Tax Type
Individual Income Tax
Description
Domiciliary Resident or Actual Resident
Topic
Residency
Date Issued
11-28-2001
November 28, 2001
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****
This will reply to your letter in which you seek correction of the Virginia individual income tax assessments issued to your clients, ***** (the "Taxpayers") for the 1994 through 1996 taxable years. I apologize for the delay in the department's response.
FACTS
In 1994, the Taxpayers, a husband and wife, moved from Virginia to a foreign country ("Country A") when the husband accepted a job transfer. In 1996, the husband was offered a promotion involving a transfer back to Virginia.
The Taxpayers rented an apartment in Country A and maintained their former residence in Virginia as rental property. In the fall of 1996, the wife and child moved back to Virginia into rental property other than the former residence in order to begin primary school. The husband returned to Virginia later that fall and a new home was purchased in Virginia.
The Taxpayers retained their Virginia driver's licenses during the years in question. Their two Virginia vehicles were placed in storage out-of-state with friends and family. The husband obtained an international driver's license while in Country A and used a vehicle provided by his employer. The Taxpayers were registered to vote in the United States ("U.S.") elections while overseas, but they did not vote during this period.
The Taxpayers filed federal and Virginia nonresident returns during the 1994 and 1995 taxable years using their Country A address. In 1996, they filed a Virginia part-year return.
Under audit, the department classified the Taxpayers as domiciliary residents of Virginia for the 1994 through 1996 taxable years and assessed additional tax and interest. The Taxpayers contest the assessments and contend that they were domiciliary residents of Country A during the 1994 and 1995 taxable year and through the date in 1996 when they returned to Virginia.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 58.1-302, copy enclosed. 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 another state, 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 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.
A Virginia domiciliary resident must intend to abandon his Virginia domicile with no intent of returning to Virginia, and he must concurrently acquire a new domicile where that person is physically present with the intent to remain permanently or indefinitely. If individuals intend to return to the U.S. after moving overseas, they do not establish a domiciliary residence in their foreign country residence. If they do not establish domiciliary residence in the foreign country, they fail to divest themselves of their Virginia domiciliary residence.
The preponderance of the evidence indicates that the Taxpayers intended to establish a Country A domicile. When the Taxpayers moved to Country A, they leased their Virginia residence, rather than taking a loss on its sale. When they returned to Virginia, they rented and ultimately purchased a new residence. There is no indication from the husband's employment agreement that the transfer to Country A was temporary. When the Taxpayer's moved to Country A, all personal items were moved to Country A or stored outside of Virginia.
Based on all the information provided, I find that the Taxpayers were domiciliary residents of Country A during the periods at issue. Accordingly, the assessments for the taxable years of 1994 through 1996 have been abated. If you have any questions regarding this determination, you may contact ***** in the department's Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/16162B
Rulings of the Tax Commissioner