Tax Type
Individual Income Tax
Description
Audit concluded Taxpayers changed their domicile from State A to Virginia
Topic
Persons Subject to Tax
Residency
Date Issued
07-08-2005
July 8, 2005
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 "Taxpayers") for the taxable years ended December 31, 2001 through 2003.
FACTS
The Taxpayers, a husband and wife, moved with their children to a Virginia residence from ***** ("State A") in 1998. The husband is a merchant marine based in Virginia who works as a civilian employee for a branch of the United States Military and spends more than 200 days per year at sea.
The Taxpayers jointly purchased a Virginia residence, where the wife and children reside on a full-time basis. The Taxpayers jointly own several vehicles that are registered in Virginia. The wife has a Virginia driver's license and votes in Virginia. The husband has maintained his State A driver's license. He states that he voted in State A elections. The husband's tax information returns are sent to a State A address. The Taxpayers filed Virginia nonresident individual income tax returns for the years at issue that used this State A address.
The Department audited the Taxpayers and concluded that they changed their domicile from State A to Virginia. As a result, assessments were issued for additional tax, interest and 100% fraud penalty. The Taxpayers concede that the wife is a Virginia resident, but contend that the husband never relinquished his State A residence.
DETERMINATION
Domicile
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 an individual or the place to which he intends to return even though he may actually reside elsewhere. For an individual to change his domiciliary residency to another state, that individual must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that individual must acquire a new domicile, where that individual is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means an individual who, for an aggregate of more than 183 days of the taxable year, maintains a place of abode within Virginia, whether domiciled in Virginia or not.
An individual may become a Virginia domiciliary resident, even if he works in other parts of the country, in another country, or, as in the husband's case, is employed on board a vessel more than 183 days in a taxable year.
In determining domicile, consideration may be given to an 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 an individual's domicile. An individual'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 domiciliary residency.
The Taxpayers concede that the wife is a Virginia resident for income tax purposes. Therefore, the issue is whether the husband gave up his State A domicile and became a Virginia resident.
The husband has performed several actions supporting a change in domicile to Virginia. He jointly owns a residence and automobiles in Virginia. The husband is based in Virginia by his employer. The husband's wife and children reside at the Virginia residence on a full-time basis, and the husband resides at the Virginia residence when he is not at sea.
The husband also performed actions that are consistent with maintaining a State A domicile. The husband maintained a State A driver's license, voted in State A elections and has the Taxpayers' tax information returns sent to a State A address.
While the Taxpayers filed a joint Virginia nonresident individual income tax return for each of the years at issue, these returns were improperly filed. The wife resides in Virginia throughout the year; therefore, she is an actual resident of Virginia, as well as a domiciliary resident of Virginia.
According to the information available, the State A address used for mailing tax information is the residence of one of the Taxpayers' relatives. In addition, no evidence has been provided to show that the husband ever resided in State A during the years at issue. Based on a review of the facts and circumstances in this case, I find that the husband was a domiciliary resident of Virginia for the 2001 through 2003 taxable years. Accordingly, the assessment of tax issued to the Taxpayers is correct.
Penalty
Virginia Code § 58.1-308 requires a 100% penalty with interest to be assessed if the underpayment of tax is "false or fraudulent with intent to evade the tax". After reviewing the documentation provided in the instant case, I find that the evidence is insufficient to show that the Taxpayer's underpayment of tax was false or fraudulent with the intent to evade the tax. Thus, the 100% penalty will be waived.
Pursuant to Va. Code § 58.1-351, an individual who does not pay his tax in full is subject to a penalty of 6% of the assessable tax due per month or fraction thereof, not to exceed 30% in the aggregate. The assessments were made in October 2004 and no payments have been made toward the taxes due. Accordingly, the 30% penalty will be assessed on taxes due for 2001 through 2003 taxable years.
CONCLUSION
The assessments have been adjusted according to the enclosed schedule. Please remit payment for the total outstanding balance to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203. Payment must be made within 30 days from the date of this letter to avoid the accrual of additional interest.
The Code of Virginia sections cited are available on-line in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions regarding this determination, you may contact ***** at *****.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/54109B
Rulings of the Tax Commissioner