October 24, 2018
Re: § 58.1-1821 Application: Individual Income Tax
This will reply to your letter in which you seek correction of the individual income tax assessment issued to your clients, ***** (the “Taxpayers”), for the taxable year ended December 31, 2015.
The Taxpayers filed a Virginia part-year resident individual income tax return for the 2015 taxable year. Under audit, the Department determined that the Taxpayers were taxable as domiciliary residents of Virginia for the entire 2015 taxable year and issued an assessment. The Taxpayers appealed, contending the husband was a part-year resident of ***** (State A).
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. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The husband performed some actions indicating he may have established domicile in State A. He obtained employment in State A and lived there from October 2014 to October 2015 in a recreational vehicle. He also had close family members that lived in State A. In addition, he states that he was paid based on his employer’s State A pay scale, listed his State A address on his W-2 and filed a return separate from his spouse, who remained a Virginia resident. The Department’s records, however, indicate that the Taxpayers filed jointly as part-year Virginia residents for the 2015 taxable year.
The husband also retained numerous connections with Virginia. The Taxpayers acknowledge the wife remained domiciled in Virginia, but did not earn any income. They continued to own a personal residence in Virginia. He had a number of vehicles registered in Virginia and held a Virginia driver’s license and Virginia voter’s registration.
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 argue that the Internal Revenue Service (IRS) defines a home to include a recreational vehicle. The Department has not found any instances in the Internal Revenue Code (IRC) or Treasury Regulations where a recreational vehicle is expressly defined as a home. In the context of the mortgage interest deduction, Treas. Reg. § 1.163-10T (p)(3)(ii) provides that property may be considered a residence based on all of the relevant facts and circumstances, but it generally includes a house, condominium, mobile home, boat, or house trailer, that contains sleeping space and toilet and cooking facilities.
Regardless, how the IRS may treat a recreational vehicle for federal income tax purposes is irrelevant in determining whether a taxpayer changed domicile because the test to determine whether such a change occurred is one of state, not federal, law. The Department does not dispute that a recreational vehicle could be a taxpayer’s home as normally defined. A “home” or “residence” in the physical sense, however, is different than the concept of domicile, which involves a broader inquiry including intent. Because recreational vehicles are readily moveable, it may be difficult for a taxpayer to prove that he had the requisite intent to establish domicile in a given place where the vehicle was located.
In addition, it appears that the recreational vehicle the husband lived in continued to be registered in Virginia. The Department has observed that insurance rates are generally lower in Virginia than in State A. See P.D. 11-5 (1/11/2011) and P.D. 16-191 (9/20/2016). The Department considers a taxpayer’s continued connections to Virginia for the purpose of taking advantage of favorable Virginia laws in order to gain the benefits of lower costs available to Virginia residents to be strong evidence of intent of that taxpayer’s desire to be a domiciliary resident of Virginia. Further, because most states have registration requirements for vehicles that are used by their residents, the Department would question the domiciliary intent of any person who resides in a recreational vehicle and claims another state as his or her domicile but has failed to register that vehicle in such state.
The Taxpayers also cite Title 23 of the Virginia Administrative Code (VAC) 10-110-30 for the rule that a taxpayer who has changed his place of abode to a location outside of Virginia but begins residing in Virginia again within six months is prima facie evidence that the taxpayer did not intend to abandon his Virginia domicile. The Taxpayers state that the husband lived in State A for more than 290 days in 2015. This provision, however, only applies to taxpayers who return to Virginia within six months of their move out of Virginia. As the Department as previously observed, it should not be construed to create a presumption that taxpayers who are absent from Virginia for more than six months changed their Virginia domicile. See P.D. 18-68 (5/2/2018).
As stated above, the test for a change of domicile requires (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. Both elements must be satisfied concurrently. Even if the husband acquired domicile in State A, he has not proven his intent to abandon his Virginia domicile because of the Virginia connections he retained, such as a home, vehicle registrations, driver’s license and voter’s registration. Therefore, a change of domicile did not occur and the husband remained taxable as a domiciliary resident of Virginia for the 2015 taxable year.
Accordingly, the assessment is upheld. An updated bill will be mailed to the Taxpayers, which will include accrued interest to date. The Taxpayers should remit 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, regulation and public documents cited are available on-line at 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 *****.
Craig M. Burns