Tax Type
Individual Income Tax
Description
Taxpayer did not take sufficient actions to change his domicile to Virginia
Topic
Persons Subject to Tax
Residency
Date Issued
07-02-2007
July 2, 2007
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 "Taxpayer") for the taxable years ended December 31, 2001 and 2002.
FACTS
The Taxpayer and his wife were full time residents of Virginia prior to 1990. In 1990, they purchased a residence in ***** ("State A"). The Taxpayer and his wife typically reside in State A for approximately 7 months during the late fall through early spring and lived in Virginia for the remainder of the year. In 2001, the Taxpayer suffered a serious medical condition that prevented him from going to State A in the late fall. As a result, he remained in Virginia for more than 183 days in 2001 in order to undergo medical treatment and rehabilitation.
The Department audited the Taxpayer and the auditor determined that the Taxpayer failed to abandon his Virginia domicile. An assessment for additional individual income tax and interest was issued for the 2001 and 2002 taxable years. The Taxpayer contends that he effectively changed his domicile to State A in 1990 and that a previous audit conducted by the Department determined that he was domiciled in State A.
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.
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 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.
Actual Resident
In 2001, the Taxpayer involuntarily remained in Virginia for more than 183 days due to an unforeseen illness. The Department has upheld the assessment of income tax against individuals who have become actual residents of Virginia by involuntarily residing in the Commonwealth for more than 183 days. See Public Document (P.D.) 00-68 (5/10/2000) and P.D. 00-180 (10/05/2000).
In P.D. 00-68, the Commissioner held that an individual, who was an out-of-state domiciliary, was subject to Virginia income tax as an actual resident when that person was placed in a nursing home for more than 183 days after becoming ill while visiting relatives in Virginia. In P.D. 00-180, the taxpayers remained in Virginia for more than 183 days due to unforeseen medical complications from a voluntary medical procedure performed in Virginia. The rationale for counting the days a taxpayer remains in Virginia towards their residency, due to an involuntary medical reason, is that the Taxpayer is considered to be residing at a "place of abode" in Virginia during their convalescence. Any place in which a taxpayer resides is considered a "place of abode" even if it is temporary residence, such as a medical facility.
Domicile
In 2002, the Taxpayer resided in Virginia for less than 183 days. As with preceding years, the Taxpayer maintained numerous connections with both Virginia and State A. For federal income tax purposes, the Taxpayer maintained his principal residence in State A. He also maintained a permanent place of abode in Virginia. The Taxpayer held automobile registrations and driver's licenses in both states. The Taxpayer is registered to vote in State A. He received numerous federal income tax reporting documents at his addresses in Virginia and State A.
The Taxpayer states that he was previously audited by the Department and found not to be a domiciliary resident of Virginia. In fact, the Department investigated the Taxpayer for the 1993 taxable year and, at that time, determined that the Taxpayer was not a domiciliary resident of Virginia. The Taxpayer argues that his connections have not changed since then.
A review of the evidence indicates that the Taxpayer's argument is correct except for the fact that he renewed his Virginia driver's license in 2001. Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." The Department has ruled that obtaining or renewing a Virginia licenses is a strong indicator of an individual's intent to be a domiciliary resident of Virginia. See P.D. 02-149 (12/09/2002). However, Va. Code § 46.2-308 grants a new resident only 60 days to obtain a Virginia driver's license. Because the Taxpayer was an actual Virginia resident in 2001, he was technically required to obtain a valid Virginia driver's license in order to drive in Virginia.
Based on all the information presented, it is my determination that the Taxpayer previously established domicile in State A, and he did not take sufficient actions that would have caused him to change his domicile to Virginia for the 2002 taxable year.
CONCLUSION
The Taxpayer's request for the abatement of the assessment issued for the 2001 taxable year is denied because the Taxpayer was an actual resident of Virginia. The assessment of income tax for the 2002 taxable year has been abated because the Taxpayer has demonstrated that he was not a domiciliary or actual resident of Virginia for that year.
I would also note that under Va. Code § 46.2-323.1, only a Virginia resident may possess a Virginia driver's license. The Taxpayer's renewal of his Virginia Driver's license in the future could be construed by the Department as intent to establish domicile with Virginia for income tax purposes.
The Taxpayer should remit payment of the tax due plus the accrued interest for the 2001 taxable year pursuant to the enclosed schedule to the Virginia Department of Taxation, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *****. Payment must be received 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 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 ***** at *****.
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- Sincerely,
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Janie E. Bowen
Tax Commissioner
1-599610110B
Rulings of the Tax Commissioner