Tax Type
Individual Income Tax
Description
Taxpayer did not abandon his Virginia domicile.
Topic
Domicile
Persons Subject to Tax
Records/Returns/Payments
Date Issued
06-11-2013
June 11, 2013
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the Virginia individual income tax assessment issued to ***** (the "Taxpayer") for the taxable year ended December 31, 2008. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer, originally domiciled in California, is employed as a foreign service officer for the Government of the United States. In 2003, the Taxpayer moved to Virginia pursuant to a job transfer. He purchased a Virginia home, registered a motor vehicle in Virginia, and obtained a Virginia driver's license. He was registered to vote in California.
In 2007, the Taxpayer was transferred to the ***** (Country A). Pursuant to this transfer, he sold his Virginia home and motor vehicle. He, however, retained his Virginia driver's license, which was renewed in March 2007 and September 2012. The Taxpayer also married a Virginia resident in December 2008. He was transferred back to the United States and resumed residing in Virginia in August 2009.
The Taxpayer filed Virginia resident income tax returns during the 2003 through 2007 taxable years. He filed a California part-year return for 2007 and California nonresident returns for 2008 and 2009. The Taxpayer did not file returns in Virginia for the 2008 or 2009 taxable years. His spouse filed separate Virginia income tax returns as a resident for each of these taxable years. The Taxpayer and his wife filed a joint Virginia resident return for 2010.
Under audit, the Department determined that the Taxpayer was a Virginia domiciliary resident during the 2008 taxable year and issued an assessment for individual income tax. The Taxpayer appeals the Department's assessment, contending he was not a Virginia resident in 2008.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domicile 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 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 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 of an individual's intent is not sufficient to establish residency.
California Domicile
In order to determine whether the Taxpayer was correctly assessed for the 2008 taxable year, the Department must first consider whether the Taxpayer intended to change his domiciliary residence to Virginia when he moved from California in 2003. The Taxpayer asserts that he always retained his California domiciliary residence and only filed Virginia resident returns for the 2004 through 2007 because he was an actual resident of Virginia. The Taxpayer was registered to vote in California and has voted in elections. In addition, the Taxpayer held a California driver's license, which he did not surrender when he applied for a Virginia driver's license. He also continued to have California income tax withheld from his salary and filed California income tax returns.
The Taxpayer performed a number of activities consistent with acquiring a Virginia domiciliary residence when he moved to Virginia in 2003. He purchased a residence, registered a motor vehicle in Virginia and obtained a Virginia driver's license. The Taxpayer renewed his Virginia driver's license in March 2007, prior to his transfer to Country A.
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. 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 (12/9/2002).
The Taxpayer admits that he obtained the Virginia driver's license while he was assigned to Virginia. He believed that he was required to obtain a Virginia driver's license when he purchased a vehicle in Virginia. He further argues that the definition of a Virginia resident for driving privileges may be different than for purposes of taxation.
The statutes regarding the privilege to operate a motor vehicle in the Commonwealth do not specifically define domiciliary residency. However, Va. Code § 46.2-100 defines a "nonresident" to include every individual who is not domiciled in Virginia. The definition includes a number of exceptions. Under one of these exceptions, and individual "who has actually resided in the Commonwealth for a period of six months, whether employed or not, or who has registered a motor vehicle, listing an address in the Commonwealth in the application for registration shall be deemed a resident for the purposes of this title." Under this statute, an individual would be considered to be a resident of Virginia even if they maintained their domicile elsewhere. This definition appears to work similarly to the concept of an actual resident for Virginia income tax purposes. The driver's license, however, is only one of the factors to consider in determining an individual's place of domicile, especially when an individual continues to reside primarily in Virginia and renews their driver's license twice in nine years.
Likewise, the Department has found voter registration statutes do not precisely mirror residency as it applies to income tax. Under Va. Code § 24.2-101, an individual qualified to vote in Virginia must be a resident of the precinct in which he offers to vote. This statute requires a resident to have both legal 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.
Federal law, however, requires states to establish procedures in order to permit absentee voting in federal elections for certain overseas voters. See 42 U.S.C.
