Tax Type
Individual Income Tax
Description
Domicile Determination
Topic
Residency
Date Issued
10-01-2001
October 1, 2001
Re: § 58.1-1821 Application: Individual Income Taxation
Dear *****
This will reply to your letter in which you seek correction of the assessments of individual income tax and interest issued to your clients, ***** (the "Taxpayers") for the 1996 and 1997 taxable years.
FACTS
The Taxpayers, a husband and wife, resided in Virginia through June 1996. At that time, they established domicile with another state ("State A"). The Taxpayers continued to operate a Virginia corporation until its dissolution in March of 1997.
Following an audit by the department, the Taxpayers were assessed additional tax and interest as nonresidents on the portion of their salaries earned from the Virginia corporation for the 1996 and 1997 taxable years. The Taxpayers contend that they changed their domicile and owe no Virginia income tax on income earned after June 1996.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 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 actually reside elsewhere. For a person to change domiciliary residency to Virginia, that person must intend to abandon his old domicile with no intention of returning to that same domicile. 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 working in other parts of the 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 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, sites of real and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
In Public Document ("P.D.") 93-22 (2/5/93) (copy enclosed), the department determined that a taxpayer who maintains a place of abode and is physically present in Virginia for more than 183 days during any taxable year is an actual resident for Virginia individual income tax purposes. The evidence indicates that the Taxpayers maintained a place of abode for the entire 1996 taxable year and they were present in Virginia for more than 183 days during that year. The information provided shows that the Taxpayers moved to State A in June 1996 and spent 88 days in Virginia from July through December 1996. As actual residents, the Taxpayers are subject to Virginia individual income tax on their entire income for the 1996 taxable year.
The evidence further demonstrates the Taxpayers were present in Virginia for fourteen days during the 1997 taxable year prior to the sale of their Virginia corporation. As such, they were neither domiciliary nor actual residents of Virginia during the 1997 taxable year. Individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. The Virginia taxable income of a nonresident is defined under Code of Virginia § 58.1-325 as:
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- an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources.
Under Code of Virginia § 58.1-302, income and deductions from Virginia sources include income from, "[a] business, trade, profession or occupation carried on in Virginia." (Emphasis added). The fourteen days that were spent closing the Virginia corporation constituted income from an occupation carried on in Virginia. As such, the Taxpayers are subject to Virginia income taxation as nonresidents on their portion of wages earned while in Virginia from the Virginia corporation.
The assessments of individual income tax issued to the Taxpayers have been adjusted in accordance with this determination on the attached schedules. Please remit payment of the amounts due to ***** in the Office of Policy and Administration, Appeals and Rulings, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23218-1880. If you have any questions regarding this determination, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
ARO/33225B
Rulings of the Tax Commissioner