June 22, 2016
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 ***** (the “Taxpayers”) for the taxable year ended December 31, 2012. I apologize for the delay in responding to your appeal.
FACTS
The Department received information from the Internal Revenue Service (IRS) that the Taxpayers, a husband and wife, may have received income subject to Virginia income tax during the 2012 taxable year. The Department requested additional information from the Taxpayer. When no response was received, the Department issued an assessment based on the Taxpayers' federal adjusted gross income (FAGI) as reported to the IRS. The Taxpayers contend they were domiciled in ***** (State A) and moved into Virginia during the 2013 taxable year.
DETERMINATION
Domicile
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 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.
The evidence shows the Taxpayers began taking permanent steps to change their domicile in 2012. The husband accepted employment in March 2012. No documentation has been provided indicating this was a temporary assignment. In addition, the Taxpayers enrolled their children in Virginia schools in August 2012. The Taxpayers conceded that they stayed with friends beginning in September 2012 in order for the husband to be closer to work and the children could attend school. Apparently, the Taxpayers either favored Virginia schools over those in State A or they intended to move to Virginia and did not want to change education systems in the middle of the school year. To this end, they purchased a Virginia residence in November 2012.
The Taxpayers contend they did not make a final decision to move into Virginia until January 2013. They claim they stayed with their friends through the end of the 2012 and did not move into their Virginia residence until March 2013. The wife surrendered her State A driver's license to Virginia in January 2013, and the Taxpayers registered their motor vehicle in Virginia in February 2013. The husband held his State A driver's license until 2014. Voter's registration cards were issued concurrent to the Taxpayers' driver's licenses. The Taxpayers did not sell their State A residence until 2015
According to numerous Virginia court cases, changing domicile is a two-step process. First, a person must intend to permanently move away from one domicile. Second, the person must acquire a new domicile where he intends to remain permanently or indefinitely. See Robert H. Talley v. Commonwealth of Virginia, 127 Va. 516, 103 S.E. 612 (1920), State-Planters Bank, v. Commonwealth of Virginia, 174 Va. 289, 6 S.E.2d 629 (1940), and Barbara B. Woods v. Commonwealth of Virginia, Circuit Court of Wise County and the City of Norton, Law No. 97-422 (3/20/2002).
Part-Year Residents
Virginia Code § 58.1-303 provides that a person who becomes a resident of Virginia is subject to taxation during the period in which he or she is a Virginia resident and is taxed as a resident only for the portion of the year that he or she resides in Virginia. Generally, an individual who moves into or out of Virginia is permitted to file a part-year income tax return.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. The Taxpayers admit they changed their domicile early in 2013. The facts that the entire family relocated in 2012 and began establishing a permanent place of abode, permanent employment and changing school systems in 2012 coupled with subsequent actions relinquishing their connections with State A, including a driver's license in January 2013, are a firm indication that the Taxpayers intended to establish domicile in Virginia before the end of 2012.
Where a change of domicile occurs as part of a process, the exact timing of when the true intent of an individual to change domiciliary residence can be difficult to discern. Unless a change in domicile has clearly been established through the preponderance of evidence, the Department will generally consider a change to have occurred toward the beginning of the process.
Here, the Taxpayers maintained a number of connections in State A, but gave no indication of returning to State A after they moved into Virginia in 2012. Although, the Taxpayers state they did not intend to change their domicile until 2013, the information indicates the establishment of a Virginia domicile was clearly in process during the 2012 taxable year.
After carefully weighing all of the evidence, I find the Taxpayers began the process of changing their domicile to Virginia as of September 2012. Because the Taxpayers moved into Virginia during 2012, they would be considered to be part-year residents and would be eligible to file a part-year return.
The assessment at issue was made based on the best information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayers may have information that better represents their Virginia income tax liability for the year at issue. Therefore, the Taxpayers should file a 2012 part-year resident income tax return. The return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the documentation will be reviewed and assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.
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/1-6057602300D