Tax Type
Individual Income Tax
Description
Taxpayer failed to take sufficient steps to abandon his Virginia domicile
Topic
Domicile
Persons Subject to Tax
Date Issued
12-19-2008
December 19, 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 assessment issued to ***** (the "Taxpayer") for the taxable year ended December 31, 2004.
FACTS
The Taxpayer is an artist who travels extensively in support of his business. He owns homes in ***** (State A) and ***** (State B), where his studios are located. He also leases a residence in Virginia. The Taxpayer and his family reside at the Virginia residence approximately 120 days per year. The Taxpayer's child attends school in Virginia for half the school year and attends school in State A for the other half of the school year.
The Taxpayer acquired a Virginia driver's license in January 1999, which was renewed in December 2003. The Taxpayer relinquished the license in February 2008. The Taxpayer has been registered to vote in Virginia since 1980. The Taxpayer's wife has held a State A driver's license and voter registration since 1999. The Taxpayer owned a number of automobiles that were all registered in State A. The Taxpayer has also received federal tax return information at his Virginia address during 2004.
Upon audit, the Department determined that the taxpayer was a resident of Virginia and assessed additional tax. The Taxpayer has paid the assessment and contends that he was not a Virginia resident during 2004.
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. 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 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.
In the instant case, the Taxpayer performed a number of activities that are consistent with establishing domicile outside the Commonwealth. He owns a home in State A and primarily conducts his business from studios located in State A and State B. All of his motor vehicles are registered in State A, and his wife changed her domicile to State A in 1999.
The Taxpayer also performed actions indicative of maintaining a Virginia domicile. The Taxpayer maintained a permanent place of abode in Virginia, which he established prior to purchasing the home in State A. The Taxpayer continued to hold a Virginia driver's license, which he renewed in 2003, and he was registered to vote in Virginia. In addition, a number of federal information returns are sent to his Virginia address.
The Taxpayer asserts that he maintained his Virginia residence in order to provide access to the northeast art markets and allow his wife and child to live with him when he traveled. The Taxpayer, however, resided in the Virginia residence prior to the acquisition of the State A residence.
The Taxpayer has indicated that he receives numerous federal information returns from galleries that sell his work and that some of these returns were sent to his residence in Virginia. Most of the information returns were sent to the Taxpayer's State A address. The Taxpayer has presented evidence that the returns sent to his Virginia address were done so in error, and that he has made attempts to have them sent to his State A address.
Regarding the Virginia driver's license, the Taxpayer states he maintained the Virginia driver's license as a convenience. He states that he never got a State A driver's license because his Virginia license was renewed in 2003 and was valid for a number of years. 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 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 his Virginia driver's license most recently in 2003. In response to the Department's audit, the Taxpayer surrendered his Virginia driver's license in 2008.
The renewal of a Virginia driver's license is considered to be a declaration of intent to maintain a Virginia domicile. Based on the evidence, the Taxpayer clearly made a declaration of intent to maintain his Virginia domicile through 2003. The assessment at issue, however, is for the 2004 taxable year.
Most states, including State A, require that once a person moves into the state and intends to operate a motor vehicle he must obtain a license from that state within a certain time period (30 days in State A) and surrender his previous license. The Taxpayer failed acquire a State A driver's license until 2008.
Moreover, the Taxpayer did not register to vote in State A when he moved to State A. The Taxpayer indicates that he did not register to vote in State A because he does not vote. While failing to change one's voter registration is not in itself indicative of the intent to remain in Virginia, it is a factor that is considered. The Taxpayer indicates that he canceled his Virginia voter registration in 2008.
A determination as to whether an individual successfully changes his domicile can only be made after considering all of the evidence. In this case, the Taxpayer continued to inhabit a permanent place of abode in Virginia established prior to 1999, continued to hold a Virginia driver's license and operate motor vehicles as a Virginia resident, conducted business activities in Virginia, sent his children to school in Virginia and held a valid voter registration in Virginia during 2004. Although the Taxpayer established substantial connections with State A, I find that the preponderance of evidence shows that the Taxpayer failed to take sufficient steps to abandon his Virginia domicile for the 2004 taxable year.
Further, if these facts are consistent for subsequent taxable years, the Taxpayer may be considered to have maintained his Virginia domicile until he surrendered his Virginia driver's license and voter registration in 2008. At that time, the evidence would appear to indicate that he successfully abandoned his Virginia domicile and obtained domicile in State A.
The Code of Virginia sections and public document 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 Tax Policy, 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/1-2533946047.B
Rulings of the Tax Commissioner