February 24, 2024
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply 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, 2016 through 2019.
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 2016 through 2019 taxable years. 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. Based on the information provided, the Department concluded that the Taxpayer was taxable as a domiciliary resident of Virginia. The Taxpayer paid the assessments and appealed, contending he was a resident of ***** (Country A).
DETERMINATION
Citizenship
The Department determined that the Taxpayer remained a domiciliary resident of Virginia at least in part because he maintained his United States citizenship while residing overseas. The Department, however, has previously ruled that an individual can abandon a Virginia domicile and establish domicile in a foreign country and continue to be a United States citizen. See Public Document (P.D.) 00-6 (2/28/2000) and P.D. 12-26 (3/15/2012).
Residency
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 or she intends to return even though he or she may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his or her 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 or her 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 or her 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 or she has abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer performed a number of actions indicating his intent to establish domiciliary residency in Country A. From 1988 until 1993 he moved to, and was employed in, Country A. In 1990, the Taxpayer married a Country A citizen and became a permanent resident of Country A. In 2000, he purchased a residence in Country A. From 1993 through 2004, he was transferred to several different countries on the same continent. From 2004 through 2014, he again lived and worked in Country A.
The Taxpayer’s first wife passed away in 2007, and in 2008 the Taxpayer married his second wife who was a permanent resident of Country A. In 2014, he was transferred by his employer to ***** (Country B) where he resided until 2019, when the Country B office was closed. The Taxpayer paid both Country A taxes and Country B taxes while he lived in those respective countries. He has also continued to maintain a Country A health insurance policy. In addition, the Taxpayer’s son was raised in Country A and attended Country A schools. The son continues to reside in Country A as a Country A citizen.
The Taxpayer also retained some connections with Virginia. He has continuously maintained a Virginia driver’s license since 1979. The Taxpayer owned a vehicle that was registered in Virginia in 2019. The Taxpayer also purchased a Virginia residence in 1995. The Taxpayer and his wife have lived in this residence since they returned to Virginia in 2019. In addition, the Taxpayer has voted in Virginia and United States national elections since then. Further, he filed a Virginia resident return for the 2020 taxable year.
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 or she retains a Virginia driver’s license. See 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).
The fact that an individual has a Virginia driver’s license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver’s licenses. See Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver’s license.
Individuals who have resided in Virginia more than six months, however, are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia, including the driver’s licensing provisions of Title 46.2, Chapter 3 (Virginia Code § 46.2-300 et seq.). In addition, because an individual who has been physically present and residing in Virginia for more than six months may nevertheless remain a domiciliary resident of another state or country, it may be necessary in such cases to examine additional factors to determine whether a person who has obtained a driver’s license based on physical presence and actual residency in Virginia also intended to become a domiciliary resident of Virginia. However, once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver’s license even while absent from the state will be considered very strong evidence of the individual’s intent to remain a domiciliary resident of Virginia. That is because the basis of the individual’s claim to be entitled to a Virginia driver’s license would no longer be based on the length of time he was physically present in Virginia as an actual resident, but rather on the implication that he remained a domiciliary resident of Virginia.
With regard to eligibility to vote, Article II, Section 1 of the Constitution of Virginia states in relevant part as follows:
In elections by the people, the qualifications of voters shall be as follows: Each voter shall be a citizen of the United States, shall be eighteen years of age, shall fulfill the residency requirements set forth in this section, and shall be registered to vote pursuant to this article.
The residence requirements shall be that each voter shall be a resident of the Commonwealth and of the precinct where he votes. Residence, for all purposes of qualification to vote, requires both domicile and place of abode.
The domicile and place of abode requirement found in the Constitution of Virginia is also reflected in the definition of “residence” or “resident” used in Virginia election statutes. See Virginia Code § 24.2-101. Consistent with the precedent established by the Virginia Supreme Court in Coopers Adm’r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917), the Department will consider the fact that a taxpayer obtained a Virginia voter’s registration and voted in elections in Virginia to be very strong evidence that such individual considered Virginia to be their domicile during the time they held and used such registrations.
The Taxpayer has provided information explaining his ongoing connections with Virginia. He indicates that he purchased the Virginia residence for his mother. The Taxpayer states that because he did not need a vehicle in Country A or any of the other countries in which he lived, he maintained a Virginia license in order to drive when visiting the United States. He explains that he and his wife were on an extended visit with his mother beginning in the fall of 2019 and he was unable to return to Country A due to the Covid-19 pandemic. His mother passed away in April 2021 and he has continued to live in the Virginia residence in order to prepare it for sale and to settle her estate.
The Department considers a change of domicile to be part of a process and the change is generally considered to have occurred at the beginning of that process even when official connections with the state or country were not obtained until later. See P.D. 16-138 (6/24/2016) and P.D. 19-19 (3/26/2019). In this case, the Taxpayer resided overseas from 1988 until the fall of 2019. He became a Country A permanent resident and has voted in Country A elections. The Department considers registering to vote in a state or country, and voting in elections to be very strong evidence of domiciliary intent, consistent with Cooper’s Adm’r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917). See also P.D. 20-85 (5/14/2020).
After carefully considering the information provided, I find that the totality of the evidence shows that the Taxpayer successfully changed his domicile to Country A prior to the 2016 taxable year he remained domiciled there at least through the 2018 taxable year. Even if he changed his domicile to Country B by 2016, he still could not have re-acquired Virginia domicile until he began residing in Virginia again in 2019.
Part-Year Residents
Virginia Code § 58.1-303 provides that a taxpayer who becomes a resident of Virginia during the taxable year is subject to taxation for the period in which they were a Virginia resident. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, part-year residents may claim a portion of their Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, part-year residents may claim a prorated Virginia standard deduction if they claim the standard deduction for federal income tax purposes. See P.D. 14-67 (5/20/2014).
Pursuant to Virginia Code § 58.1-303, part-year residents are subject to tax only on their income that is attributable to Virginia. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 B specifically defines income attributable to Virginia as “that which is received during the portion of the year in which the individual is a Virginia resident”. Taxpayers that are part-year residents are required to file Virginia part-year income tax returns if they have taxable income earned while they resided in the Commonwealth.
In this case, the Taxpayer began residing in Virginia again in 2019. While in Virginia, he has voted in both national and Virginia elections. He has also maintained his Virginia driver’s license and registered a vehicle. As such, the evidence indicates that the Taxpayer intended to make Virginia their domiciliary residence that year. Accordingly, the Taxpayer was required to file a 2019 Virginia part-year resident return.
CONCLUSION
The Taxpayer was not taxable as a Virginia domiciliary resident for the 2016 through 2018 taxable years. The Taxpayer, however, established his domicile in Virginia during 2019. Accordingly, refunds of the Virginia income tax paid, along with interest, will be issued for the 2016 through 2018 taxable years.
Further, the assessment issued for the 2019 taxable year was based on residency for the entire year. Because he was a part-year resident, the Taxpayer should file a 2019 Virginia part-year income tax return to more accurately reflect his Virginia tax liability. 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, the liability adjusted, and a refund issued, as warranted. If the return is not received within the allotted time, the assessment will be adjusted based on the best information available.
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 web site. 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/4483.B