Tax Type
Individual Income Tax
Description
Taxpayers did not abandon their domicile in Virginia during the taxable years.
Topic
Domicile
Persons Subject to Tax
Records/Returns/Payments
Date Issued
06-22-2011
June 22, 2011
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, 2007 and 2008.
FACTS
The Taxpayers, domiciliary residents of Virginia, purchased a home in ****** (Country A) in 2006. In early 2007, the Taxpayers moved to the home in Country A. However, because they maintained business interests in Virginia, they returned to Virginia for long periods of time in 2007 and 2008. They continued to hold Virginia driver's licenses and motor vehicles registered in Virginia. The Taxpayer filed nonresident Virginia income tax returns for the 2007 and 2008 taxable years.
Under audit, the Department determined the Taxpayers were domiciliary residents of Virginia. As a result, the Department issued assessments for additional tax and interest for each of the taxable years at issue. The Taxpayers appeal the assessments, contending they have demonstrated their intent to abandon Virginia and establish domicile in Country A.
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. 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.
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 domicile. The Department determines a taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he or she has established or abandoned his or her Virginia domicile.
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 this burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayers performed several actions consistent with establishing domicile in Country A. They established a place of abode and spent the majority of their time during 2007 and 2008 in Country A.
The Taxpayers also performed several actions consistent with maintaining their Virginia domicile. The returned to Virginia for significant portions of each taxable year to manage and operate businesses located within the Commonwealth. They spent 158 days in 2007 and 160 days 2008 in Virginia primarily for this purpose. The Taxpayers maintained registered motor vehicles and held driver's licenses in Virginia. In addition, they owned residences in which they stayed while working in Virginia.
The Taxpayers assert that the motor vehicles were registered in Virginia for business related purposes, and they where transferred to the business in 2010. The motor vehicles were of a make that would normally be used in the Taxpayer's business.
United States citizens are not required to have a passport or obtain a Country A driver's license so long as they have a driver's license from a state, commonwealth or territory of the United States. Virginia Code § 46.2-323.1, however, 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 a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver's license. See Public Document (P.D.) 00-151 (8/18/2000). However, 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).
In this case, the Taxpayers renewed their Virginia licenses in 2008. Further, although they obtained Country A driver's licenses in 2010, the Taxpayers have not surrendered their Virginia driver's licenses. They indicate that they were required to maintain Virginia driver's licenses in order to obtain insurance for the vehicles used in the Taxpayers' businesses. The Department considers such continued connections to Virginia for the purpose of obtaining resources required to operate a business that benefits from Virginia's economic environment, which is encouraged and protected by Virginia's laws and regulations, to be strong intent of a taxpayer's desire to be a domiciliary resident of Virginia.
During the taxable years at issue, the Taxpayers received federal information returns at a Virginia address and used the address when filing their 2008 Virginia income tax return. The Taxpayers assert that the Virginia address is that of one of the remaining Virginia businesses, and it was used because the mail service in Country A is not reliable. Again, the Taxpayers seek the benefit of the stable environment provided by Virginia, in contrast to the inefficient services provided in Country A.
The Taxpayers claim that they stayed with relatives while in Virginia. However, they have also indicated that they stayed at one of their investment properties. In addition, the address for the wife's mother was reported on the Taxpayer's federal return as a rental property. Although the Taxpayers claimed expenses for this property on 2007 and 2008 federal income tax returns, they received no rental income for either taxable year and indicated that no family member lived at the property during the taxable years at issue. The Taxpayers also claimed a business loss on the property when it was sold in 2008. Based on this information, it appears the Taxpayers had at least one permanent place of abode available in Virginia during 2007 and 2008.
After reviewing all the evidence in this case, it is my determination that while the Taxpayers did take steps indicative of establishing domicile in Country A, they did not abandon their domicile in Virginia during the 2007 or 2008 taxable years. Accordingly, the assessments at issue are upheld.
The Taxpayers will receive an updated bill with interest accrued to date. The outstanding balance should be paid within 30 days of the bill date to avoid the accrual of additional interest.
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 determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Craig M. Burns
Tax Commissioner
- Craig M. Burns
-
-
-
-
-
-
AR/1-4554166673.D
Rulings of the Tax Commissioner