Tax Type
Individual Income Tax
Description
Change of Domicile for one spouse
Topic
Assessment
Residency
Date Issued
03-24-2005
March 24, 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 your clients, ***** (the "Taxpayers"), for the taxable years ended December 31, 1997 through 1999 and December 31, 2001.
FACTS
The Taxpayers, a husband and wife, resided in Virginia. In June 1997, the husband accepted a job in ***** ("State A"). His employment contract required him to reside in State A. He resided in temporary quarters until he purchased a condominium in State A in March 1998. The husband obtained a State A driver's license and registered two vehicles in State A. He also registered to vote in State A. Beginning with the 1998 taxable year, the husband filed a resident State A individual income tax return and maintained a college savings plan available exclusively to State A residents.
The wife and the couple's children continued to reside in Virginia during the taxable years at issue. The husband spent 79 days in Virginia in 1998, 58 days in Virginia in 1999, and 88 days in Virginia in 2001. The wife and husband jointly own a Virginia residence.
The Taxpayers filed Virginia individual income tax returns under the status "married, filing separately on this combined return" for the 1998 and 1999 taxable years and filed jointly for the 2000 and 2001 taxable years. The Taxpayers claimed a subtraction for the salary earned by the husband from his State A employer.
The Department disallowed the subtraction and assessed additional tax and interest for the 1998, 1999 and 2001 taxable years. While conceding that they improperly filed Virginia resident individual income tax returns, the Taxpayers contend that the husband was not a domiciliary resident of Virginia for the 1998 through 2001 taxable years. Based on this position, the Taxpayers maintain that the salary the husband earned from his employment in State A should not be subject to Virginia income tax, and the assessments should be abated.
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 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 that 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.
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.
The husband performed many activities that were consistent with changing domicile. The husband leased an abode for several months and subsequently purchased a condominium. He also registered two cars and obtained a driver's license in State A, registered to vote in State A, and obtained and used dental and medical services in State A. In addition, the husband's job was permanent and required him to reside in State A.
The husband also performed activities that were consistent with remaining domiciled in Virginia. He maintained a house in Virginia where his wife and children continued to reside throughout the years in question. The husband filed a Virginia resident individual income tax return with his wife during the years at issue. The Taxpayers maintained and continue to maintain a home in Virginia.
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 Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to return to Virginia.
It is my determination that the Taxpayers have met the burden of proving the husband intended to acquire another domicile with the intention to remain there permanently or indefinitely. The weight of evidence demonstrates the husband performed a significant number of acts that were consistent with changing domicile, such as acquiring full-time employment in State A that required he reside there, purchasing a condominium in State A, registering cars and obtaining a driver's license in State A and registering to vote in State A. While maintaining a home in Virginia is a strong indication of Virginia domicile, in this case there were legitimate reasons for the wife to remain in Virginia in the family home. Accordingly, the assessments for the 1998, 1999 and 2001 taxable years have been abated.
As previously stated, the Taxpayers incorrectly filed their 1998 through 2001 Virginia individual income tax returns. The filing limitations as prescribed in Va. Code § 58.1-1823 preclude the Taxpayers from filing amended returns for the 1998 through 2000 taxable years. The Taxpayers, however, should file an amended individual income tax return for the 2001 taxable year.
Federal Audit
In 2000, the Department issued an assessment for the 1997 taxable year based on information received from the Internal Revenue Service ("IRS") indicating that changes had been made to the Taxpayers' 1997 federal income tax return. The Taxpayers subsequently filed a 1997 Virginia income tax return and paid the tax based on federal adjusted gross income reported on their original federal return. As a result, the Department reduced the assessment.
The Taxpayers paid the federal assessment and contested the results of the audit by the IRS. In May 2002, the IRS issued a final determination overturning the audit assessment and refunded the assessment paid by the Taxpayers.
The Taxpayers contend that they provided information to the Department after the May 31, 2002 final determination by the IRS in order to get a refund of overpaid Virginia income tax. The Department's records indicate that, pursuant to the Taxpayers' notice, the assessment for the 1997 taxable year has been abated. The Department's records do not indicate any payments were made toward this assessment. As such, there is no overpayment of tax for the 1997 taxable year to refund.
The Code of Virginia section cited, along with other reference documents, 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 ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/52608B
Rulings of the Tax Commissioner