June 9, 2022
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 assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 2006 through December 31, 2008, December 31, 2015, and December 31, 2016.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file Virginia income tax returns for the taxable years at issue. A review of the Department’s records showed that the Taxpayer had not filed returns. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. After reviewing the information provided, the Department determined that he was a domiciliary resident of Virginia and issued assessments.
In response, the Taxpayer filed nonresident Virginia income tax returns for the 2015 and 2016 taxable years, allocating none of his income to Virginia. Based on the prior review, the Department adjusted the nonresident returns to resident returns and reissued assessments. The Department’s records indicate that the assessments for the 2007 and 2008 taxable years were abated because the Taxpayer had sufficient credit for taxes paid to ***** (State A) to offset his Virginia income tax liability.
The Taxpayer appeals, contending he was a resident of State A. In the alternative, the Taxpayer requests that he be allowed to claim a credit for taxes paid to 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 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, 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 individual’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. A taxpayer has the burden of proving that he has abandoned his Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he intended to remain indefinitely in Virginia.
The Taxpayer completed a domicile questionnaire in response to the Department’s request. In an attempt to gain additional information from the Taxpayer, the Department sent follow-up questions on January 13, 2022, including a request for a copy of Taxpayer’s State A return filed for the 2006 taxable year. When no response was received, the Department sent a second request on March 1, 2022. To date, the Taxpayer has failed to respond with the requested information.
Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an “assessment of a tax by the Department shall be deemed prima facie correct.” As such, the burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia. Furthermore, Virginia Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is attributable to the taxpayers’ willful failure or refusal to provide the Department with necessary information as required by law.
Because the assessments at issue were made based on the best information available to the Department pursuant to Virginia Code § 58.1-111, the Taxpayer will be given one final opportunity to provide the additional information requested or file Virginia resident income tax returns. The additional information or returns 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 information or returns will be reviewed and the assessments will be adjusted, as appropriate. If the information or returns are not received within the allotted time, the assessments will be considered correct and collection actions may result. Further, the Taxpayer should review his circumstances for any taxable years after 2016, and take appropriate actions to comply with any filing requirements he may have had with Virginia based on such circumstances.
The Code of Virginia sections cited are available online at www.tax.virginia.gov in the Laws, Rules, & 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/3748.X