpayers do not own or maintain a home in State A. The Taxpayers own two homes in Virginia, one which is a rental home and another which they use during the times they stay in Virginia. Virginia is the only state in which the Taxpayers have lived for an extended period of time in the U.S. since the husband accepted employment as a foreign service officer in 1981.
The Taxpayers filed Virginia individual income tax returns for 1987, 1988, and 1997 as actual residents and part-year resident returns for 1989 and 1993. For all other years between 1987 and 1997, the Taxpayers filed nonresident individual income tax returns. Under audit, the department determined that the Taxpayers were domiciliary residents and assessed additional income tax for the 1995 and 1996 taxable years. The Taxpayers have paid the assessment and have filed an appeal requesting a refund.
DETERMINATION
For purposes of income taxation there are two classes of residents in Virginia, (1) domiciliary residents and (2) actual residents. Domiciliary residents are those whose legal domicile is Virginia. Any person who is a domiciliary resident, who has not moved from Virginia with the intention of permanently residing outside of Virginia, is still a domiciliary resident even though he may be actually living somewhere else.
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. An individual may remain an actual resident of Virginia until such time that he demonstrates the intent and actions necessary to establish his domicile in Virginia. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
In Public Document ("P.D.') 87-161, 6/2/87, copy enclosed, the department ruled on a set of circumstances where an individual was domiciled in California and employed as a foreign service officer. The individual was contemplating purchasing a home in Virginia to use during the time in which she was on assignment in the Washington, D.C. area. The department ruled that the purchase of a house in Virginia was not enough to establish a domicile in Virginia if the individual maintained her California domicile and took no overt steps to establish a domicile in Virginia. In addition, the department stipulated that the individual would be subject to Virginia individual income tax as an actual resident if she resided in Virginia for more than 183 days in any calendar year. Further, the ruling states the individual would become subject to Virginia income tax as a nonresident if she received income from the rental of the house in Virginia while she was not residing in Virginia.
While the circumstances between this case and those ruled upon in P.D. 87-161 have a similar background, they can be differentiated. The ruling articulated in P.D. 87-161 was based on a foreign service officer whose only connection with Virginia was the purchase of the home. Specifically, the ruling stated that "as long as it appears that (the taxpayers) continue to actively maintain (their) California domicile and take no overt steps to establish a domicile in Virginia, other than to purchase a house in Virginia, such purchase by itself, is not sufficient to demonstrate an intent to establish a domicile in Virginia.' (Emphasis added).
In the present case, the Taxpayers have not actively maintained their domicile in State A and they have taken overt steps to establish a domicile in Virginia. The Taxpayers' only remaining ties with State A are a savings account, safe deposit boxes, and a parcel of undeveloped land in State A. The Taxpayers are also registered to vote in State A, but have not voted since 1992. While their State A domicile has not been maintained, the Taxpayers have connections with Virginia beyond the purchase of a residence. The fact that the Taxpayers own two homes in Virginia, have Virginia drivers' licenses, have automobiles registered in Virginia, and have children attending Virginia public schools clearly shows that the Taxpayers have taken overt steps to establish a domicile in Virginia. This is aided by the fact that the only state in which the Taxpayers have lived in since 1982 is Virginia. After every overseas assignment that the Taxpayers have completed, they have returned to live in Virginia. Except for possible visits to family, the Taxpayers have not lived in State A since 1981. The facts clearly show that the Taxpayers have established domicile in Virginia.
The Taxpayers argue that their stay in Virginia is not indefinite. They state that under State Department regulations, the maximum tour of duty in Washington, D.C. is six years and they plan to leave Virginia upon retirement. The Taxpayer cite language from State-Planters Bank v. Commonwealth, 174 Va. 289 (1940), in which the Virginia Supreme Court said that "Domicile is residence at a particular place, accompanied by intention to remain there for an unlimited time. Both residence and intention to remain there must concur to constitute domicile... Mere change of place or absence from a fixed home does not work a change of domicile.' While residence in Virginia clearly exists, it is the intent of the Taxpayers that must be determined. In State-Planters Bank, the Virginia Supreme Court also said, "Intent must frequently be determined from the declarations and conduct of the person in light of the attending circumstances.'
The Taxpayers have declared that they are domiciliary residents of State A. However, the large majority of their conduct demonstrates an abandonment of the domicile in State A and the establishment of a Virginia domicile. The Taxpayers point to the fact that their maximum tour of duty in Washington, D.C. is six years. They further assert that they do not intend to remain in Virginia when they retire. The Taxpayers believe this shows that their move to Virginia is temporary. The department disagrees. The Taxpayers have taken significant steps to establish Virginia as their permanent home even though their assignment to Washington, D.C. may be temporary. The fact that the job is only for a limited time is not enough by itself to defeat domicile in Virginia.
Accordingly, your request for a refund cannot be granted. If you have any questions concerning this ruling, please contact ***** at*****.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner