August 23, 2017
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, 2013.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2013 taxable year. A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. The Taxpayer responded, but the Department concluded that the Taxpayer was taxable as a domiciliary resident of Virginia. As a result, an assessment was issued. The Taxpayer appeals, contending he was a resident of ***** (State A).
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 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 Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer obtained employment in State A in 2012. He began leasing a personal residence in State A in January 2013 in order to be closer to his workplace. He states that he moved his personal belongings to the new residence with the intention to remain there indefinitely. He explains that he moved back to Virginia in January 2015 in order to be closer to a family member who had become ill. The Taxpayer filed State A resident income tax returns but did not obtain a State A driver's license or vehicle registration or a State A voter's registration.
The Taxpayer also retained some connections with Virginia. He filed his 2013 federal and State A income tax returns with a Virginia address. He also retained 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 fact that an individual has a Virginia driver's license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver's licenses. See Va. Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Va. Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Va. Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver's license.
Individuals who have resided in Virginia more than six months, however, are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia, including the driver's licensing provisions of Title 46.2, Chapter 3 (Va. Code § 46.2-300 et seq.). In addition, because an individual who has been physically present and residing in Virginia for more than six months may nevertheless remain a domiciliary resident of another state or country, it may be necessary in such cases to examine additional factors to determine whether a person who has obtained a driver's license based on physical presence and actual residency in Virginia also intended to become a domiciliary resident of Virginia. However, once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver's license even while absent from the state will be considered very strong evidence of the individual's intent to remain a domiciliary resident of Virginia. That is because the basis of the individual's claim to be entitled to a Virginia driver's license would no longer be based on the length of time he was physically present in Virginia as an actual resident, but rather on the implication that he remained a domiciliary resident of Virginia.
The Taxpayer explains that he did not obtain a State A driver's license because he did not own a car and only used public transportation in State A. In addition, although the Taxpayer did not obtain a State A voter's registration, the Virginia voting record supplied indicates that the Taxpayer did not vote in any Virginia elections while he was living in State A. Rather, the record indicates he voted in the 2016 election, after the taxable year at issue and when he was residing in Virginia again. Further, although he filed his federal and State A income tax return with a Virginia address, his Form W-2 was sent to his State A address, and it reported State A income tax withholding.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. The Department recognizes that taxpayers may have originally intended to establish a permanent residence in another state and abandon their previous domicile but circumstances sometimes occur unexpectedly that require a taxpayer to return to the previous domicile. It appears that the Taxpayer at least intended to remain in State A indefinitely to be closer to his place of employment and only returned to Virginia when a family member became ill. In addition, although the Taxpayer filed his federal and State A income tax returns using a Virginia address, it does not appear that he performed any action that affirmatively asserted Virginia domiciliary residency privileges, such as voting using a Virginia voter's registration or renewing his Virginia driver's license.
After carefully considering all of the evidence presented, I find that the Taxpayer was not a domiciliary resident of Virginia as of the 2013 taxable year. Accordingly, the assessment will be abated.
The Code of Virginia sections 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 Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1273.M