Document Number
Tax Type
Individual Income Tax
Taxpayers have not taken sufficient steps to sever their Virginia domicile.
Date Issued

November 4, 2010

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 "Taxpayers") for the taxable years ended December 31, 2005 through 2006. I apologize for the delay in the Department's response.


The Taxpayers, a husband and wife, maintain a residence in Virginia and a residence in ***** (State A). Beginning in 2005, the Taxpayers began residing in State A for more than 183 days per year and qualified for State A's homestead exemption.

The Taxpayers have renewed and continue to maintain their Virginia driver's licenses. They have four vehicles registered in Virginia. In 2003, the Taxpayers registered to vote in State A and acquired State A identification cards.

The Taxpayers filed nonresident Virginia returns for the taxable years at issue and reported all passive income derived from Virginia based pass-through entities as Virginia source income. The Taxpayers are currently in the process of transferring the ownership of their Virginia residence to their son through a qualified personal residence trust (QPRT).

The Department's auditor determined that the Taxpayers were Virginia domiciliary residents for the taxable years at issue and issued assessments. The Taxpayers appeal the assessments, contending they successfully terminated their Virginia domicile and acquired a State A domicile.


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 from Virginia to another state, that person must intend to abandon his old domicile with no intention of returning to that same domicile. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely.

In determining domicile, consideration maybe 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.

According to numerous Virginia court cases, changing domicile is a two-step process. First, a person must intend to permanently move away from one domicile. Second, the person must acquire a new domicile where he intends to remain permanently or indefinitely. See Robert H. Talley v. Commonwealth of Virginia, 127 Va. 516, 103 S.E. 612 (1920), State-Planters Bank, v. Commonwealth of Virginia, 174 Va. 289, 6 S.E.2d 629 (1940), and Barbara B. Woods v. Commonwealth of Virginia, Circuit Court of the City of Wise County and the City of Norton, Law No. 97-422 (3/20/2002).

The Taxpayers performed actions that are consistent with establishing a State A domicile. They obtained a place of abode, registered to vote and obtained identification cards in State A.

The Taxpayers also performed actions consistent with maintaining their Virginia domicile. The Taxpayers maintained Virginia driver's licenses, which the wife renewed in 2004 and the husband renewed in 2006. The Taxpayers have four vehicles registered in Virginia.

Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." In fact, this section states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident. While renewing their driver's licenses may have been for purposes of convenience, doing so demonstrates the Taxpayers' intent to be residents of Virginia. It should also be noted that a person providing a false statement to DMV is subject to punishment under the laws of the Commonwealth.

In addition, the Taxpayers are in the process of transferring their Virginia residence to their son through a QPRT. Under a QPRT, the settler donates the residence to a trust and reserves the right to live in the residence for a specified period of time at which point the ownership of the residence goes to the beneficiaries of the trust. Upon the trust's term ending, the residence is transferred to the Taxpayer's adult son. A QPRT is an estate planning devise used to reduce the gift tax upon transferring a residence to family members. Whether a home is owned by an individual or a trust, residing in a permanent place of abode in Virginia for a significant portion of a taxable year can be an indication of intent to establish or maintain domicile.

The Taxpayers argue that while State A provides information on becoming a State A resident, Virginia provides no instructions on changing domicile. However, domicile is a legal standing that has been established by the Virginia courts since 1920. In addition, the Department has issued numerous public documents over the years that address the issue of domicile in Virginia.

The Taxpayers also assert that many residents of State A maintain driver's licenses and automobile registrations in other states because of high costs for insurance in State A. This is done as a matter of convenience and cost savings for the State A residents.

This situation is similar to the taxpayer that provided residency information to the Virginia universities on the application for in-state tuition rates indicating that he had been living in Virginia, but claimed he was not a domiciliary resident of Virginia. See Public Document (P.D.) 02-149 (12/09/02). Like the circumstances in P.D. 02-149, the Taxpayers availed themselves of lower costs under the laws of Virginia while claiming not to be residents of Virginia for income tax purposes. The Department considers the fact that a taxpayer seeks to gain the benefits of lower costs available to Virginia residents to be strong intent of a taxpayer's desire to be a domiciliary resident of Virginia.

Based on the foregoing, I find that the weight of the evidence shows that the Taxpayers failed to abandon their Virginia domicile for the 2005 and 2006 taxable years. While the Taxpayers have taken steps to acquire a State A domicile, they have not taken sufficient steps to sever their Virginia domicile. Therefore, the Taxpayers were subject to Virginia individual income tax.

An updated bill, with interest accrued to date, will be sent to the Taxpayers. No additional interest will accrue provided the outstanding balance in paid within 30 days from the date of the revised bill.

The Code of Virginia sections and public documents cited, along with other reference documents, are available on-line at 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 Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,

                • Craig M. Burns
                  Acting Tax Commissioner


Last Updated 08/25/2014 16:46