July 13, 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 her income was taxable in Virginia. Based on the Taxpayer’s response, the Department determined that she was taxable as a domiciliary resident of Virginia and issued an assessment accordingly. The Department subsequently adjusted the assessment by allowing a credit for income tax paid to ***** (State A). The Taxpayer appeals, contending she owes no income tax to Virginia because she was a resident of 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 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, 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.
The Taxpayer explains that she last lived in Virginia in 2011. She lived and worked in ***** (State B) from April 2011 to November 2011, in ***** (State C) from November 2011 to July 2017 and in State A since August 2017. She leased a personal residence in State A from August 2017 to September 2021 and then purchased a residence there, where she continues to reside. The Taxpayer filed a 2018 State A resident income tax return and her federal income tax return using her State A address. She also obtained a State A driver’s license and registered her vehicles in State A in 2022.
The Taxpayer also retained connections to Virginia. She retained a Virginia driver’s license, which was renewed in December 2016. She also owned three vehicles that were registered in Virginia. The Taxpayer explains that she retained and renewed her Virginia driver’s license and registered her vehicles at her parent’s Virginia address due to her frequent moves.
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 (DMV) 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 he 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 (12/9/2002).
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 she was not subject to income tax in Virginia.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. Where a change of domicile occurs as part of a process, the exact timing of when the true intent of an individual forms to change domiciliary residence can be difficult to discern. Unless a change in domicile has clearly been established through the preponderance of evidence, the Department will generally consider a change to have occurred toward the beginning of the process.
The Taxpayer has not resided in Virginia since 2011, a period of approximately 12 years. The Department has reasoned that the longer a person is absent from a prior state or country of domicile, the more likely they intend to abandon such domicile. See P.D. 16-189 (9/19/2016).
The Taxpayer states that she renewed her Virginia driver’s license and vehicle registrations as a convenience because of her relocations. She also states that she was not aware that keeping her Virginia driver’s license and vehicle registrations could cause questions to be raised concerning the status of her domicile. The Taxpayer states that had she known, she would have not have renewed these connections. The Taxpayer has now transferred these official documents to State A. In addition, the fact that she has purchased a home in State A and continuously filed State A resident income tax returns evidences a strong intent to establish a State A domicile. Although she retained some connections with Virginia during her period of State A residence, it does not appear that the connections strongly evidenced an intent to retain a Virginia domicile under the unique facts of this case.
As stated above, a change in domicile occurs as part of a process in which no single factor is dispositive. Although it would have helped the Taxpayer’s case to have terminated her Virginia connections prior to moving to State A, it appears that the Taxpayer intended to make State A her domicile. Accordingly, the assessment for the 2018 taxable year will be abated.
The Code of Virginia sections and public documents cited are available on-line 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/4388.B