Tax Type
Individual Income Tax
Description
Evidence shows the Taxpayer resided in Virginia for more than 183 days during 2005.
Topic
Federal Conformity
Records/Returns/Payments
Residency
Date Issued
12-28-2010
December 28, 2010
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to the appeal filed on your behalf by your daughter, ***** seeking correction of the individual income tax assessment issued to ***** (the "Taxpayer") for the taxable year ended December 31, 2005. I apologize for the delay in the Department's response.
FACTS
The Department received information from the Internal Revenue Service ("IRS") indicating the Taxpayer had income from Virginia sources. The Department requested that the Taxpayer file the proper Virginia individual income tax return or provide an explanation concerning why the income was not taxable. When an adequate response was not received, the Department issued an assessment based on the information provided by the IRS. The Taxpayer appeals the assessment, contending she was not a domiciliary resident of Virginia during the 2005 taxable year and that most of the income was retirement income from her former employer in ***** (State A).
DETERMINATION
Residency
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 to another state, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. 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 also subject to Virginia taxation.
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.
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 concedes that it is difficult to know whether a taxpayer intends to return to Virginia. 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 Taxpayer sold her State A home in 2003, but retained her State A driver's license. Since then, the Taxpayer has been residing with relatives for periods of time in various states. The Taxpayer moved to Virginia in August 2004, to live with a daughter. The evidence indicates that she did not spend all of 2005 in Virginia. However, during 2005, she earned wage income from employment in Virginia. She did not file an income tax return with either Virginia or State A during the 2005 taxable year.
Based on the evidence provided, it appears that the Taxpayer may not have fully abandoned her domiciliary residency in State A. On the other hand, the evidence appears to show that the Taxpayer resided in Virginia for more than 183 days during 2005. Without sufficient documentation with regard to the Taxpayer's activities in 2005, the Department must conclude that she was an actual resident of Virginia for the 2005 taxable year.
Retirement Income
Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code unless a different meaning is clearly required. For individual income tax purposes, Virginia "conforms" to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). Income included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.
Virginia Code § 58.1-322 C 19 does provide a subtraction from FAGI for income received from certain pension and retirement plans when the contributions to the plans were taxed in prior years by another state, but not by the federal government. Individual income taxpayers eligible for this subtraction are able to avoid taxation by both Virginia and another state on the same retirement savings. The Taxpayer has provided no information that she was taxed on income contributed to the retirement plan provided by her State A employer.
Further, Public Law ("P.L.") 104-95, as codified at Title 4 U.S.C.A § 114, prohibits a state from imposing an income tax on any retirement income received by an individual who is not a resident or domiciliary of that state. If the Taxpayer was an actual resident of Virginia in 2005, the retirement income received could not be taxed by State A, even if the retirement income was derived from employment in State A and the taxpayer remained a domiciliary resident of State A. To the extent it is included in FAGI, the retirement income would be included in the computation of Virginia taxable income. See Public Document (P.D.) 02-118 (9/03/2002).
CONCLUSION
By letter dated August 11, 2009, the Department requested the Taxpayer to provide evidence to support her assertion that she was not subject to income taxation by Virginia. As of the date of this letter, the requested information has not been received. Because the Taxpayer has failed to furnish the required information, I find no basis to adjust the assessment for the 2005 taxable year at this time.
Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show that the assessment is incorrect.
Notwithstanding the above, I will allow the Taxpayer one last opportunity to provide the Department with additional information regarding this matter. This information should be mailed to the Department's Office of Tax Policy, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attn: *****. Upon receipt, the documentation will be reviewed to determine if a revision to the assessment is appropriate. If the documentation is not provided within 60 days from the date of this letter, the assessment will be considered correct as issued and collection action will resume.
If you are unable to pay the balance due in full within the time provided, you may contact the Department's Collections Unit at (804) 367-8045 to arrange a payment plan. Please note that while a payment plan will provide an extended period for payment of the balance due, interest will continue to accrue on the balance until paid, pursuant to Va. Code § 58.1-1812.
The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact ***** at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Linda D. Foster
Deputy Tax Commissioner
- Linda D. Foster
-
-
-
-
-
-
AR/1-3082785382.E
Rulings of the Tax Commissioner