Document Number
10-270
Tax Type
Individual Income Tax
Description
Spouse A is resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes.
Topic
Domicile
Filing Extensions
Filing Status
Residency
Taxable Income
Date Issued
12-16-2010


December 16, 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, 2006 and 2007.

FACTS


The Taxpayers, a husband and wife, moved to Virginia in the early 1990s. While residing in Virginia, the husband established and solely owned a business that operated in Virginia. In 2003, the Taxpayers legally separated and the husband acquired a place of abode in ***** (State A). In November 2003, the husband acquired a State A driver's license, but did not surrender his Virginia license. The husband's Virginia driver's license was renewed in February 2006.

While in State A, the husband became part owner of a business located in ***** (State B). He travels to and performs Services in State A and State B on behalf of his State B business. He also performed services in Virginia and a neighboring state several days per month on behalf of his Virginia business. When he performed services on behalf of his Virginia business, he spent his nights in ***** (State C).

During 2006 and 2007, the Taxpayers had four vehicles jointly registered in Virginia. Joint federal tax returns were filed using the husband's State A address. The husband registered and voted ire State A since November 2003, but did not end his Virginia voter registration. The wife registered and voted in Virginia. The Taxpayers filed joint nonresident Virginia individual income tax returns using the husband's address.

The Taxpayers were audited and the Department concluded that the Taxpayers were both actual and domiciliary residents of Virginia. As a result, the Department issued assessments for additional tax and interest for the 2006 and 2007 taxable years. The Taxpayers concede the wife was a Virginia resident during 2006 and 2007, but contend the husband was not an actual or domiciliary resident of Virginia.

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 Taxpayers 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 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 intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.

Actual Residency

A taxpayer that is a domiciliary resident of a state other than Virginia but spends significant portions of his time in Virginia (whether for business or personal reasons) should retain records to substantiate where he spent his time. An account book, diary, log, statement of expenses, trip sheet, or similar record should include information as to where the taxpayer spent each day of the taxable year. Absent such record, the Department will have to rely on available information to make a determination.

The Department's auditor used credit card statements to calculate that the husband spent more than 183 days in Virginia. The evidence provided indicates the statements came from both the husband's personal account and his business accounts. The Taxpayers have provided documentation that demonstrates that some of the purchases attributed to Virginia were made by employees of the Virginia based business or made over the phone or by fax from outside Virginia. Also, the various businesses to which the husband provided services have submitted substantiation physically placing the husband in other states during time periods the auditor deemed him in Virginia.

Although credit card and debit card statements are helpful in determining how much contact a taxpayer has with Virginia, they may not be reliable in determining the precise number of days a taxpayer spends in Virginia. Reasons for this lack of reliability include vendors that may not transmit transactions on the day they occur, cards with multiple users, and banks that may not record a transaction on the date it occurs. However, when a taxpayer fails to keep sufficient records as to the number of days or portions of days spent in Virginia, these statements can be used to estimate such taxpayer's days spent in Virginia.

In this case, the husband has provided evidence that he spent less than 183 days in Virginia in during each of the taxable years at issue. Therefore, I find that the husband was not an actual resident during the taxable years at issue.

Domicile

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 or domicile.

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 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 husband took several actions consistent with abandoning his Virginia domicile. He established a permanent place of abode and obtained a driver's license in State A when he legally separated from his wife. He established a business in State B and commuted to the business from his State A place of abode. During 2006 and 2007, the husband spent 68 days and 72 days respectively in Virginia. When he was working on behalf of his Virginia business, he stayed overnight in State C.

The husband continued to maintain a number of connections with Virginia. The Taxpayers jointly owned a home in Virginia where the wife and children lived. All of the automobiles were jointly titled in the Taxpayers' names and registered in Virginia. In addition, the husband obtained and renewed a Virginia driver's license and remained actively registered to vote in Virginia. Also, the husband solely owned a Virginia based business for which he continued to perform services.

The Taxpayer never surrendered his Virginia driver's license upon moving to State A and, in fact, renewed it in February 2006. The Taxpayer contends the Virginia Department of Motor Vehicles (DMV) told him he could retain have two licenses, and the DMV in State A did not require him to surrender his Virginia license when he obtained a State A driver's license.

Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." Every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles a statement that certifies the applicant is a Virginia resident. 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 goes on to state that every person applying for a driver's license must execute and furnish to the [DMV] a statement which certifies that the applicant is a Virginia resident. Further, the Department has found that obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (12/09/2002). The husband surrendered his Virginia driver's license in December 2009.

With regard to voting in Virginia, an individual qualified to vote in Virginia must be a resident of the precinct in which one offers to vote. See Va. Code § 24.2-101. This statute also requires a resident to have both domicile and a place of abode in Virginia. For Virginia voting purposes, domicile is determined by the intention of the individual, supported by an individual's factual circumstances. See State Board of Elections (SBE) Policy 2009-005. The husband has terminated his Virginia voting registration.

Given the fact that the wife remained in Virginia, it is reasonable under the specific facts and circumstances of this case that the Virginia residence and some of the Taxpayers' joint possessions would remain for the benefit and use of the wife. Once the Taxpayers separated, their Virginia home and other personal belongings remained with the wife.

CONCLUSION


After reviewing all the evidence in this case, it is my determination that the husband was a not a domiciliary resident of Virginia during the 2006 and 2007 taxable years. While the husband did take steps indicative of maintaining domicile in Virginia, the totality of his actions and his circumstances indicate that he successfully abandoned his domiciliary residence in Virginia prior to the 2006 taxable year.

The wife concedes she was a Virginia resident for the taxable years at issue. The documentation indicates that she may have income subject to Virginia tax. The husband also may have Virginia source income from his Virginia based business and other investments. Virginia Code, § 58.1-326 states, "If husband or wife is a resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes on such single or separate forms as may be required by the Department, unless both elect to determine their joint Virginia taxable income as if both were residents."

Because the Taxpayers do not want to file jointly as Virginia residents, they must file separate amended Virginia returns for the 2006 and 2007 taxable years. The amended returns must be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. Upon receipt, the returns will be reviewed and processed. If the returns are not received within this time, the Taxpayers' 2006 and 2007 tax liability will be adjusted in accordance with the information available. Upon completion, the Taxpayers will be advised of the balance due or refund, as applicable.

The Code of Virginia and regulation 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 website. If you have questions concerning this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,


                • Linda D. Foster
                  Deputy Tax Commissioner



AR/1-4415746266.B


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46