June 23, 2023
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 assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2018.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2018 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. Based on the information provided, the Department concluded that the Taxpayer was taxable as a domiciliary resident of Virginia and issued an assessment. The Taxpayer paid the assessment in part and filed an appeal, contending he was a resident of the Kingdom of ***** (Country 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 that person and the place to which that person intends to return even though they may be residing elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their 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, Virginia Internet Filing and Payment for Businesses and Individuals maintained their 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 their 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 person’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. The taxpayer has the burden of proving that their Virginia domicile has been abandoned. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.
In August 2017, the Taxpayer, a military veteran and Department of Defense civilian employee, was assigned an 18 month tour in Country A. In February 2019, his tour was extended by 18 months. The Taxpayer’s tour was extended yet again in August 2020. The Taxpayer owned a vehicle and leased residences while living in Country A. He resigned from his position in Country A and returned to Virginia in August 2022. The Taxpayer was registered to vote in *****(State A) which was his home of record while in the military. It does not appear, however, that the Taxpayer actively voted using his State A voter registration.
The Taxpayer also retained some connections with Virginia. He continued to own a personal residence in Virginia. The Taxpayer also owned several vehicles that were registered in Virginia, and he retained a Virginia driver’s license which he renewed in June 2017. The Taxpayer explains that was required to renew his Virginia driver’s license prior to his move to Country A. He also explains that his wife had a medical condition which prevented her from moving to Country A. As such, the Taxpayer contends that the residence and a vehicle were kept in Virginia for her use and thus should not be considered factors in determining whether he remained taxable as a Virginia resident.
Virginia Code § 46.2-323.1 states, ‘No driver’s license shall be issued to any person who is not a Virginia resident.” In fact, this section states that every person applying for a driver’s license must execute and furnish to the Commissioner of the Department of Motor Vehicles (CMV) a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if that individual retains a Virginia driver’s license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver’s license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (1219/2002).
The Taxpayer’s tours in Country A were extended twice, the second by 24 months. The documentation provided by the Taxpayer shows that the Department of Defense had the option to extend the tours by larger increments. A military command memorandum provided by the Taxpayer states specifically that “Tour extensions are not an employee entitlement nor should they be expected. The overseas assignment is not intended to be a permanent placement for DON (Department of Navy) civilians.”
The Department has considered similar cases involving United States government employees who take positions overseas. Rarely, if ever, do these employees establish domicile in these countries while maintaining numerous connections to Virginia. See, e.g., P.D.15-165 (8/18/2015), P.D.17-72 (5/23/2017), and P.D.18-161 (8/22/2018).
A change in domicile requires that a taxpayer intend to reside in the new place of residence permanently or indefinitely. In addition, in order to change domicile, a taxpayer must also demonstrate the intent to abandon the prior domicile with no intention to return. The fact that the Taxpayer’s tour extensions were limited, coupled with the fact that he maintained a Virginia residence, driver’s license, and vehicle registrations and that his wife remained in Virginia demonstrates that the residence in Country A was temporary, and that he would return to Virginia upon its conclusion, which he did.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. After carefully considering all of the evidence presented, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2018 taxable year. As such, the Taxpayer’s request for a refund of Virginia income tax paid for the 2018 taxable year cannot be granted. The payment made by the Taxpayer was applied to tax, penalty, and interest. After the application of the payment, some interest is still due.
The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer may have information that better represents his Virginia income tax liability for the year at issue. Therefore, the Taxpayer should file a 2018 Virginia resident income tax return. The return 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 return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct and a bill will be issued for the balance due.
The Code of Virginia sections and public documents 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 (804) *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4443.B