Tax Type
Individual Income Tax
Description
Taxpayers were not taxable as domiciliary residents of Virginia for the taxable year
Topic
Domicile
Federal Conformity
Records/Returns/Payments
Date Issued
06-26-2013
June 26, 2013
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the Virginia individual income tax assessment issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2009.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, may have been required to file a Virginia income tax return for the 2009 taxable year. A review of the Department's records showed that the Taxpayers had not filed a return. Responding to inquiries by the Department, the husband explained that he had lived and worked for a portion of the year in ***** (State A). For the remainder of the year, he had lived in ***** (State B) where he attended school. Under audit, the Department discovered that the husband had renewed his Virginia driver's license in July 2008. As a result, the Department issued an assessment to the Taxpayers as domiciliary residents of Virginia. The Taxpayers appeal the assessment, contending they were not residents of Virginia during the taxable year in question.
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 reside elsewhere. For a person to change domiciliary residency to another state or country, 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 Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, 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 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 individuals' 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 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. A 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 Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
Wife
The wife lived in Virginia during portions of 2003 and 2004 to attend graduate school. Both before and after graduate school, she was a domiciliary and actual resident of State A, including throughout 2009. As such, the wife was not taxable as a resident of Virginia for the 2009 taxable year.
Husband
The husband, who was born and raised in Virginia, moved to State A after graduating from college. When he moved, he sold his motor vehicle. He did not purchase an automobile because of alternative transportation options were available. His term of employment in State A was not for a fixed term or temporary. He established a permanent place of abode and employment in State A. During that period, he filed State A resident tax returns.
In 2007, the husband moved to State B in 2007 to attend law school. It has been the Department's experience that college students rarely establish domicile in the state where they attend college. See Public Document (P.D.) 82-39 (4/2/1982) and P.D. 11-121 (6/30/2011). Other than reside and attend classes, the evidence indicates the husband took little action to establish domicile in State B. Because the Taxpayer took substantial steps to abandon his State A domicile when he started school in State B, however, the issue becomes whether the husband intended to change his domiciliary residence when he moved out of State A.
After moving to State A, the husband maintained some connections with Virginia. He retained a Virginia driver's license and renewed it in July 2008. 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 Department of Motor Vehicles (DMV) 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 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 (12/9/2002). In this case, the Taxpayer renewed his Virginia driver's license in 2008 while working at an internship in Virginia.
In addition, the husband's parents still lived in Virginia. The husband had mail directed to their address, and the Taxpayers used the address when filing their 2009 federal, State A, and State B income tax returns. The husband explained that the parents' address was used because he was finishing law school in State B shortly after filing the returns and did not want to miss any correspondence. The Department has found no indication that the husband lived in Virginia during 2009.
Based on this information, the husband showed some intent to retain or reestablish his domicile in Virginia in 2008. Circumstances in this case, however, raise doubts as to his intent toward a Virginia domicile. Because he did not drive in State A, the need to obtain a State A license was eliminated. It is also understandable that he did not obtain a license in State B because, as a student, he was merely a temporary resident.
Further, the husband's later actions in 2009 reinforce his intent to retain his State A domicile. During the summer of 2009, the husband took a position with a law firm in State A and subsequently accepted a permanent offer of employment to begin after graduation. The same year, he married a resident of State A, who continued to reside there while he finished school. He returned to State B to finish school and finished in 2010. After graduation, he sat for and passed the State A Bar exam.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. After carefully weighing all of the evidence, I find that the Taxpayer successfully abandoned his Virginia domicile and established domicile in State A in 2005. Further, the evidence shows that the husband intended to remain a domiciliary resident of State A in 2009.
Based on this determination, I find that the Taxpayers were not taxable as domiciliary residents of Virginia for the 2009 taxable year. Accordingly, the assessment issued to the Taxpayers for the 2009 taxable year will be abated.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5294655076.M
Rulings of the Tax Commissioner