Tax Type
Individual Income Tax
Description
Taxpayer failed to abandon her Virginia domicile for the 2005 and 2006 taxable years
Topic
Domicile
Residency
Date Issued
09-11-2008
September 11, 2008
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 2005 and 2006 taxable years.
FACTS
The Taxpayer became a Virginia resident in 1992 and registered to vote that same year. She purchased a residence in Virginia in 2001. The Taxpayer acquired a Virginia driver's license and registered her car in Virginia. The Taxpayer renewed her Virginia driver's license in August 2002 and in June 2007. In 2001, she started a business and rented office space in ***** (State A) a neighboring state, and in ***** (State B).
In June 2005, the Taxpayer purchased a residence in State B and moved a portion of her furniture and personal items from her Virginia residence to State B. She also purchased furnishings and appliances in State B for her State B residence. She acquired a State B driver's license and acquired a car that she registered in State B. In October 2005, the Taxpayer moved her State B office to a location that was leased for five years.
In September 2005, the Taxpayer consulted with realtors regarding the sale of her Virginia residence. She listed her home for sale in May 2006. She took her Virginia home off the market in September 2006. The Taxpayer relisted her house in March 2007 and sold it in October 2007.
The Taxpayer filed a Virginia part-year return in 2005. The Department audited the Taxpayer and determined that she had not abandoned her Virginia domicile and assessed additional tax for the 2005 and 2006 taxable years. The Taxpayer contests the assessments, asserting that she successfully acquired a State B domicile in June 2005.
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. 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 determines a taxpayer's intent through the information provided. A 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 has performed several actions that were consistent with changing her domicile. She purchased a residence in State B and acquired a State B driver's license. She took a five-year lease for her business offices in State B. During the taxable years at issue, she listed her Virginia home for sale.
In addition, the Taxpayer performed actions consistent with maintaining a Virginia domicile. She maintained a Virginia driver's license which she renewed several times, including in June 2007. She had a car registered in Virginia and she had registered to vote in Virginia.
In the case of the Taxpayer's home sale, she consulted realtors in September 2005 and did not list it until March 2006. She removed it from the market in September 2006 and relisted it in March 2007. While she may have been timing the sale of her home to maximize its sale price and took it off the market to care for a sick parent, she still used it as a residence when conducting business at her State A office.
Concerning the Taxpayer's driver's license, Va. 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 license is a strong indicator of an individual's intent to be a domiciliary resident of Virginia. See Public Document (P.D.) 02-149 (12/09/2002). The Department has also found that an individual may successfully establish a domicile outside Virginia even if they retain a Virginia driver's license. See P.D. 00-151 (8/18/2000). In this case, however, the Taxpayer renewed her Virginia driver's license most recently in June 2007. The renewal of a Virginia driver's license is considered to be a declaration of intent to maintain a Virginia domicile.
Also, the Taxpayer kept a car registered in Virginia. She states that she also owns a newer more expensive car in State B. The Taxpayer further contends that she kept the car in Virginia because it was old, had low mileage, and was used only when she was in the area or on loan to friends. While the Taxpayer may have only kept her car as a convenience, she did have a car registered in Virginia available for her use demonstrating an intent to retain her Virginia domicile.
While conceding that the Taxpayer took actions to establish domicile in State B, she maintained substantial connections in Virginia. Virginia requires that a Taxpayer abandon Virginia in order to change domicile. After careful consideration of all the information provided, I find that the weight of the evidence shows that the Taxpayer failed to abandon her Virginia domicile for the 2005 and 2006 taxable years. Therefore, the Taxpayer was subject to Virginia individual income tax.
CONCLUSION
The assessments for the 2005 and 2006 taxable years are correct as issued. An updated bill, with interest accrued to date, will be sent to the Taxpayer. No additional interest will accrue provided the outstanding balance in paid within 30 days from the date of the bill.
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 about this determination, you may contact ***** at *****.
Sincerely,
Janie E. Bowen
Tax Commissioner
AR/1-1919567797.B
Rulings of the Tax Commissioner