May 2, 2016
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 "Taxpayer") for the taxable year ended December 31, 2012.
FACTS
The Taxpayer, a foreign service officer, and his spouse lived in a Virginia residence with their children. They filed joint resident Virginia income tax returns for the 2010 and 2011 taxable years. The Taxpayer was originally from ***** (State A) and has continuously maintained his driver's license and voter registration in that state. In February 2012, he accepted an assignment in a foreign country. The Taxpayer filed a 2012 part-year Virginia income tax return. His spouse filed a separate Virginia income tax return.
The Department audited the Taxpayer and determined that he was a resident of Virginia for the entire year and issued an assessment. The Taxpayer appeals the assessment, contending he was a domiciliary resident of State A and resided in Virginia for only part of the 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 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.
The Department has also considered the unique circumstances of those individuals employed as foreign service officers for the United States Department of State. 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.
In P.D. 87-161 (6/2/1987), 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 the *****. In that case, the foreign service officer and his spouse maintained driver's licenses and voter registrations in another state and had no other connection with Virginia.
In this case, the Taxpayer grew up in State A, claims he remained a domiciliary of State A and engaged in activities consistent with maintaining his State A domicile. The evidence indicates Taxpayer retained his driver's license and voter registration.
He moved to Virginia after taking a position with the United States Department of State. As was the case in P.D. 87-161, the Taxpayer and his spouse purchased a house in Virginia. Further in accordance with Virginia policy, he filed joint income tax returns as an actual resident for the 2010, 2011, 2013 and 2014 taxable years. The one activity he engaged in that goes beyond permitted connections in P.D. 87-161 was registering motor vehicles he jointly owned with his wife in Virginia.
In order to change one's domicile, the current domicile must be abandoned and a new domicile established. While the Taxpayer may have engaged in activities consistent with establishing a Virginia residence, the evidence shows he did not abandon his State A domicile. Accordingly, I find that the Taxpayer was not a domiciliary resident of Virginia during the 2012 taxable year. As such, the assessment for the 2012 taxable year will be abated.
The Taxpayer, however, should be aware that continuing to use a Virginia address on federal forms and owning automobiles registered in Virginia could result in future contact by the Department and the discovery of additional Virginia connections could lead to a different finding.
In addition, because the Taxpayer was not a domiciliary resident and did not move into or out of the state of Virginia, he would not have been considered to be a part-year resident. Instead, individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. See Va. Code § 58.1-325. Virginia Code § 58.1-302 limits the term income and deductions from Virginia sources to the items of income, gain, loss and deductions attributable to the ownership of property in Virginia or the conduct of a business, trade, profession or occupation in Virginia. In this case, the Taxpayer had wage income from employment in Virginia. Such income was Virginia source income subject to Virginia income tax. Because the Taxpayer would be considered a nonresident of Virginia, he should file a 2012 nonresident return (Form 763).
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/1-6174317219.B