09-86 | Virginia Tax

Tax Type

Individual Income Tax

Description

Taxpayers took sufficient steps to abandon their Virginia domicile in 2004

Topic

Domicile

Taxpayers' Remedies

Date Issued

05-28-2009

May 28, 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 assessment issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2005.

FACTS

The Taxpayers, a husband and wife, moved to ***** (State A) in 2004 where they purchased a home and began operating a business. They failed to surrender their Virginia driver's licenses when they moved to State A and continued to own an automobile registered in Virginia. The Taxpayers also maintained their residence in Virginia.

Under audit, the Department determined the Taxpayers were domiciliary residents of Virginia for the 2005 taxable year and assessed additional tax. The Taxpayers have paid the assessment but contend they took sufficient steps to abandon their Virginia domicile 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.

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 Department must conclude that the taxpayer did intend to return to his or her original domicile.

The Taxpayers performed a number of actions that are consistent with a change in domicile. They established a permanent place of abode and began operating a business in State A. The Taxpayers state that this business required them to work roughly ten hours a day, seven days a week.

At the same time, the Taxpayers maintained a number of connections with Virginia. They maintained a home in Virginia; however, they indicate they placed the home on the market but were unable to sell it. They eventually began using the house as a rental property.

The Taxpayers also retained their Virginia driver's licenses and owned a vehicle registered in Virginia. The Taxpayers indicate that they never got a State A driver's license because they did not have time. 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, the Taxpayers did not renew their Virginia driver's licenses in 2005 after moving to State A.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. While some steps were not completed during the 2005 taxable year (e.g., the sale of the Virginia home, obtaining State A driver's licenses), it is my determination that the Taxpayers have met their burden of proving that they intended to acquire domicile in State A with the intention to remain there permanently or indefinitely in 2004. Accordingly, the assessment for the 2005 taxable year has been abated and a refund will be issued.

The Code of Virginia sections and public documents 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 ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/1-3183363771.o

Rulings of the Tax Commissioner