August 22, 2018
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessments issued to ***** (the “Taxpayers”) for the taxable years ended December 31, 2015, and 2016.
FACTS
The Taxpayers, a husband and a wife, filed a Virginia resident individual income tax return for the 2015 taxable year. For the 2016 taxable year, the Taxpayers filed a Virginia part-year resident return. Later, they amended their 2015 resident return to a part-year resident return. Under audit, the Department requested additional information to determine the Taxpayer’s proper residency status. Based on the information received, the Department determined that the Taxpayers were domiciliary residents of Virginia for the entire 2015 and 2016 taxable years and issued assessments. The Taxpayers appeal the assessments, contending they were not residents of Virginia.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia 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. See Virginia Code § 58.1-205. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayers claim that the husband was a resident of ***** (Country A), and the wife was a resident of the ***** (Country B) during the taxable years at issue. The husband was assigned to a position in Country A in 2014 pursuant to temporary relocation orders from his employer, a United States government agency. In January 2015, the wife began living and working in Country B. She leased a residence in Country B, obtained a driver’s license and registered a vehicle in Country B, and enrolled their children in school there. Upon completion of the husband’s temporary assignment, the Taxpayers relocated to ***** (State A).
The Taxpayers also maintained connections with Virginia. They owned a residence in Virginia. They were both registered to vote in Virginia, and the husband voted in the 2016 general election. The husband maintained a Virginia vehicle registration, and they both continued to hold Virginia driver’s licenses.
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 Taxpayers obtained or renewed their Virginia driver’s licenses in 2012 and 2014 and both licenses remain active.
The fact that the Taxpayers have retained and renewed their driver’s licenses raises questions as to their intent to reside without Virginia permanently. In P.D. 10-249 (11/04/2010), a taxpayer asserted that many residents of another state maintain driver’s licenses and automobile registrations in other states because of high costs for automobile insurance. While it is unclear why the Taxpayers have failed to cancel their licenses in Virginia and obtain State A driver’s licenses, the Department considers such continued connections to Virginia for the purpose of gaining benefits from Virginia’s economic environment, which is encouraged and protected by Virginia’s laws and regulations, to be strong intent of a taxpayer’s desire to be domiciliary resident of Virginia. See also P.D. 04-140 (9/16/2004), P.D. 11-116 (6/22/2011), and P.D. 14-99 (7/2/2014).
In addition, the Taxpayers were registered to vote in Virginia. The Department has observed that federal law generally allows United States citizens living abroad to vote in federal elections using a voter’s registration from the state of the individual’s last domicile. See 52 U.S.C. § 20310. See also P.D. 14-141 (8/13/2014). The exercise of such federal voting rights by an overseas citizen shall not affect the domicile or residence of such citizen for purposes of any federal, state or local tax. See 52 U.S.C. § 20309. Based on the documentation provided, however, it does not appear that the husband voted solely in the federal election in 2016.
Further, the Taxpayers claim they did not own, register, or operate a motor vehicle in Virginia during their period overseas. DMV records, however, indicate an automobile was registered in the husband’s name in 2015 and 2016.
The Department has acknowledged that it is possible for a United States citizen to be domiciled in a foreign country. See P.D. 85-15 (2/14/1985) and P.D. 00-9 (3/6/2000). In considering employment as it relates to an individual’s domicile, the Department has analyzed whether a specific employment contract was established permanently or for an indefinite period of time. See P.D. 99-158 (6/21/1999). In the case of individuals who engage in employment under set term contracts, the Department has ruled that such individuals generally lack the intent to abandon their Virginia domicile based on the temporary nature of the activity. See P.D. 86-219 (11/3/1986), P.D. 94-353 (11/23/1994), P.D. 96-207 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), P.D. 10-134 (7/12/2010), P.D. 15-142 (6/30/2015), and P.D. 17-169 (9/19/2017). In P.D. 01-611 (10/23/2001), however, the Department held that a taxpayer that takes sufficient actions to abandon his Virginia domicile could be considered to have established a new domicile even though he was temporarily employed for a definite period of time.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. In this case, the Taxpayers’ moves to Country A and Country B, respectively, appear to have been temporary. As such it seems doubtful the Taxpayers truly intended to establish domicile in these countries. In addition, even if the Taxpayers performed sufficient actions to indicate their intent to establish domicile, they have failed to prove their intent to abandon their Virginia domicile because of the ongoing connections they maintained with Virginia. Therefore, a change of domicile had not yet occurred, and they remained taxable as Virginia domiciliary residents during the 2015 and 2016 taxable years.
Accordingly, the assessments are upheld. Updated bills, with accrued interest to date, will be mailed to the Taxpayers shortly. They should pay the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.
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 about this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1644.C