April 3, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you request correction of the individual income tax assessment issued to your client, ***** (the "Taxpayer"), for the taxable year ended December 31, 2011.
FACTS
The Taxpayer and his wife jointly own a Virginia residence. In July 2006, the Taxpayer purchased a residence in ***** (State A). In November 2007, he acquired a State A driver's license, registered a vehicle, and registered to vote in State A. He also used a vehicle which is registered in Virginia by a wholly owned pass-through entity. The Taxpayer purchased a residence in Virginia in October 2010. He filed separate Virginia nonresident returns since the 2008 taxable year.
The Taxpayer was audited by the Department. The auditor determined that the Taxpayer was a resident of Virginia for the 2011 taxable year. The Taxpayer appeals, contending that he had established residency in State A prior to the 2011 taxable year.
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 Taxpayer engaged in several activities consistent with maintaining a Virginia residence. He jointly owned a Virginia residence with his wife, who was a Virginia domiciliary resident. He maintained business interests in Virginia and continued to use a car in Virginia registered in the name of a wholly owned pass-through entity.
The Taxpayer asserts that he separated from his wife and retired to State A. He asserts that he purchased the second residence in Virginia in order to visit his children and grandchildren.
The Taxpayer also performed a number of actions to establish domicile in State A. He purchased a place of abode in State A in July 2006. He obtained a driver's license, registered his motor vehicle, and registered to vote in State A in November 2007. He filed a Virginia Nonresident Income Tax Return using his State A address. He also spent significantly more time in State A than Virginia during the 2010 and 2011 taxable years.
The concept of domicile requires both the establishment of a new residency in fact and an intent to abandon the old domicile and remain in the new. See Mitchell v. United States, 88 U.S. 350, 1874 WL 17410 (1874). The mere absence from a previous domicile, however long, is insufficient to prove intent. The Taxpayer must also prove he intended to change his domicile permanently even though he established a permanent place of abode in State A.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. The Taxpayer has shown, through consistent activity over an extended period of time, that he intended to be a domiciliary resident of State A. The preponderance of evidence shows that the Taxpayer abandoned his Virginia domicile and established domicile in State A as of November 2007. As such, the Taxpayer was not a resident of Virginia for the 2011 taxable year and was not required to file a Virginia Resident Income Tax Return. Accordingly, the individual income tax assessment for the 2011 taxable year will be abated.
The Code of Virginia sections 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/1-5878542868.B