Tax Type
Individual Income Tax
Description
Retirees in Virginia taxed uniformly on their pension income
Topic
Residency
Taxable Income
Date Issued
09-16-2004
September 16, 2004
Re: § 58.1-1821-Application: Individual Income Tax
Dear *****:
This will reply to your correspondence in which you seek correction of the individual income tax assessments issued to ***** (the "Taxpayer") for the taxable years ended December 31, 1991, 1995, 1996, 1998 and 1999. I apologize for the delay in the Department's response.
FACTS
In 1984, the Taxpayer retired from the United States military. He moved to Virginia in 1985. He admits to residing in Virginia from 1985 until 1990. The Taxpayer represents that he purchased a motor home in 1990, and has lived in it since that time. The Taxpayer states that, since 1990, he lived in various states in his motor home and did not spend more than three days in Virginia during any of the years at issue. The Taxpayer contends he is not a domiciliary resident of Virginia and, therefore, is not subject to Virginia income tax. The Taxpayer seeks abatement of the outstanding individual income tax assessments for the periods in question.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. 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 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 as a resident.
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, 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 the facts and circumstances of the particular case. A simple declaration is not sufficient to establish domicile.
The Department concedes that it is difficult to know whether a taxpayer intends to return to Virginia. The Department determines a taxpayer's intent through the information provided. The taxpayer has the burden of proving that he or she has abandoned his or her original domicile. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer did intend to return to his or her original domicile.
The Taxpayer has performed a number of actions that are consistent with retaining his Virginia domicile. After separation from his spouse in Virginia, he resided in Virginia. The Taxpayer maintained a Virginia driver's license and continued to register the motor home in Virginia during the years at issue. The Taxpayer also owns several other vehicles that are registered in Virginia. The Taxpayer also maintained a post office box in Virginia to which mail was forwarded by the postal service.
Although the Taxpayer indicates that the vehicles were garaged outside Virginia, he maintained a Virginia driver's license and Virginia vehicle registrations because insurance and vehicle taxes are less expensive in Virginia than the states in which he claims to have resided during the taxable years at issue. Not coincidently, neither of these states ("State A" or "State B") imposes an individual income tax. Thus, the Taxpayer availed himself of the benefits of maintaining Virginia vehicle registrations while avoiding any Virginia income tax liability by claiming he resided in either State A or State B during the years at issue. The Taxpayer, however, demonstrated his intent to maintain his domicile with Virginia by clearly indicating his desire to avail himself of benefits (lower taxes and insurance premiums) afforded residents of Virginia.
In addition, by maintaining a driver's license, the Taxpayer has demonstrated his intent to retain his domiciliary residence in Virginia. Virginia Code § 46.2-323.1 states that, "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 a statement that certifies that the applicant is a Virginia resident. A person providing a false statement is subject to punishment under the laws of the Commonwealth.
The Taxpayer represents that he has spent very little time in Virginia since 1990, when he purchased a motor home. He admits to passing through Virginia on his way to other destinations and for the purpose of registering his vehicles. The Taxpayer states that he lived in his motor home and traveled extensively throughout the United States during the years at issue. The vehicle registration record you provided for the motor home does not support your position. The registration shows the motor home was purchased in June 1997; therefore, there is doubt as to when the Taxpayer actually lived in the motor home and traveled outside Virginia.
Based on the information provided, I find that the Taxpayer has not shown sufficient evidence that he abandoned his Virginia domicile and simultaneously obtained a domicile elsewhere. Accordingly, the Taxpayer is considered a domiciliary resident of Virginia for the years in question. As such, the assessments issued to the Taxpayer are correct.
In one of your letters, you state, "Also, I believe the courts ruled it unconstitutional for Virginia to tax any person's military retirement for the year 1991." Your understanding is not correct. The United States Supreme Court held in Davis v. Michigan, 489 U.S. 803 (1989) that state taxation of pension income of retired federal government employees, while exempting from taxation pension income of retired state government employees, violated the doctrine of intergovernmental tax immunity. The Court did not hold that states may not tax federal retirement income, only that taxation may not differentiate based on the source of the income. As a result of Davis, the Virginia General Assembly repealed the state income tax exemption for state and local government retirees in April of 1989. Since that time, all retirees in Virginia have been taxed uniformly on their pension income, regardless of the source.
Payment of the balance due for the outstanding assessments should be paid, in accordance with the enclosed schedule, within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P.O. Box 1880, Richmond, Virginia 23218-1880, Attention: *****
If payment is not received within the time allowed, interest will accrue on the outstanding balance and collection action will resume.
The Code of Virginia sections cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions regarding this matter,
please contact ***** at *****.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR44398E
Rulings of the Tax Commissioner