02-160 | Virginia Tax

Tax Type

Individual Income Tax

Description

Domiciliary resident

Topic

Residency

Date Issued

12-17-2002

December 17, 2002

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This will reply to your letter in which you seek a correction of the individual income tax assessment issued to your client, ***** (the "Taxpayer") for the 1998 taxable year.

FACTS

Prior to 1996, the Taxpayer was a domiciliary resident of State A. The Taxpayer was an employee and stockholder of a corporation based in State A. In August 1996, the Taxpayer accepted a temporary job assignment that required him to relocate to Virginia to work directly with a client.

Upon his arrival in Virginia, the Taxpayer rented an apartment. The Taxpayer did not register to vote in Virginia. While in Virginia, the Taxpayer maintained a business office in State A and frequently traveled back to State A for business and personal reasons. Because the duration of his stay in Virginia was going to be longer than six months, the Taxpayer obtained a Virginia driver's license and registered his vehicle in Virginia.

In April 1998, the Taxpayer left Virginia and moved to State B, where the Taxpayer established a residence with family members, obtained a driver's license, registered a number of vehicles, and had State B income taxes withheld from his income. In November 1998, the Taxpayer moved back to State A, where he currently resides.

During his stay in Virginia, the Taxpayer filed part-year resident and resident individual income tax returns based upon his actual residence in Virginia. Under an audit review, the department determined that the Taxpayer was a domiciliary resident of Virginia during the time period in which the Taxpayer was present in Virginia and subsequently in State B. During the time in which the Taxpayer was in State B, he realized a gain from the sale of his shares of stock. The auditor assessed the Taxpayer additional individual income tax based upon this sale of stock. The Taxpayer has filed an appeal with the department disputing this assessment.

DETERMINATION

Code of Virginia § 58.1-322 provides that all Virginia residents with sufficient Virginia taxable income are subject to Virginia income tax. 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.

As indicated by a number of Virginia court cases, (e.g., Talley v. Commonwealth 127 Va. 516, 103 S.E. 612 (1920); State-Planters Bank v. Commonwealth,174 Va. 289, 6 S.E.2d 629 (1940); and Layton v. Pribble, 200 Va. 405, 105 S.E.2d 864 (1958)), 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. An old domicile remains until a new domicile is established. The burden of proving that the domicile has been changed lies with the person alleging the change. While residence in Virginia may clearly exist, it is the taxpayer's intent that must be determined. In State-Planters Bank, the Virginia Supreme Court also said, "Intent must frequently be determined from the declarations and conduct of the person in light of the attending circumstances."

The attending circumstances of the Taxpayer's case show that the Taxpayer established a domicile in Virginia. When the Taxpayer departed State A for Virginia, the Taxpayer effectively abandoned State A as his domicile as he concurrently established a Virginia domicile. The acquisition of a Virginia driver's license, the registration of his vehicle in Virginia, his actual residence in Virginia, and the rental of an apartment were sufficient to establish a domicile in Virginia, especially considering the fact that he had no meaningful connections to any other state, including State A.

Likewise, the same analysis holds true when the Taxpayer moved from Virginia to State B. The Taxpayer established a residence with family members, obtained a driver's license, registered a number of vehicles, and had State B income taxes withheld from his income in State B. These acts were done concurrently with his abandonment of Virginia. Once the Taxpayer left Virginia, he had no articulable connection remaining with Virginia. Therefore, based on the evidence, the Taxpayer established a domicile in State B when he moved from Virginia.

Based on the facts as presented, the Taxpayer was not a domiciliary resident of Virginia during the period for which he was assessed additional income tax. Accordingly, the 1998 income tax assessment has been abated in full. If you have any questions, please call ***** in our Policy Development Office at *****.

- - - - Sincerely,

- - - - Kenneth W. Thorson
        Tax Commissioner

PD/33434G

Rulings of the Tax Commissioner