06-132 | Virginia Tax

Tax Type

Individual Income Tax

Description

Virginia domicile existed as established by the Department

Topic

Domicile

Date Issued

10-30-2006

October 30, 2006

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, 2000 through 2004.

FACTS

The Taxpayers are husband and wife. The husband was born in ***** ("Country A") and possesses a Country A passport. The Taxpayers resided in ***** ("Country B") from 1976 through 1985. The Taxpayers resided in Virginia from 1985 through 1995. In 1985, the Taxpayers purchased a home in Virginia. The husband obtained a Virginia driver's license that was renewed in February 2001 and surrendered in July of 2005. The wife was issued duplicate Virginia driver's licenses in May 2002 and again on November 2003.

Two of the Taxpayers' adult children reside at the Virginia residence. The husband currently has a vehicle registered in Virginia in his name. The husband is listed as a co-registrant with his adult children on three vehicles in Virginia. In addition, the husband's professional license is in active standing in Virginia.

In 1995, the husband secured employment in Country B. The Taxpayer has worked in Country B under a series of contracts that were extended through February 2006. The employer's documentation states that the husband is an American national. The Taxpayers filed federal 1040 resident income tax returns for the taxable years at issue. They did not file Virginia individual income tax returns.

Pursuant to an audit, the Department determined that the Taxpayers did not abandon their Virginia domicile and assessed tax, penalty, and interest against the Taxpayers for the taxable years at issue. The Taxpayers contend that they reside in Country B. They also contend that they maintain residences in Country A and in ***** ("Country C"), where they intend to reside upon retirement.

DETERMINATION

Timeliness of Appeal

Virginia Code § 58.1-1821 provides, in pertinent part, "Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner."

Virginia Code § 58.1-1825 A provides, in pertinent part, "Any person assessed with any tax administered by the Department of Taxation and aggrieved by any such assessment may, unless otherwise specifically provided by law, within (i) three years from the date such assessment is made or (ii) one year from the date of the Tax Commissioner's determination under § 58.1-1822, whichever is later, apply to the circuit court for relief."

For assessments issued prior to August 15, 2003, the Department had a policy of accepting administrative appeals at any time within the three-year statute of limitations for pursuing a judicial remedy. In this instance, the tax assessment issued to the Taxpayers for the 2000 taxable year was dated July 14, 2003. In accordance with the Department's policy as it existed at the time the assessment was issued, the Taxpayer was permitted to file its administrative appeal with the Tax Commissioner within three years of the date of assessment.

The Department's records indicate an administrative appeal for the 2000 taxable year was filed with the Department on October 26, 2005, within three years from the date of assessment. Therefore, the Taxpayer's application for correction pursuant to Va. Code § 58.1-1821 for the 2000 taxable year is considered timely filed.

Effective for assessments made on or after August 15, 2003, the Department began strictly enforcing the requirement in Va. Code § 58.1-1821 that taxpayers file administrative appeals with the Tax Commissioner within 90 days from the date of assessment. See Virginia Tax Bulletin 03-8 (7/15/2003).

The assessments for the 2001 and 2002 taxable years were made on March 19, 2004. The Taxpayers were required to file an administrative appeal within 90 days from the date of assessment, or by June 17, 2004. The appeal for these taxable years was filed on March 26, 2005, well after the 90-day limitations period. As such, the Taxpayers' application for correction for the 2001 and 2002 taxable years is barred by statute.

The Taxpayers' administrative appeal for the 2003 and 2004 taxable years was filed within 90 days of the date of assessment. Accordingly, this determination will be limited to the Taxpayers' appeal of assessments for the 2000, 2003, and 2004 taxable years.

Residency

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 or in another 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.

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.

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 his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayers maintain that they never established domicile in Virginia. The evidence clearly shows otherwise. After residing in Country B for a number of years, the Taxpayers moved to Virginia. The husband claims that the time spent in Virginia was for the purpose of honing his professional skills before resuming practice in Country B. No evidence has been provided to show that the husband's Virginia employment was temporary. The Taxpayers did obtain legal residency status in the United States, purchased a home in Virginia, obtained Virginia driver's licenses, and registered automobiles in Virginia. In addition, the husband applied for and was granted a professional license to practice in Virginia. While the Taxpayers maintained some connections in other countries while living in Virginia, they clearly took sufficient steps to establish domicile in Virginia.

The Taxpayers performed numerous actions to show that they did not abandon their Virginia domicile. The Taxpayers purchased and continued to own a home in Virginia. The husband had a vehicle registered in Virginia and is a co-registrant of three vehicles with his adult children. The Taxpayers retained Virginia driver's licenses during the years at issue, and the husband renewed his license in February of 2001.

Virginia Code § 46.2-323.1 states, "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 ("DMV") a statement that certifies that the applicant is a Virginia resident. While renewing his driver's license may have been for purposes of convenience for the husband, doing so demonstrates the husband's intent to be a domiciliary resident of Virginia. It should also be noted that a person providing a false statement to DMV is subject to punishment under the laws of the Commonwealth.

The evidence that supports the Taxpayers' claim that they permanently abandoned their Virginia domicile consists of the husband's Country B passport and the fact that the Taxpayers spent less than 20 days per year in Virginia. The Taxpayers also contend that the husband's employment contract was extended indefinitely. The information provided, however, indicates that the husband was employed under a series of employment contracts for a set duration of time. The extension provided to the Department indicates a termination date in February 2006. The husband has not provided documentation to substantiate that, at the time he left Virginia or any other time during his stay in Country B, his specific employment contract was established permanently or for an indefinite period of time.

Based on the evidence provided, the Taxpayers were domiciliary residents of Virginia and failed to abandon their Virginia domicile. Therefore, the Taxpayers must file Virginia individual income tax returns for the 2000, 2003 and 2004 taxable years. The completed returns should be sent to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. Upon the filing of the 2000, 2003 and 2004 returns, the assessments for those taxable years will be adjusted as appropriate. If the returns are not filed within 30 days from the date of this letter, the assessments as issued will become immediately due and payable and collection action will be initiated.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/1-247974810B

Rulings of the Tax Commissioner