Tax Type
Individual Income Tax
Description
Domiciliary residents liable for VA income tax earned in specified time period
Topic
Persons Subject to Tax
Residency
Date Issued
07-19-2005
July 19, 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 assessment issued to ***** (the "Taxpayers") for the 2002 taxable year.
FACTS
The Taxpayers, a husband and wife, were residents of Virginia. In 2000, the husband accepted employment with a company located in ***** ("Country A"). In May 2000, the Taxpayers moved to Country A. The Taxpayers received permits to reside in Country A, and the husband received a permanent permit to work in Country A. The Taxpayers enrolled their minor child in a Country A school. At the time of the move, the Taxpayers terminated the lease on a Virginia residence and sold their automobiles registered in Virginia.
In September 2002, the husband's employment was terminated by his Country A employer. In August and September 2002, the Taxpayers purchased and registered vehicles in Virginia. The Taxpayers entered into a lease for a residence in Virginia in December 2002. The husband reinstated his Virginia driver's license in October 2003.
Pursuant to an audit, the Department determined that the Taxpayers never abandoned their Virginia domicile and assessed tax, penalty, and interest against the Taxpayers for the taxable year at issue. The Taxpayers contend that they moved back to Virginia in December 2002 and had no Virginia income tax liability for the 2002 taxable year.
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 that 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 or the world 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 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency or domicile.
The Department concedes that it may be difficult to ascertain 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 Virginia domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayers performed numerous actions to establish domicile in Country A. The husband received a Country A work visa that was of an indeterminate length. The Taxpayers leased a Country A residence and enrolled their child in a Country A school. In addition, they took actions to abandon their Virginia domicile by divesting all real and personal property in Virginia. The only evidence connecting the Taxpayers to Virginia after 2000 was a driver's license held by the wife. She eventually obtained a Country A driver's license.
Based on the facts and circumstances in this case, I find that the Taxpayers changed their domicile to Country A in 2000. Furthermore, the Taxpayers changed their domicile back to Virginia during the 2002 taxable year. Based on the evidence presented, the Taxpayers became domiciliary residents of Virginia when they signed their lease for a residence on December 15, 2002. Therefore, the Taxpayers are liable for Virginia income tax for the 2002 taxable year on any income earned between December 15, 2002 and December 31, 2002. As such, if the Taxpayers earned any income during that period, including passive, unearned income, they must file a part-year Virginia individual income tax return and pay the applicable tax, penalty and interest due.
If the Taxpayers are required to file a 2002 part-year individual income tax return as noted above, please send it 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 27203, Richmond, Virginia 23261-7203, Attention: *****.
The Code of Virginia section cited is 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
- Kenneth W. Thorson
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Rulings of the Tax Commissioner