Tax Type
Individual Income Tax
Description
Taxpayer successfully changed in his domicile to State A
Topic
Domicile
Pass-Through Entities
Persons Subject to Tax
Date Issued
09-08-2009
September 8, 2009
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 your client, ***** (the "Taxpayer"), for the taxable years ended December 31, 2004 through 2006. I apologize for the delay in this response.
FACTS
Prior to 2004, the Taxpayer was a Virginia domiciliary resident who owned and operated several businesses in Virginia. In 2003, the Taxpayer retired from his businesses. He divested himself of a portion of his business interests, but maintained a 5% ownership of a personal service business and 50% ownership of a real estate rental business. After purchasing a townhouse in ***** ("State A"), the Taxpayer moved to State A, acquired a State A driver's license, and registered to vote there in August 2003. Soon thereafter, the Taxpayer purchased an automobile and registered it in State A.
In 2004, the Taxpayer purchased an automobile to be registered and garaged in Virginia. This vehicle was used primarily by the Taxpayer when he visited Virginia. He purchased another automobile, registered and garaged it in Virginia in 2005. This vehicle has primarily been used by the Taxpayer's son. The Taxpayer also joined a country club in State A in 2005, and he resigned his membership in a Virginia country club in 2006. Also in 2006, the Taxpayer joined a State A chapter of a nonprofit organization that provides free counseling to small businesses.
The Taxpayer did not sell his home in Virginia and continued to use it when he made trips to Virginia. The records show that the Taxpayer spent less than 183 days in Virginia during the 2005 and 2006 taxable years, primarily visiting with friends and family. The majority of the Taxpayer's time was spent in State A where a number of his family live.
Because the Virginia businesses are pass-through entities, the Taxpayer filed nonresident individual income tax returns for the taxable years at issue. Under review, the Department determined that the Taxpayer did not abandon his Virginia domicile and assessments were issued. The auditor's conclusion was based on the fact that the Taxpayer continued to own businesses and a permanent place of abode in Virginia, did not surrender his Virginia driver's license when he moved to State A, and renewed his Virginia driver's license in 2007. The Taxpayer contests the assessments, maintaining that he successfully changed his domicile to State A in 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. A person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is subject to Virginia taxation.
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 domicile.
The Department concedes that it is difficult to know whether a taxpayer intends to return to his or her original domicile. The Department determines a taxpayer's intent through the information provided. In this case, the Taxpayer has the burden of proving that he established his domicile in State A and abandoned his Virginia domicile. If the evidence is inadequate to meet this burden, the Department must conclude that the Taxpayer intended to obtain a Virginia domicile.
The Taxpayer took a number of actions indicating an intent to establish domicile in State A. In 2003, he resigned from his positions of employment in Virginia, established a permanent place of abode in State A, obtained a State A driver's license, purchased an automobile, and registered to vote in State A. He established community ties there by joining a country club and a chapter of a nonprofit organization.
The Taxpayer also performed a number of actions consistent with maintaining his Virginia domicile. He continued to use and maintain his residence in Virginia, retained an ownership in two Virginia pass-through entities, and maintained two automobiles registered in Virginia. One of these automobiles was used primarily by the Taxpayer. The Taxpayer maintained a driver's license in Virginia and renewed it in 2007.
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 he retains a Virginia driver's license. See P.D. 00-151 (8/18/2000).
In accordance with P.D. 00-151, the failure to surrender the Virginia driver's license immediately upon moving to State A would not be considered to be a strong indicator of an intent to retain a Virginia domicile, especially in light of the fact that the Taxpayer obtained a valid State A driver's license. The renewal of the Virginia driver's license in 2007 would be a factor indicating an intent to establish or retain a Virginia domicile.
The Taxpayer asserts that he believed that he was required to have a Virginia driver's license because he had automobiles registered in Virginia and was not acting with the intent of establishing or retaining a domicile in Virginia. However, as noted above, obtaining or renewing a Virginia driver's license is considered to be strong evidence of a person's domiciliary intent. The Taxpayer has indicated that he immediately surrendered his Virginia driver's license when he, realized his error.
Based on the preponderance of evidence as noted above, I find that the Taxpayer successfully changed in his domicile to State A at the beginning of 2004 and was not a domiciliary resident of Virginia for the 2004 through 2006 taxable years. Accordingly, the assessments for those taxable years have been abated. Any tax refunds from subsequent taxable years that were applied to the assessments will be refunded with applicable interest.
The Code of Virginia section cited, along with other reference documents, are available on-line at www.tax.virgiilia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact ***** in the Department's 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/1-246458758.E
Rulings of the Tax Commissioner