August 25, 2016
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you request correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2012.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 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. When a response was not received, the Department issued an assessment. The Taxpayer appeals the assessment, contending that he was a domiciliary resident of ***** (State A) during the taxable year at issue.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his 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 his 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 his 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, the 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 providing that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, professional 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. A taxpayer has the burden of proving that he or she abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer admits he resided with his parents, Virginia domiciliary residents, until he attended college. It has been the Department's experience that college students rarely establish domicile where they attend college. See Public Document (P.D.) 82-39 (4/2/1982) and P.D. 11-121 (6/30/2011). After graduating college, the Taxpayer moved frequently between State A and ***** (State B). When he moved to State A in 2011, he began working for a start-up corporation and was concerned about the permanence of the position. Due to his frequent moves and employment situation, the Taxpayer used his Virginia address to file his 2012 federal return. He also failed to establish any other permanent connections with State B during this period. However, he continued to hold and renew his Virginia driver's license.
By his own admission, the Taxpayer has stated he was unsure how long he would remain in State A. The facts also indicate that the Taxpayer was unsure where he would be living. As such, the Taxpayer has failed to show that he established domicile in State A with the intent to live there permanently and indefinitely. Further, the Taxpayer maintained significant connections with Virginia including his driver's license and a place of abode to which he could return if needed. Until intent can be established by circumstances indicating a permanent change of domicile, the Department must conclude a change has not occurred.
Credit for Taxes Paid to Another State
State A statutes allow domiciled residents a credit against State A income taxes for income tax imposed by other states, their political subdivisions, or the District of Columbia. The credit may not exceed the income tax paid to the other taxing jurisdiction and is only allowed to full year or part-year domiciliary residents.
Similarly, Va. Code § 58.1-332 A allows Virginia residents a credit on their Virginia return for income taxes paid to another state provided the income is either earned or business income or gain from the sale of a capital asset. Virginia law does not necessarily allow a taxpayer to claim a credit for the total amount of tax paid to another state. Rather, the credit is limited to the lesser of the amount of tax actually paid to the other state or the amount of Virginia income tax actually imposed on the taxpayer on the income earned or derived in the other state. See P.D. 97-301 (7/7/1997). The limitation is computed by multiplying the individual's Virginia tax liability by a fraction, the numerator of which is the income upon which the other state's tax is imposed, and the denominator of which is Virginia taxable income.
Because the Department held the Taxpayer as a domiciliary resident of Virginia, the Taxpayer may be eligible for a tax credit for income tax paid to State A. To claim the credit, the Taxpayer should attach an official transcript of his State A income tax return to support the tax credit computation.
The assessment at issue was made based on the best information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayer may have information that better represent his Virginia income tax liability for the year at issue. Therefore, the Taxpayer will be granted one last opportunity to provide adequate documentation with regard to the income tax paid to State A and file a 2012 Virginia resident income tax return. The documentation should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the documentation will be reviewed and assessment will be adjusted, as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.
The Code of Virginia sections, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules, and 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/1-6241307674.D