March 15, 2018
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 ending December 31, 2014. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer filed a Virginia nonresident individual income tax return for the 2014 taxable year. The return was selected for audit and the Department requested additional information to verify the Taxpayer's residency status. Under review, the Department determined that the Taxpayer's entire income was subject to Virginia income tax on the basis that he remained a domiciliary resident of Virginia. As a result, an assessment was issued. The Taxpayer appealed, contending he was a resident of ***** (Country A).
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 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. 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. 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. Therefore, 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 as an actual resident.
In order to change from one legal domicile to another, there must be: (1) actual abandonment of the old domicile, coupled with the 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 the 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 performed some actions to establish domicile in Country A prior to the 2014 taxable year. He obtained employment in Country A in 2012. He also leased a personal residence in Country A and obtained a Country A driver's license. In addition, the Taxpayer states that he applied for permanent residency status in Country A. However, because the program was full, his application was denied. Subsequently, when his employment ended in 2015, the Taxpayer returned to Virginia.
The Taxpayer also retained a number of connections to Virginia. The Taxpayer's wife and children continued to reside at their Virginia residence, and all of the Taxpayer's tax reporting documents were mailed to that address. The Taxpayer also returned to Virginia for approximately 90 days during the taxable year at issue. One of the Taxpayer's children graduated from a Virginia public high school and later enrolled at a Virginia community college. Another child was also enrolled at the community college and then at a Virginia public university. Each of the children was receiving instate tuition rates. In addition, the Taxpayer retained his Virginia voter's registration, but he states that he did not vote in any elections after 2012. Further, all five vehicles owned by the Taxpayer were registered in Virginia during the year in question and both spouses retained their Virginia driver's licenses. The Taxpayer explains, however, that he was required to surrender his Virginia driver's license when he obtained his Country A license in 2013.
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 Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia 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 Virginia 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.
As stated above, a change of domicile requires both (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. Each element must be satisfied concurrently. The fact that the Taxpayer applied for permanent residence status, even though the application was ultimately denied, is strong evidence of his intent to establish domicile in Country A. Even if the Taxpayer relinquished his Virginia driver's license, however, in the Department's opinion, the Taxpayer still has not satisfied the burden of proving he abandoned his Virginia domicile because of the other ongoing connections he retained with Virginia. Therefore, a change of domicile did not occur. Accordingly, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2014 taxable year.
The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable year at issue. Therefore, the Taxpayer should file a Virginia resident income tax return for the 2014 taxable year.
The return should be submitted within 30 days of the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. Once the return is received, it will be processed and the assessment adjusted as warranted. If the return is not received within the allotted time, the assessment will be considered to be correct.
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/1327.A