Tax Type
Individual Income Tax
Description
Amended nonresident individual income tax return; Credit on tax paid to Virginia
Topic
Credits
Domicile
Residency
Statute of Limitations
Date Issued
05-25-2007
May 25, 2007
Re: Ruling Request: Individual Income Tax
Dear *****:
This will respond to your letter in which you request a ruling concerning amended individual income tax returns for the 2001 and 2002 taxable years.
FACTS
***** (the "Taxpayer") was a domiciliary resident of ***** ("State A") when her employer transferred her to Virginia in 2001. In 2002, her employer was merged with its parent entity and her position was eliminated. She worked in Virginia into September 2002 before moving back to State A. She filed part-year resident returns in Virginia for both the 2001 and 2002 taxable years.
Under audit, State A determined that the Taxpayer never abandoned her State A domicile and issued assessments for 2001 and 2002. The Taxpayer challenged the assessments, but they where upheld by the State A Tax Court decision in July 2006. The Taxpayer asks to be permitted to file amended Virginia part-year returns in order to claim the out-of-state tax credit for the 2001 and 2002 taxable years.
RULING
Residency
Before ruling on the issue of the amended returns, it is necessary to determine the residency status of the Taxpayer for the taxable years at issue. Although the Taxpayer filed part-year returns with Virginia, her status as a domiciliary or actual resident is unclear.
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 Taxpayer moved to Virginia in September 2001 as a result of being transferred by her employer. She rented an apartment in Virginia for approximately 260 days until she moved back to State A in September 2002. The apartment served as her place of abode when she worked at her employer's facility in Virginia. During this period, she spent approximately 50% of the days traveling outside Virginia for business and personal reasons. For purposes of determining actual residency, the Taxpayer is considered to have maintained a place of abode within Virginia for approximately 130 days in 2002. The Taxpayer was, therefore, not an actual resident of Virginia in either the 2001 or 2002 taxable years.
The Taxpayer performed a number of actions that would indicate an intent to establish domicile in Virginia. She acquired a permanent place of abode in the form of an apartment and moved personal items to Virginia. In addition, the Taxpayer obtained a Virginia driver's license and moved and registered her automobile in Virginia.
The Taxpayer also performed numerous actions to show that she did not abandon her State A domicile. The Taxpayer continued to own a home in State A with her spouse, who remained in State A. She also owned a number of vehicles with her spouse that remained registered in State A. A large portion of the extensive travel involved returning to State A for both business and personal visits. She maintained her voter registration in State A. Federal income tax returns were filed using the address of the home in State A. In addition, the Taxpayer received unemployment income from State A during 2002. Further, the State A Tax Court found that the Taxpayer had not abandoned her State A domicile in 2001 and upheld the assessments for the 2001 and 2002 taxable years.
Based on the evidence provided, I must concur with the State A Tax Court's decision. Although the Taxpayer did take a number of steps that could establish domicile in Virginia, she failed to abandon her State A domicile. Because the Taxpayer was neither an actual nor a domiciliary resident of Virginia for the taxable years at issue, she should have been taxed as a nonresident on her income from Virginia sources.
Credit for Taxes Paid Other States
Virginia Code § 58.1-332 establishes a credit for taxes paid other states and provides that:
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- Whenever a nonresident individual of this Commonwealth has become liable to the state where he resides for income tax upon his Virginia taxable income for the taxable year, derived from Virginia sources and subject to taxation under this chapter, the amount of such tax payable under this chapter shall be credited with such proportion of the tax so payable by him to the state where he resides .... The credit, however, shall be allowed only if the laws of such state: (i) grant a substantially similar credit to residents of Virginia subject to income tax under such laws ....
In this case, State A permits a credit to nonresidents against their State A personal income tax for income taxes paid to their state of residence on income taxable by State A. This credit is substantially similar to Virginia's nonresident out-of-state tax credit. Accordingly, the Taxpayer would be eligible for a credit against income tax paid to Virginia on her Virginia nonresident income tax return.
Amended Returns
Under Va. Code § 58.1-312 A 4, effective for audits by other states completed on or after July 1, 2006, a taxpayer has one year from the final determination of a change made by any other state to file an amended return to request a refund resulting from credits for taxes paid to other states. For purposes of this statute and in the case of the Taxpayer, the State A audit was not considered to be completed until the State A Tax Court rendered its decision on July 27, 2006. As such, the statute of limitations for the Taxpayer to file amended 2001 and 2002 nonresident Virginia returns and claim the appropriate credit for taxes paid other states remains open through July 26, 2007.
This ruling is based on the facts presented as summarized above. Any change in facts or the introduction of new facts may lead to a different result. A copy of this ruling should be attached to the Taxpayer's amended nonresident income tax returns for 2001 and 2002.
The Code of Virginia sections cited, along with other reference documents, 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 response, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-989914854o
Rulings of the Tax Commissioner