§ 1973ff-1. Under 42 U.S.C. § 1973ff-6(5), an overseas voter must be permitted to vote in the last place in which such individual was domiciled before leaving the United States. To comply with federal law, the Virginia Board of Elections (VBE) has established procedures allowing overseas voters to be eligible for a temporary voter registration in order to vote in elections. The Taxpayer was not an overseas voter in 2004 through 2007.
In addition, the Taxpayer has filed California income tax returns using the form for nonresidents. According to the Taxpayer, foreign service officers domiciled in California who are employed temporarily outside California are allowed to file nonresident returns while they are absent. Cal. Rev. & Tax. Code § 17014(d) provides, with certain exceptions, a safe harbor for domiciliary residents who are absent from the state for an uninterrupted period of at least 546 consecutive days under an employment-related contract. Such an individual is considered to reside outside California and is not treated as a resident subject to tax. Under this statute, it would appear that the Taxpayer would have been required to file nonresident California returns for the 2004 through 2006 taxable years, yet no evidence has been provided that would indicate he filed such returns.
The Taxpayer cites P.D. 87-161 (6/2/1987) to support of his position. While acknowledging the employment by the United States Department of State as a foreign service officer is generally temporary in nature, the determination of one's domicile can only be made after considering all of the facts and circumstances.
In P.D. 87-161, the Department held that a foreign service officer domiciled in another state would not establish domicile in Virginia merely by purchasing a home in Virginia to reside in while temporarily on assignment in Washington D.C. In that case, the foreign service officer and his spouse maintained driver's licenses and voter registrations in another state and would have no other connection with Virginia. In contrast, the Taxpayer only maintained a voter registration in California while obtaining a Virginia driver's license and purchasing an automobile registered in Virginia. In addition, P.D. 87-161 does not indicate the duration of the temporary assignments to the Washington D.C. office. The Taxpayer has resided in Virginia for 7 out of 9 years.
The Department also addresses the domicile of a foreign service officer in P.D. 99-182 (7/9/1999). Again, the foreign service officer and his spouse maintained more connections with their state of domicile than the Taxpayer. They also spent less than three years in Virginia over a nine year period.
After considering the Taxpayer's expressed intent, conduct, and other facts and circumstances, it is my conclusion that the Taxpayer abandoned his domicile in California and established a Virginia domicile in 2003. Accordingly, the question becomes whether the Taxpayer abandoned his Virginia domicile when he was assigned to Country A in 2007.
Country A Residency
The Taxpayer performed activities consistent with abandoning his Virginia domicile, which include selling his residence and car when he moved from Virginia to Country A. No information has been provided to indicate what, if any steps the Taxpayer took to establish domicile in Country A.
The Taxpayer also performed several activities consistent with retaining domicile in Virginia. He maintained his Virginia driver's license, which he renewed just before leaving the United States. In addition, he married a Virginia resident in 2008. The wife remained in Virginia while the Taxpayer was on assignment in Country A.
The Taxpayer cites P.D. 10-181, in which the Department concluded that a taxpayer was not a domiciliary resident of the Commonwealth merely because he maintained a Virginia driver's license. Again, this case is distinguishable from P.D. 10-181. In addition to retaining a Virginia driver's license, the Taxpayer's spouse resided in Virginia. In addition, the taxpayer in P.D. 10-181 had established a number of connections outside Virginia that would indicate an intent to establish domicile elsewhere. The Taxpayer has provided no evidence that he took any steps to establish Country A as his permanent place of residence.
The determination of a bona fide intent to change one's domicile is a factual matter that can only be resolved on an individual case-by-case basis. See P.D. 96-198 (8/19/1996). Based on the evidence provided in this case, I must conclude that the Taxpayer did not abandon his Virginia domicile and, therefore, remained a Virginia domiciliary resident during the 2008 taxable year.
Accordingly, the assessment for the 2008 taxable year is upheld. An updated bill, with interest accrued to date, will be mailed to the Taxpayer shortly. No further interest will accrue provided the outstanding balance is paid within 30 days from the date indicated of the revised bill.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. 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
Tax Commissioner
AR/1-5025183126.B
Rulings of the Tax Commissioner