December 8, 2015
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 assessment issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2010. I apologize for the delay in responding to your appeal.
FACTS
In 2010, the Taxpayers, a husband and wife, were domiciliary residents of ***** (State A) residing in Virginia. While in Virginia, the Taxpayers accepted employment in the ***** (State B) and ***** (State C). Both employers withheld Virginia income tax. The Taxpayers filed a 2010 Virginia nonresident individual income tax return and a refund of the full amount of payments was issued. Under review, the Department discovered that the federal adjusted gross income (FAGI) reported to Internal Revenue (IRS) did not match the FAGI reported to Virginia. As a result, the Department adjusted the return and issued an assessment for additional tax and interest. The Taxpayers appeal the assessment, contending they resided in Virginia less than 35 days during the 2010 taxable year and the income earned was not from Virginia sources.
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. 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.
Individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. The Virginia taxable income of a nonresident is defined under Va. Code § 58.1-325 as "an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources.
While it is clear that the Taxpayers maintained significant connections to their current state of domicile, the determinative question is whether the Taxpayers spent a sufficient number of days in Virginia to be considered actual residents and subject of Virginia income tax, or if the Taxpayers were nonresidents of Virginia with no Virginia source income. Such determination is totally contingent on the number of days the Taxpayers spent in Virginia during the taxable year. For purposes of Va. Code § 58.1302, a “day” is any portion of a day in which a taxpayer is physically present except for a part of a day during which an individual is present solely while in transit to a destination outside Virginia. See P.D. 98-183 (10/31/1998).
In P.D. 09-95, the Department held that when a Taxpayer is domiciled in another state and spends a significant number of days in Virginia, the Taxpayer should retain sufficient records to indicate the number of days spent in Virginia. The Taxpayers contend they spent only 35 days in Virginia during the 2010 taxable year. The Taxpayers provided bank statements for the months of January through March to support her claim. Because the Taxpayer must show the number of days spent during the entire year, the Department requested the bank statement for the remainder of the taxable year. As of the date of this letter, no additional information was provided.
Pursuant to Va. Code § 58.1-205 any assessment of tax by the Department is deemed prima facie correct. This means that the burden of proof is upon the Taxpayer to establish that the assessment is incorrect. The Taxpayer has not met this burden. As such, the Department's assessment is upheld.
The Taxpayers, however, will be granted one final opportunity provide sufficient documentation for the Department to determine the number of days spent in Virginia during the 2010 taxable year. The Taxpayers are requested to provide copies of their bank and credit card statements for the entire 2010 taxable year. The requested documentation should be provided within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *****. If the requested information is not provided within the allotted time, the assessment will be upheld and collection actions may resume.
The Code of Virginia sections and public document 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/1-5878542794.D