August 18, 2015
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 "Taxpayers") for the taxable year ended December 31, 2010. I apologize for the delay in responding to your appeal.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, filed their 2010 federal income tax return using a Virginia mailing address. The Department requested additional information from the Taxpayers to determine if they were also required to file a Virginia income tax return. When a response was not received, an assessment was issued. The husband subsequently submitted additional information indicating he was employed by the United States Department of State in 2010, assigned to a position in ***** (Country A) and on temporary assignment in ***** (Country B) beginning in April 2010. Based on all the available information, the Department concluded that the Taxpayers remained taxable as domiciliary residents of Virginia. The husband filed an appeal, contending that the Taxpayers did not reside in Virginia during the taxable year in question and intended to retire to ***** (State A) when the husband's employment with the Department of State ended.
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 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, situs of real or 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.
In Public Document (P.D.) 91-70 (4/15/1991), the Department ruled that Foreign Service employees may retain their original state of domicile even while assigned to a temporary post. The Department acknowledges that most assignments from the Department of State are generally temporary in nature and the determination of one's domicile can only be made after considering all of the facts and circumstances.
The Taxpayers moved to Virginia and became domiciliary residents in 1998. In 2002, the husband began employment with the Department of State. He served for approximately two years each in ***** (City A) and ***** (Country C) before he was assigned to a position in Country A in 2006. The husband states that he obtained driver's license at each successive location. He also states that the wife maintained a Country A driver's license from 1994 until she died in 2011. In addition, he registered a vehicle in Country A in October 2009. The temporary nature of foreign service assignments, however, makes it difficult for individuals to show they intended to remain in a foreign country permanently or indefinitely.
The Taxpayers also maintained significant connections with Virginia. Several of the husband's family members lived in Virginia, including his mother and one of his sons. His mother served as his other son's legal guardian from 2004 until 2006 while the son attended a public school in Virginia. In 2014, the son again enrolled in a Virginia public school under the guardianship of another family member. When the husband's mother died in 2012, he inherited her Virginia residence which he currently still owns. He was also receiving mail at the residence. In addition, he registered two vehicles in Virginia in 2014. The Taxpayers also retained their Virginia driver's licenses.
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 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 wife last renewed her Virginia driver's license in February 2009, and the husband renewed his in June 2008.
Although the husband currently owns a Virginia residence, he acquired it by inheritance in 2012, several years after the taxable year at issue, and states that he is preparing to sell it. He states that he received mail at his mother's residence in 2010 because he was temporarily assigned to Country B at that time and it took a long time to receive mail there. Of the two vehicles which he registered in Virginia in 2014, he gave one to his son and he intended to transport the other to his next assignment in ***** (Country D). Country D's import regulations changed, however, and he was forced to sell that car before leaving. Also, the husband states that he retained his Virginia driver's license because he returned to Virginia every few years for training purposes.
In addition, the husband explains that when he began his employment with the Department of State, he was instructed to file taxes with the state he intended to retire to, which was State A. Although he lived in State A from 1977 until 1993, there is no evidence he retained sufficient connections with State A to indicate an intent to retain domiciliary residency. Generally, acquiring domicile in a new location requires both intent and personal presence. In Coopers Adm'r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917), the Virginia Supreme Court ruled that acquiring domicile in another state requires both intent and personal presence. As such, an individual must establish a physical presence in a state in order for Virginia to consider such individual to have established domicile there.
As indicated above, the Taxpayers were residents of Virginia prior to transferring overseas. Although he designated State A as the state for which his employer should withhold income taxes, no evidence has been provided to show the Taxpayers established physical presence in State A after leaving Virginia for the husband's foreign service assignments.
The Department acknowledges that a change of 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 Taxpayers did not successfully abandon their Virginia domicile as of the 2010 taxable year. Therefore, they remained taxable as Virginia residents.
The Department's assessment was based on the information available. The Taxpayers, however, may have additional information to more accurately reflect their Virginia income tax liability. As such, the Taxpayers are requested to file a Virginia resident income tax return for the 2010 taxable year. The return should be filed within 30 days from the date of this letter and mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attention: *****, P.O. 27203, Richmond, Virginia 23261-7203.
The requested return will be processed and the assessment adjusted accordingly. If the return is not filed within the time allowed, the assessment will be considered to be correct, and an updated bill, with additional accrued interest, will be issued.
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 *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5929456844.M