May 17, 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, 2014.
FACTS
The Taxpayer moved from Virginia to ***** (State A) prior to 2013. During 2014 she maintained a Virginia driver's license and took an early distribution from a retirement account from a Virginia business. The federal form 1099-R reporting the distribution was sent to the Taxpayer via the Virginia business address of a relative. As such, Virginia income tax was withheld from the early distribution. The Taxpayer also received wage income from two State A employers, which withheld State A income tax.
The Taxpayer filed both Virginia and State A resident income tax returns for the 2014 taxable year reporting all of her wage income but did not pay the liability on her Virginia return. As a result, an assessment was issued. The Taxpayer appealed contending that being liable for income tax in both states would be double taxation.
DETERMINATION
Residency
The Taxpayer filed resident income tax returns for both Virginia and State A for the 2014 taxable year. A person can only have one domicile. See Title 23 of the Virginia Administrative Code (VAC) 10-110-30. As such, the Taxpayer could not simultaneously be a resident of both Virginia and State A.
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 Department must conclude that he or she intended to remain indefinitely in Virginia.
During the taxable year at issue, the Taxpayer both lived and worked in State A. State A income tax was withheld and the employer sent her federal Form W-2 statements to a State A address. However, Virginia income tax was withheld from the early distribution of retirement income and a federal form 1099-R was sent to the Taxpayer at the business address of a relative. In addition, the Taxpayer maintained a Virginia driver's license.
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 Public Document (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)
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. The Taxpayer indicates she moved to State A in order to ski. To that end, she did take significant steps to acquire domicile in State A by establishing a place of abode and obtaining employment. Although the Taxpayer maintained a Virginia driver's license and received tax information at a Virginia address, I find that the Taxpayer abandoned her Virginia domicile and established a State A domicile in 2013.
Nonresident Individuals
Under Va. Code § 58.1-325, individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. 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. Neither the wage income earned in State A nor the early withdrawal of retirement income was Virginia source income.
CONCLUSION
Based on the foregoing, I find that the Taxpayer was not an actual or domiciliary resident of Virginia, and she did not have Virginia taxable income during the 2014 taxable year. As such, the assessment issued to the Taxpayer will be abated and a refund of the Virginia income tax withheld will be issued.
While the Department concedes that the Taxpayer may not be a domiciliary resident of Virginia during the taxable year at issue, continuing connections with Virginia, such as retaining a Virginia driver's license or using a Virginia address in addition to other indicators of a permanent residency will likely result in future contacts and possible assessments by the Department with respect to the situs of her domicile.In addition, the Taxpayer should be aware that Virginia law does not permit a nonresident to obtain a Virginia driver's license. Any persons providing a false statement to the DMV in order to apply for or maintain a driver's license may be subject to penalty under Virginia law.
The Code of Virginia sections, regulation, 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 Department's Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6240530670.B