April 19, 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, 2014 and December 31, 2015. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayers, a husband and wife, resided in Virginia. The husband, a contract commercial airline pilot, obtained employment with a company in ***** (“Country A”) in 2009. Upon obtaining employment, the Taxpayers moved to Country A. Under audit, the Department determined that the Taxpayers remained domiciliary residents of Virginia for the 2014 and 2015 taxable years. Accordingly, the Department adjusted the Virginia nonresident income tax returns filed by the Taxpayers and issued assessments for the 2014 and 2015 taxable years. The Taxpayers appeal, contending that they were residents 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 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.
In their appeal, the Taxpayers claim to be residents of Country A, stating that they maintain their primary abode in Country A, the husband is employed in Country A, they qualify for federal foreign earned income exclusion, and Country A considers them residents for taxation purposes. However, the Taxpayers have maintained several connections with Virginia. The Taxpayers have maintained driver's licenses and registered vehicles in Virginia, owned and maintained a home in Virginia, visited Virginia 22 of the 24 months in question, and used their Virginia address for federal income tax purposes.
In regard to the 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).
While it is clear that the Taxpayers attempted to establish a new domicile in Country A, they have failed to establish an intent to abandon, and not return to, their Virginia domicile. Although their appeal indicates that the Taxpayers have no intent to return to Virginia, in an earlier correspondence with the auditor, the Taxpayers indicated that they maintain their Virginia home because they intend to retire to Virginia. The Taxpayers' statement about retiring to Virginia indicates an intent return to Virginia and does not satisfy the two-pronged test for abandoning Virginia domicile.
CONCLUSION
Because the Taxpayers maintained several connections with Virginia, and intend to return to Virginia, they were properly considered domiciliary residents of Virginia. The assessments at issue were made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. Because the Taxpayers were required to file Virginia resident income tax returns, the Department was correct in issuing the assessments. The Taxpayers, however, may have information that better represents their Virginia income tax liability for the taxable year at issue. Therefore, they should file 2014 and 2015 Virginia resident income tax returns to reflect more accurately their Virginia tax liability.
The returns should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the returns will be reviewed and the assessments will be adjusted, as appropriate. If the returns are not received within the allotted time, the assessments will be adjusted based on the information available.
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/1392.C